Recently, power distribution grid is moving toward a smart grid where energy generation is decentralized and the grid adapts to demands. Due to the most cost-effective way for two-way communication, the use of power line distribution grid for data communication of smart meters has gained higher interests by utility companies. This paper presents the smart grid system with power line communication (PLC). The system serves as the communication infrastructure linking smart meters through the PLC network. The characteristics of PLC multipath channel and the noise model are presented. The smart meters and PLC are modeled based on the actual distribution grid data to set the model for analyzing the feasibility and performance of a smart grid. Orthogonal Frequency Division Multiplexing (OFDM) modulation technique is used to improve better performance and higher efficiency. Simulation results on different loading conditions have confirmed the performance of OFDM when operating in a power line channel in smart grid system.