A conventional power system is a centralized architecture in which power is generated is relatively large power plants, transmitted at high voltages and delivered to many loads that can be hundreds and even thousands of miles away. The technical solution is to integrate small and Distributed generations (DG) sources into the grid at various voltage levels. The current engineering practice for DG/Utility interconnected systems is to revert the utility systems to its original configuration(radial or meshed distribution systems) with all interconnected DG units de-energized whenever an unexpected disturbance occurs in the system. Thus, the system reliability stays at the same level as it was before integrating the DG. If connected DGs are permitted to work as microgrid and supply the local load during utility outages, the system reliability will be much better and the customers will not experience any discontinuity of their supply and can avoid loss of generation within the microgrid. When DGs operate in a microgrid environment, a central control and coordination are required. Microgrid Central controller(MGCC), a supervisory controller which co-ordinates operation between the DG, the utility grid and the algorithm is considered for the above case. The study results show that during the islanding operation the frequency and voltage are within the acceptable limit. By implementing proper control and protection schemes, DGs can be used as alternative generation backup within the microgrid during the loss of supply and hence system reliability can be improved and loss of generation can be avoided. Electric utilities should, therefore, pay special attention to their existing control and protection systems in order to incorporate intentional islanding operation in their system to retain integrity.