Supplying electrical energy economically to the customers is very important to cater to the needs of the distribution area effectively. The sensitivity of dispatch of quality power always depends on the reliability of the power system. Deregulated power system environment is increasing rapidly, and the power system reliability functions play effectively in the operation. Reliability always depends on the continuity and the quality of power system which susceptible to interruption. In the deregulated power diligence, the complexity of the power disturbances depends on the deficiencies in the transmission and distribution networks which are controlled by the transmission system operators and the system aggregators. This paper explains the research done at the three major areas in the test system which includes modeling of generator units, identification of transmission deficiencies, and reliability performance. Also, this paper proposes the effective method to enhance power system reliability and the way to modify the existing system through derated adjusted forced outage rate in the transmission and distribution network.