This paper proposes a novel strategy of control of the active power flow from the power system grid to a micro grid by a power electronic transformer (PET), consisting of controllable loads and distributed energy resources (DER), both renewable and non-renewable. A 60 Hz, step down transformer is generally used at the Point of common coupling (PCC) of a micro grid to connect to the power system grid. A power electronic transformer at the PCC 1) Restricts the active power flow at a desired value determined by the utilities. 2) Allows the micro grid to utilize the change in its local grid frequency, due to a restricted macro grid power, to dynamically control the active power generation or consumption within the micro grid. 3) Ensures decentralized control of the DERs as well as the controllable loads that operate synchronously to supply to the demand within the micro grid. 4) Provides smooth transition from islanding to grid-dependent mode without the need of grid synchronization. To investigate the dynamic power control a simplified representation of the smart micro grid as interconnected power systems is considered and simulated in MATLAB/Simulink. The results obtained demonstrate the dependence of dynamic control of the micro grid's DERs on the change in its grid frequency.