market-based rates, will not be paid above their cost-based bid for the Ancillary Service concerned even if the relevant market clearing price is higher.
2.5.7.4	Bidding and Self-Provision of Ancillary Services
The ISO will procure Ancillary Services in accordance with this ISO Tariff, and the applicable ISO Protocols.
2.5.7.4.1	Scheduling Coordinators may bid or self-provide Ancillary Services or specify Inter-Scheduling Coordinator Ancillary Service Trades from resources located within the ISO Control Area.
2.5.7.4.2	Scheduling Coordinators may bid or self-provide external imports of Spinning Reserve, Non-Spinning Reserve or Replacement Reserve or specify Inter-Scheduling Coordinator Ancillary Service Trades from resources located outside the ISO Control Area, where technically feasible and consistent with WSCC criteria; and provided that such Scheduling Coordinators have certified to the ISO their ability to deliver the service to the point of interchange with the ISO Control Area (including with respect to their ability to make changes, or cause such changes to be made, to interchange schedules during any interval of a Settlement Period at the discretion of the ISO).
2.5.7.4.3	Except as provided in section 2.5.7.4.4, Scheduling Coordinators cannot bid or self-provide external imports of Regulation Reserve from resources located outside the ISO Control Area.
2.5.7.4.4	Scheduling Coordinators may utilize transmission service under Existing Contracts to self-provide Regulation (consistent with the applicable ISO Protocols), Spinning Reserve, Non-Spinning Reserve or Replacement Reserve from resources located outside the ISO Control Area, where technically feasible, consistent with WSCC standards.
metered Demand (excluding exports) served in each hour in that Zone.  Each Scheduling Coordinator’s Operating Reserve obligation in each Zone shall be pro rata based upon the same proportion as the ratio of the product of its percentage obligation based on metered output and the sum of its metered Demand and firm exports bears to the total of such products for all Scheduling Coordinators in the Zone.  The Scheduling Coordinator’s percentage obligation based on metered output shall be calculated as the sum of 5% of its Demand (except the Demand covered by firm purchases from outside the ISO Control Area) met by Generation from hydroelectric resources plus 7% of its Demand (except the Demand covered by firm purchases from outside the ISO Control Area) met by Generation from non-hydroelectric resources in that Zone, plus 100% of any Interruptible Imports and on-demand obligations which it schedules.  Each Scheduling Coordinator’s Replacement Reserve obligation in each Zone is calculated as described in Section 2.5.28.4.  Scheduling Coordinator obligations for each Ancillary Service will be calculated based on the requirement for each Ancillary Service as the ISO determines prior to the adjustment set forth in Section 2.5.3.6.
2.5.20.2  Right to Self Provide.
Each Scheduling Coordinator may choose to self provide all, or a portion, of its Regulation and Reserve obligation in each Zone.  The ISO shall schedule self provided Ancillary Services, Day-Ahead and Hour-Ahead, and Dispatch self provided Ancillary Services in real time.  To the extent that a Scheduling Coordinator self provides, the 
ISO shall correspondingly reduce the quantity of the Ancillary Services concerned, which it procures as described in Sections 2.5.14 to 2.5.17.  In accordance with Section 2.5.22.11 and Section 2.5.26.2, if a Scheduling Coordinator uses capacity scheduled to self-provide Spinning Reserve, Non-Spinning Reserve, or Replacement Reserve to supply Uninstructed Imbalance Energy to the ISO from a Generating Unit, Curtailable Demand, or System Resource under circumstances that would cause the elimination of payments to the Scheduling Coordinator under Section 2.5.26.2 if the capacity had been bid and was selected by the ISO to supply the Ancillary Service, the Scheduling Coordinator shall pay to the ISO the amount of the payment that would be eliminated under that section.  Scheduling Coordinators may trade Ancillary Services obligations so that any Scheduling Coordinator may reduce its Ancillary Services obligation through purchase of Ancillary Services capacity from another Scheduling Coordinator, or self-provide in excess of its obligation to sell Ancillary Services to another Scheduling Coordinator, subject to the limits specified under Section 2.5.20.5.2.  If a Scheduling Coordinator’s Day-Ahead self-provided Ancillary Service schedule is decreased in the Hour-Ahead Market, such decrease shall be deemed to be replaced at the Market Clearing Price in the Hour-Ahead Market, pursuant to Section 2.5.21.
