An iterative framework to optimally integrate various distributed generations (DG) and demand responsive resources (DRR) within a distribution system into transmission market clearing. The concept of distribution aggregated demand and distribution aggregated utility represent a summed distribution level information in consuming electricity that encompasses preferences of the individual DGs and DRRs. This distribution level preference, which is derived based on unbalanced three-phase AC optimal power flow, is bid into the transmission level for optimal market clearing. When the aggregated preferences cannot be obtained, an iterative method enables the transmission and distribution networks to exchange price and demand information. A competitive equilibrium is reached when the method converges to a price-demand coupling point.