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Modernization of the power grid to meet the growing demand requires significant amount of operational, technological, and infrastructural overhaul. The Department of Energy's “Grid 2030” strategic vision outlines the action plan to alleviate the concerns through the development of a “Smart Grid” (SG). Key emphasis is placed on demand side management and consumer interaction with market operations. Demand response (DR), distributed generation (DG) and distributed energy storage (DES) are some of the areas within the smart grid paradigm where consumers are expected to play a very active role. Majority of the DR programs are currently being supported by commercial and industrial sectors. With the introduction of plug-in hybrid electric vehicles (PHEVs), a new avenue for residential consumers to participate in DR programs is expected to open up. In order to have effective demand side management, controlled charging of PHEVs becomes an important DR strategy that can mitigate the adversarial impacts of PHEV charging. In addition, DR programs such as time of use (TOU) pricing and real time pricing (RTP) can provide the PHEV owner with additional economic incentives apart from the benefits of fuel cost and emissions reduction while driving. In this paper, impact of PHEV charging on the distribution system using a case study based on a small residential distribution network is comprehensively analyzed. For two different charging rates (level I and level II) and charging times (night and evening charging), the economic implications of PHEV charging under different electricity pricing options along with the impact on demand factor, load factor and utilization factor are thoroughly evaluated.