This document discusses optimal spinning reserve capacity in power markets. It proposes a clearing model to determine the optimal reserve capacity that maximizes social benefit by minimizing the expected cost of outages and operating costs. The spinning reserve model considers flexible reserve capacity and discusses uniform price and pay-as-bid auction mechanisms. Case studies on the IEEE Reliability Test System show that the flexible reserve model provides more social benefit than a fixed reserve model. The optimal reserve capacity is determined by evaluating changes in expected energy not served as capacity is incrementally increased.