I. Introduction
Demand response (DR) is a vital component in the future smart grids, which can be employed to facilitate the integration of intermittent and variable energy sources such as wind or solar energy into the power system, and to ensure the balance between demand and supply. DR also has great potential to reduce peak load, which helps defer the need of generation capacity expansion as well as reduce the system operation cost and carbon footprint by operating a smaller number of generators to meet the peak load. In fact, after the release of Order 745 issued by Federal Energy Regulatory Commission [1], several DR programs have been introduced by system operators to encourage participation of various DR sources in the power system [2], [3].