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This paper discusses an alternative method for evaluating demand response (DR) programs utilizing structured incentive payments to encourage customer enrollment and energy conservation. Price elasticity of demand and demand management contracts (DMC) are used to estimate feasible load reductions (LR) under N-2 random system contingencies and dynamic pricing DR. The proposed method can assist bulk-power system operators to make better use of LR during peak periods and unexpected events. A case study of four types of customers finds that customers with a greater availability of incentives tend to reduce demand and as a result improve system reliability.