Managing distributed energy sources, energy storage, and consumer's active behavior coupled with sustainability objectives, requires significant changes in the architecture and technologies used to control the electricity infrastructure. Electricity consumers are evolving into economically motivated “prosumers” that not only consume, but can also produce and store electricity. Prosumers can become smart energy ecosystems if they are equipped with technology and intelligence that allow them to achieving their own objectives. This paper demonstrates that any electric power system, from large interconnections to homes and appliances can be modeled as a prosumer. It shows that the emerging interactions and transactions related to electrical energy can be implemented using a prosumer-based architecture, which would replace the traditional, one-way, generation-transmission-distribution-consumer model. We propose a prosumer-based, service-oriented architecture, that is remarkably flexible and scalable, and which would ultimately enable a “flat” business paradigm across the industry. We describe the major components and services of this architecture, present an application to the problem of demand response, and discus several innovative features enabled by the proposed paradigm.