This paper presents look-ahead energy management system for a grid-connected residential photovoltaic (PV) system with battery under critical peak pricing for electricity, enabling effective and proactive participation of consumers in the Smart Grid’s demand response. In the proposed system, the PV is the primary energy source with the battery for storing (or retrieving) excessive (or stored) energy to pursue the lowest possible electricity bill but it is grid-tied to secure electric power delivery. Premise energy management scheme with an accurate yet practical load forecasting capability based on a Kalman filter is designed to increase the predictability in controlling the power flows among these power system components and the controllable electric appliances in the premise. The case studies with various operating scenarios demonstrate the validity of the proposed system and significant cost savings through operating the energy management scheme.