If all the resources in power supply side, transmission part, and power demand side are considered together, the optimal expansion scheme from the perspective of the whole system can be achieved. In this paper, generation expansion planning and transmission expansion planning are combined into one model. Moreover, the effects of demand response in reducing peak load are taken into account in the planning model, which can cut back the generation expansion capacity and transmission expansion capacity. Existing approaches to considering demand response for planning tend to overestimate the impacts of demand response on peak load reduction. These approaches usually focus on power reduction at the moment of peak load without considering the situations in which load demand at another moment may unexpectedly become the new peak load due to demand response. These situations are analyzed in this paper. Accordingly, a novel approach to incorporating demand response in a planning model is proposed. A modified unit commitment model with demand response is utilized. The planning model is thereby a bi-level model with interactions between generation-transmission expansion planning and operation simulation to reflect the actual effects of demand response and find the reasonably optimal planning result. (C) 2016 Elsevier Ltd. All rights, reserved.