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PJM Interconnection is the largest – and one of the most dynamic – energy markets in the United States. With record-high capacity prices in recent years, this market has been the topic of many discussions, calls for auction reform, and more. At the same time, thousands of companies across PJM’s footprint are offsetting rising capacity costs by participating in PJM’s demand response program, the Emergency Load Response Program (ELRP), where they receive payments for the energy they don’t use when the grid faces capacity constraints. 

PJM’s capacity costs are driven by a robust capacity market administered through an auction process. This process not only sets the price that energy consumers see on their bills, but it also drives demand response prices. In recent years, even as capacity prices have skyrocketed, so too has the value of demand response.

The auction drawing the most headlines is PJM’s primary capacity auction, the Base Residual Auction (BRA). While the BRA is the primary capacity auction, subsequent auctions are held closer to the start of the delivery year. These auctions are called Incremental Auctions (IAs). If you participate in the PJM demand response market – or you’re evaluating a demand response provider so you can jump in for the next delivery year – understanding how the IAs differ from the BRA is essential if you are looking to maximize value from demand response participation.

In this blog, we’ll cover what the BRA and IA are, the purpose of each auction, how they differ, why it’s critical to work with a demand response provider that secures capacity in the BRA, and red flags to watch out for. 

What is the PJM Base Residual Auction (BRA)?

How does PJM know how much energy it needs? And how much of each specific resource, like demand response? It all begins with the BRA. The BRA is PJM’s primary capacity auction, designed to ensure grid reliability well in advance of the delivery year. In this auction, PJM plans for future grid reliability needs, projecting the capacity required to meet future peak demand and enhance grid reliability – and the mix of resources, including demand response, that will provide it.

The BRA typically occurs 3 years in advance, but in recent years, delays due to market rule changes have driven PJM to impose a compressed schedule. They’re currently working to get back on a three-year forward cadence, which is expected to resume with the 2030/2031 auction in May of 2027.

Key characteristics of the BRA:

• Timing: Typically held three years before the delivery year
• Purpose: Procure most of the capacity needed to meet forecasted peak demand
• Participants: Generators across a variety of resource types, demand response providers, and more
• Outcome: Establishes the clearing price for capacity in each locational deliverability area (LDA)

There are two things to keep in mind about the BRA clearing price:

What are PJM’s Incremental Auctions (IAs)?

The IAs are secondary, follow-on auctions that adjust capacity commitments as the delivery year approaches. There are typically three IAs, each occurring at different times before the start of the delivery year (June 1), with the latest occurring just a few months before that date. Similar to the BRA, the IAs have been treated in a different fashion to accommodate the compressed timeline of the BRA, with only the Third IA being held, But typically, the timing would look like this:

Key characteristics of the IAs:

• Timing: Three auctions closer to the start of the delivery year (June 1)
• Purpose: Account for changes in load forecasts, all resources to enter or exit the market, and enable participants to buy/sell their capacity
• Participants: Generators across a variety of resource types, demand response providers, and more
• Outcome: Fine-tuning of the market

Key differences between the BRA and the IAs

The key takeaway? The BRA sets the market. The IAs fine-tune it. 

Why it matters to work with a demand response provider that secures capacity in the BRA

Businesses that want to enroll in PJM’s demand response program need to secure their spot by working with a demand response provider that has procured a set amount of capacity in either the BRA or the IAs. Not all demand response providers secure capacity in the BRA. Some rely more heavily on the IAs.

That distinction can materially impact outcomes for demand response participants. 

Because the BRA secures the majority of the capacity for the region, it largely drives customer capacity costs – and demand response pricing. The BRA reflects true market fundamentals, offering a clear picture of PJM's resource requirements and the value associated with those resources. As a result, providers who secure capacity in the BRA can offer predictable revenue streams and pricing.

IA pricing is inherently more volatile than the BRA, influenced by short-term imbalances and can fluctuate based on limited supply or localized needs. As a result, the capacity secured in these auctions varies widely in price, introducing pricing risk and uncertainty to companies that want to participate in demand response. Most times, IA pricing has been stronger than the BRA, but unforeseen events can cause the IAs to swing in the opposite direction.

Let’s use the 2026/2027 delivery year to demonstrate this: 

• BRA pricing for the 2026/2027 delivery year locked in at $329.43/MW-day, or $120,147/MW-year. 
• In contrast, the Third IA cleared at 50% of the BRA value: $164.70/MW-day, or $60,115.50/MW-year. 

What drove that decrease? Effective Load Carrying Capability (ELCC) increases were implemented for must-offer resources, such as gas generators. They needed to transact in the market, which created an abundance of sellers. That right there is an example of the various factors that can make the IAs so volatile and unpredictable when compared to the BRA.

What effect did that IA have on demand response providers? 524 MW of demand response was offered into the Third IA, and of those, only 134 MW cleared – and at the price that was 50% lower than the BRA. So, not only did less capacity clear – meaning demand response providers that wanted to secure capacity for their customers couldn’t – but any capacity they could procure was at a much lower rate.

The key takeaway: your provider should be securing capacity during the BRA 

Choosing a demand response provider that consistently participates and clears capacity in the BRA helps ensure your company captures the true value of the PJM demand response market and does not leave valuable revenue on the table. It also ensures that your provider is proactively securing MW on your behalf so you have a place in the market – instead of waiting and gambling with the IAs. A provider that consistently clears in the BRA is a signal of a mature, reliable demand response partner, one with strong market credibility, market expertise, proven operational capabilities, and successful customer management.

And so, there are some key questions that you should be asking as you evaluate providers, to ensure they are capturing BRA capacity and pricing:

1. Is your provider enrolling you in demand response with BRA MW or IA MW?
2. Does your provider have BRA capacity available to enroll your site?
3. Are you receiving a blended rate of BRA/IA pricing, or do you have contractual clarity around this?

Professional tip: even if they are offering you a really high revenue split, make sure you understand if they are using BRA pricing or IA pricing. It could mean all the difference to the demand response payments you end up seeing.

Final thoughts

In PJM’s capacity market, when capacity is secured matters just as much as how much. The BRA is the foundation of pricing, planning, and reliability in the PJM region, and your demand response provider should secure their capacity in this auction. Working with a provider anchored in the BRA is one of the clearest ways to maximize value and minimize uncertainty.

Your earnings are on the line – don’t leave them to chance. Enel actively participates in the BRA and consistently delivers BRA capacity and pricing to the customers enrolled in our portfolio. With deep expertise in the PJM market and a proven track record of performance, we help our customers navigate complexity and capture the full value of demand response. Our scale, experience, and disciplined market participation position us to deliver reliable, long-term results. 

When you partner with Enel, you’re choosing a team focused on maximizing your earnings with confidence – not uncertainty. Contact us today to get a conversation started with our team.