This paper proposes a hierarchical coordination mechanism for coordinating the economic dispatch of transmission system operator (TSO) and distribution system operator (DSO). The challenge of dispatching large-scale distributed energy resources (DERs) is addressed. The coordination problem of dispatching energy and reserve is formulated. Benders decomposition is the underlying mathematical foundation of the proposed hierarchical coordination mechanism. We define the generalized bid function to approximate the dispatch cost of distribution network by a series of affine functions. The generalized bid function is communicated from DSO to TSO. By using convex AC optimal power flow model, the convergence of hierarchical coordination is guaranteed. A grid computing structure in General Algebraic Modeling System (GAMS) to accelerate the computation is proposed. The generalized bid function is simulated for various test cases. We also demonstrate the effect of DERs on the voltage magnitude and phase angle. The numerical results show that the hierarchical coordination using the generalized bid function converges to very close results compared with the results of centralized dispatch. Hierarchical coordination is capable of managing various network congestion scenarios and power loads. The generalized bid function provides a unified format of communication between TSO and DSO. (C) 2017 Elsevier Ltd. All rights reserved.