The objective of the study is to assess the reliability of distribution system and suggest solutions of reliability improvement in smart grid environment. A feeder, which has high rate of interruption, is selected as case study, for reliability improvement measures. This feeder, having two sectionalizing switches with calculated reliability indices: SAIDI of 0.23774 hr/customer/yr and SAIFI of 0.11887 int/customer/yr. The corresponding cost of energy not served plus discounted cost of sectionalizing switches is 698.581 US$/yr. A genetic algorithm optimization technique is developed to improve automation, reclosing and switching capacity of the feeder. A sectionalizer, an automatic circuit re closer, and three sectionalizing switches are integrated in the new design integrated with existing two switches. SAIDI value of 0.25001hr/customer/yr and SAIFI of 0.12301int/customer/yr for the feeder have been achieved. The corresponding cost of energy not served plus discounted cost of automation, reclosing and switching is 4598.100 US$/yr.