Bill, Chris,

I think this is the market notice you two were refering to.  Yes, CAISO  will use the lower of SC-submitted bids or a unit's proxy cost for purposes of determining dispatch order and the MCP of supplemental energy and A/S. However, my understanding is that this adjustment only affects the auction for supplemental energy and A/S.  If you have costs above the current price cap and your costs are above your unit's proxy costs (and are willing to justify them), you should bid your higher-than-proxy costs. If you are accepted, you are supposed to be paid as bid.

Let me know if you want me to follow up with CAISO (or let me know if you have asked them about this).