Ever increasing electrical energy demand is forcing power serving entities around the world to use various demand management programs to help in stressful times of the electric power grid. Demand management programs aim to control electrical energy demand among customers and create load relief for electric utilities. Recently demand management contracts have been designed in which incentives are offered to customers who willingly sign up for load interruption. In recent years much technological advancement has been made in distributed generation, and the cost of using this option can bring about extra flexibility into existing demand management schemes. This paper explores the use of distributed generation technology within the existing demand management ideas. More specifically, it compares economic aspects of using demand management contracts with the use of distributed generation. A key observation of this paper is that there may be cases where it is more beneficial to use distributed generation rather than demand management contracts. (C) 2011 Elsevier B.V. All rights reserved.