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With ongoing smart grid activities, more amount of information is available from end-users. Objective is to use this information to make power system more efficient, environmental friendly, reliable, and secure. Major part of smart grid investment is going towards distribution systems. One of the goals within smart grid is development of infrastructure to avail price signal to end users in distribution system. This price signal is currently based on rough estimate of nodal price in transmission system. Transmission nodal price does not reflect fair pricing signal for distribution system without consideration of distribution system constraints. Solving optimal power flow (OPF) with applicable constraints is necessary to obtain locational marginal price (LMP) for each node that can be used in real-time pricing (RTP). Formulation and implementation of distribution LMP (DLMP) is needed for fair pricing. In this work, DLMP formulation is developed consisting of three major parts similar to that of LMP in transmission system but implemented at distribution level. Also, price responsive load brings another interesting prospective of demand response (DR) as shown in results. Effect of DR on DLMP using 12 bus distribution system has been presented.