This paper proposes a new and novel design of what is been named an Advanced Smart House Energy Management System. The physical system consists of a distribution transformer, the service drop and a residential house. The management system consists of an advanced infrastructure that exploits state of the art technologies such as Distributed State Estimation, smart appliances, electro-thermal models of important components, and optimization. The state estimation uses a physically based modeling approach for each component of the system; coupled with utilization of GPS synchronized measurements it provides the real time model of the system under consideration with a time tag that indicates the time at which the model was captured. This approach has two advantages: (a) it provides a high fidelity model of the transformer and residential house that is utilized for the management of the house loads and loading of the transformer, and (b) the model can be used with other similar models of residential house by upstream management systems that can construct the model of many residential loads by synthesizing the models of the house of identical time tags. The management of more than one house is beyond the scope of this paper. The proposed management system can perform advanced applications such as house peak load reduction as well as distribution transformer hot spot temperature drop. In addition, the proposed system facilitates the implementation of other state of the art application such as Setting-Less Protection, automation and integration of the system, and self-healing. This paper presents a simplified system with preliminary results. The simplified system is expected to be further developed to include all major parts of the system.