With growing tendency towards larger buildings, aggregation at the building level has become a natural choice of energy management strategy. The distribution transformer is gradually moving into the purview of building managers. As a consequence transformer has its own role of playing as an agent in the energy management strategy. One of the major concern with the transformer is its ageing effect. Transformer ageing causes financial losses for the transformer asset owner,whereas utility will face the problem of operational losses. Temperature rise is the primary reason for ageing of transformer. Traditionally load shed is the option for high temperature rise in transformer. Since then the evolution of demand response concept in smart grids, it is used as one of the solution for peak load shaving. In this paper an algorithm is proposed for reducing the temperature rise in transformer using the demand response (DR) event. In this paper heating ventilation and air conditioning (HVAC) load is considered as the flexible demand response (DR) load. HVAC load is controlled by temperature setting which is done using a smart thermostat. Temperature setting value of HVAC is decided based on temperature rise and indoor temperature. Proposed algorithm is simulated using MATLAB programming and the results are presented. Results show a reduction in temperature rise of transformer. The simulation is carried for 3 days and it is observed that the reduction in loss of life from 254 hrs to 48.6 h r s. These results explains the benefit of using demand responsive HVAC in increasing the life time of a transformer without load shedding which inherently improves the reliability of supply. © 2018 IEEE.