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Demand response (DR) is a market driven and sometimes semi-emergency action performed at the utility level or at the Demand Response Service Provider (aggregator) with the objective of reducing the overall demand of the system during peak load hours. If implemented successfully, DR helps postpone the capacity expansion projects related to the distribution network, and provides a collaborative framework for the liberalized energy market of the Smart Grid. Customers subscribed to the DR program are requested to reduce their demand or turn off one or more energy consuming appliances in exchange for financial incentives such as extra payments or discounted electricity rates. This would change the concept of distribution system reliability as is traditionally known. From one hand, DR could lead to a higher amount of unserved energy; on the other hand, it does not qualify as an unwanted lost load. This paper tries to provide a qualitative analysis on the impact of demand response on distribution system reliability.