Demand response (DR) extends customer participation to power systems and results in a paradigm shift from simplex to interactive operation in power systems due to the advancement of smart grid technology. Therefore, it is important to model the customer characteristics in DR. This paper proposes customer information as the registration and participation information of DR, thus providing indices for evaluating customer response, such as DR magnitude, duration, frequency and marginal cost. The customer response characteristics are modeled from this information. This paper also introduces the new concept of virtual generation resources, whose marginal costs are calculated in the same manner as conventional generation marginal costs, according to customer information. Finally, some of the DR constraints are manipulated and expressed using the information modeled in this paper with various status flags. Optimal scheduling, combined with generation and DR, is proposed by minimizing the system operation cost, including generation and DR costs, with the generation and DR constraints developed in this paper. (C) 2011 Elsevier Ltd. All rights reserved,