As an efficient and intelligent system for managing and monitoring electricity usage, the "smart grid" has many useful applications. It supports energy producers and energy consumers efficiently by supporting the estimation and provision of the proper amount of electricity at the proper time. The most serious threat to a smart grid system may be when information is altered or forged by attackers; the system could malfunction and could collapse. In some cases, the attackers could waste system resources on purpose and this could lead to disastrous results. In this paper, we propose security system architecture to provide the secure and reliable smart grid service. It includes a data authentication process to verify the aggregated data and virtual network management to detect a compromised area or node. It detects a false data injection attack and further prevents a denial of service attack efficiently with less overhead for the individual devices comprising the smart grid system.