Recently, power grid operation has confronted with several radical reforms with the advent of the smart grid concepts and milestones. Large amounts of controllable devices, such as flexible loads and distributed generators, are expected to be accommodated in the grid, making the complexity of the whole power grid system increased drastically in terms of management and controls. Demand response management (DRM) of these assets is a challenging task considering the feasibility of the entire power grid system. In this thesis, a hierarchical energy management system (EMS) is proposed for a group of smart homes, typically served by a secondary feeder in the distribution network. Since the nonconvex nature of the existing models deteriorate the power management performance, in this thesis the whole system is modeled as a hierarchical structure including two levels, namely, home and aggregator. Each home in the secondary network is contracted with an aggregator, and guided through a bi-directional energy exchange while having the authority to manage its own domestic flexible loads and local power generation systems. At the home level, each smart home is required to solve its own energy management optimization which is modelled by a mixed-integer linear programming (MILP) problem. The aggregator maintains the grid feasibility in the secondary network by conducting the power flow (PF) and optimal power flow (OPF) calculations.