System operators in the electricity industry are required to procure reserve capacity to deal with unanticipated outages, demand shocks, and transmission constraints. One traditional method of procuring reserves is through a separate capacity auction with two-part bids. We analyze an alternative scheme whereby reserves are procured through the energy market using only energy bids, and capacity payments are made based on a generator's implied opportunity cost. By using the revelation principle, we are able to derive the equilibrium bidding function in this market and show that generators have a clear incentive to understate their costs in order to capture higher capacity rents. We then show that in spite of making energy payments based on the marginally *procured* unit, the expected energy costs under our scheme are bounded by that of a disjoint auction. We then give a numerical example for a special case of uniform demand distributions.