With increasing interest in alternative energy resources and technologies, mass penetration of PHEVs (plug-in hybrid vehicles) into the electricity grid and widespread utilization of DERs (distributed energy resources) are anticipated in the near future. As an aggregation unit, the VPP (virtual power plant) is introduced for load management and resource scheduling. In this article, we develop an energy management model for VPPs and analyze the cost and emission impacts of VPP formation and PHEV penetration. We conduct a case study for the state of California using real-world data from official resources. An average of 29.5% cost reduction and 79% CO2 and 83% NOx emission reductions are attained as shared benefits of consumers in the case study. Results are illustrative of opportunities that VPP formation can provide for the community. Sensitivity of the results to the DER costs and capacities, battery and gasoline prices are also analyzed. In addition, we prove that charging and discharging do not simultaneously occur in the solutions, which leads to a simplification in traditional energy management models.