In the perspective of the emerging smart grid concept, the future distribution networks involves the distributed generations. In vertically integrated system the operator was responsible for the system in balance, to ensure that the production and imports continuously match the consumption and exports. Distribution system planning with distributed generation work perfect with future grid. Thus system has to undergo a process of transition and restructuring to provide low cost electricity to everyone. The restructuring process involves separation of transmission activity by generation activity, by introducing competition in generation activity through creation of power pool in spot electricity market. Efficient management of networks required a shortest route power flow from one point to another. It is often necessary to determine alternative routes through the network in deregulated electricity market. The aim of this work is to apply Dijkstra’s Algorithm to determine the optimal path for power flow in deregulated environment.