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Demand Response Participation in the Cap... > RPM Capacity Market - Pg. 428

428 PART | IV Case Studies & Applications As Table 17.1 shows, and will be contrasted below, the price of capacity in the previous construct provided little incentive for DR to participate as a capa- city resource as the market was signaling that there was little value as a capacity resource. RPM Capacity Market The RPM Capacity Market introduced a paradigm shift in how LSEs could satisfy their capacity obligations and how DR could participate as a capacity resource. RPM created a three-year-forward auction for capacity (known as the Base Resi- dual Auction or BRA) where LSEs had to cover their capacity obligations. This is a paradigm shift from the previous Capacity Credit Market that allowed assignment of resources up to the day before they were needed. The three-year-forward BRA allows both planned DR and planned generation resources to compete with exist- ing resources. LSEs, EDCs, or CSPs that clear DR in the BRA, have approximately three years to sign contracts with end-use customers and outfit end-use sites before registering those sites in eLRS (eLRS is PJM's DR administrative platform and will be discussed in section "Administration of DR in PJM's Markets"). The participation of DR in the RPM Capacity Market, which utilizes the Reliability Pricing Model (RPM), occurs by means of Load Management, which is the ability to reduce metered load either manually or automatically based on a communication signal. Load Management is broken into two categories: Demand Resource (DR) and Interruptible Load for Reliability (ILR). CSPs, EDCs, and LSEs can aggregate load reduction capability from multiple end-use sites for Load Management. Both DR and ILR must be willing and able to, at a minimum, be interrupted up to 10 times each delivery year for up to 6 hours per interruption as was the case under the ALM and Capacity Credit Market construct. RPM not only created the opportunity for DR to be offered into the auction on par with generation but also preserved through Interruptible Load for Reliability (ILR) the ability of an end-use site to be certified as Load Management only three months before the beginning of the Planning Year (June 1 to May 31). This alter- native path for DR to become a capacity resource in RPM was based on the feedback from large, industrial customers that three-year-forward commitments were unrealistic and risky for them because they couldn't guarantee that they would still be in business when the Planning Year arrived. The difference in value for the earlier commitment was recognized in the related revenue stream from RPM. DR receives the auction clearing price for its three-year-forward commitment, while ILR payments are discounted reflecting the lower risk of committing only three months in advance of delivery. 5 5 See § 5.8.5 "Zonal ILR Prices," PJM Manual 18: PJM Capacity Market for the rules for calculating Preliminary and Final Zonal ILR Prices. These payments are discounted by the value of the Capacity Transfer Rights, which is the value of transmission import capability into a constrained area.