Abstract The smart grid is expected to self-heal, self-optimize, self-configure, and self-protect from physical and cyber-disturbances. These requirements are expected to be built into intelligent electronic devices (IEDs), which would enable autonomous control of power distribution buses in the smart grid. Power distribution buses are used to redistribute electric loads across power generation sources, control voltage/VAR, satisfy economic dispatch objectives and improve the resiliency of the grid against physical disturbance and cyber-attacks. The current power grid has a centralized communication system with a centralized human-in-the-loop controller (such as in a typical SCADA system) in order to adjust operating configurations of equipment within a distribution zone. Implementing autonomous functions by moving from a centralized control architecture to a decentralized architecture can empower bus controllers with greater control over local equipment and operations. We present the secure overlay communication model (SOCOM) for smart microgrids as a solution to decentralizing the traditional centralized control architecture and a decentralized communication platform for peer bus controllers to operate and optimize operations of the grid. We demonstrate the utility of this overlay model in an 11-Bus microgrid network to achieve self-healing. Using this model, we were able to accurately detect data modification attacks that target the controller’s state-estimation and malicious control of switching devices.