The idea of automated temperature control goes back over a hundred years when Warren Johnson invented a complete multi-zone temperature control system. The basic principle of temperature control has stood the test of time and can be applied to the general problem of home energy management (HEM) where energy is delivered to different types of load. The objective of HEM is to use energy efficiently for a comfortable and enjoyable living and working environment. Underlying this objective is the fundamental tradeoff between costs and quality of services. The advent of “smart grid” will likely advance the state of the art of HEM in multiple dimensions. Some of the most important characteristics of HEM in a smart grid era include the extensive use of sensing devices, the optimal and automated management of different types of load, the integration of renewable energy and storage, and the ability to respond to dynamic prices. In this paper, we consider scenarios in which a HEM device, serving as a control center, interfaces with the consumer and an electricity retail provider. Through the HEM device, the consumer participates in an economic demand response by managing energy consumption in response to dynamic pricing. The HEM device can also be used in an emergency demand response program where the retailer sets limits on power usage at times when the consumption needs to be curtailed.