In a recent report developed by the PJM Independent Market Monitor, it has been observed that a significant share of Capacity Resources cleared in RPM Base Residual Auctions has been bought back in the Incremental Auctions. Part of this over-commitment in the BRA and underperforming in the IAs (buy-back of commitment rather than providing committed physical capacity) may be the result of the risk/reward mismatch between the BRA and IAs. Currently, a participant who clears the BRA can buy-back the capacity in an IA at a price that historically has been substantially less than the BRA price and retain 100% of the difference between the BRA price and the IA buy-back price. This has created an unintended incentive for participants to over-commit in the BRA only to buy-back the position in the IA at a lower price for the sole purpose of earning a profit. This unintended incentive has the potential to create a reliability issue in constrained LDAs where insufficient replacement resources are available. This reliability concern is currently being masked by the existing cushion of supply resources in PJM, and by the economic downturn and accompanying decrease in load forecasts from the BRAs to the IAs. However, should the changes in the load forecast between the BRA and IAs flatten-out or increase (e.g., when the economy turns around), reliability issues could be created due to a lack of sufficient physical capacity resources to satisfy the load requirement. PJM stakeholders should consider if RPM rules should be changed to eliminate the unintended financial incentive identified by the IMM for participants to over-commit in the BRA, and then buy-out their capacity commitments in the IAs…