Energy distribution technique is an essential obligation of an intelligent household system to assure optimal and economical operation. This paper considers a small-scale household system detached from the power grids consisting of some electrical components in day-to-day life. Optimal power distribution generated from a photovoltaic system is vital for ensuring economic and uninterrupted power flow. This paper presents an optimal energy distribution technique for a small-scale smart household system to ensure uninterrupted and economical operation. A photovoltaic (PV) system is considered as the primary generation system, and a battery energy storage system (BESS) is viewed as a backup power supply source. The actual load and PV generation data are used to validate the proposed technique collected from the test household system. Two different load profiles and photovoltaic power generation scenarios, namely summer and winter scenarios, are considered for case studies in this research. An actual test household system is designed in MATLAB/Simulink software for analyzing the proposed technique. The result reveals the effectiveness of the proposed technique, which can distribute the generated power and utilize the BESS unit to ensure the optimal operation. An economic analysis is conducted for the household system to determine the economic feasibility. The capital investment of the system can be returned within around 5.67 years, and the net profit of the system is 2.53 times more than the total capital investment of the system. The proposed technique can ensure economical operation, reducing the overall operating cost and ensuring an environment-friendly power system. The developed strategy can be implemented in a small-scale detached interconnected smart household system for practical operation to distribute the generated energy optimally and economically. © 2022 by the authors. Licensee MDPI, Basel, Switzerland.