2.5.20.3	Literal Self Provision by a Metered Subsystem.   A MSS operator must be the Scheduling Coordinator or act through a Scheduling Coordinator and must submit the Energy, Ancillary Services, and Adjustment Bids for all End Users within the MSS who are not served by other Scheduling Coordinators.
The MSS operator may provide its Regulation, Spinning Reserve, Non-Spinning Reserve, and Replacement Reserve requirements through any combination of Literal Self 
then calculate a total daily payment for each Scheduling Coordinator for all the Generating Units, System Units, System Resources and Curtailable Demands that it represents for each Settlement Period t.
The settlements for the Hour-Ahead markets shall be calculated by substituting Hour-Ahead prices in the relevant formulae and deducting any amounts due to the ISO from Scheduling Coordinators who buy back in the Hour-Ahead Market Regulation, Spinning Reserve, Non-Spinning Reserve or Replacement Reserve capacity they sold to the ISO in the Day-Ahead Market.
2.5.27.1	Regulation.
Regulation Up and Regulation Down payments shall be calculated separately.
Quantities.  The following quantity definitions shall be used for each Scheduling Coordinator in the settlement process:
AGCUpQDAxt = the Scheduling Coordinator’s total quantity of Regulation Up capacity in Zone X sold through the ISO auction, and scheduled Day-Ahead j for Settlement Period t.
AGCDownQDAxt = the Scheduling Coordinator’s total quantity of Regulation Down capacity in Zone X sold through the ISO auction, and scheduled Day-Ahead j for Settlement Period t.
EnQUnstxt = Uninstructed Imbalance Energy increase or decrease in Zone X in real time Dispatch for Settlement Period t, determined in accordance with the ISO Protocols.
Prices.  The prices in the Settlement process for Regulation Up and Regulation Down shall be those determined in Section 2.5.14.
Adjustment:  penalty described in Section 2.5.26.1.
PAGCUpDAxt = the market clearing price, PAGC, in Zone X for Regulation Up capacity in the Day-Ahead market for Settlement Period t.
PAGCDownDAxt = the market clearing price, PAGC, in Zone X for Regulation Down capacity in the Day-Ahead market for Settlement Period t.
Payments.  Scheduling Coordinators for Generating Units  providing Regulation Up capacity through the ISO auction shall receive the following payments for Regulation Up:
AGCUpPayxt = AGCUpQDAxt *PAGCUpDAxt - Adjustment
Scheduling Coordinators for Generating Units providing Regulation Down capacity through the ISO auction shall receive the following payments for Regulation Down:
AGCDownPayxt = AGCDownQDAxt *PAGCDownDAxt - Adjustment

2.5.28	Settlement for User Charges for Ancillary Services.
(a)	The ISO shall determine a separate hourly user rate for Regulation, Spinning Reserve, Non-Spinning Reserve and Replacement Reserve for each Settlement Period purchased in the Day-Ahead market, and in the Hour-Ahead Market.  Each rate will be charged to Scheduling Coordinators on a volumetric basis applied to each Scheduling Coordinator’s obligation for the Ancillary Service concerned which it has not self provided, as adjusted by any Inter-Scheduling Coordinator Ancillary Service Trades.
Each Scheduling Coordinator’s obligation for Regulation, Spinning Reserve, Non-Spinning Reserve and Replacement Reserve for each Zone shall be calculated in accordance with Section 2.5.20.1, notwithstanding any adjustment to the quantities of each Ancillary Service purchased by the ISO in accordance with Section 2.5.3.6.
The cost of Voltage Support and Black Start shall be allocated to Scheduling Coordinators as described in Sections 2.5.28.
Quantities and rates for the Hour-Ahead markets shall be calculated by substituting the Hour-Ahead quantities and prices in the relevant formulae (including self provided quantities of the Ancillary Service) except that the user rates for Regulation, Spinning Reserve, Non-Spinning Reserve and Replacement Reserve capacity shall be calculated by dividing the net payments made by the ISO for each service by the MW quantity purchased for each service.  The net payments are the total payments for each service net of sums payable by Scheduling Coordinators who have bought back in the Hour-Ahead Regulation, Spinning Reserve, Non-Spinning Reserve or Replacement Reserve capacity, as the case may be, which they had sold to the ISO in the Day-Ahead Market.
	Ancillary Services obligations may be negative, and credits for such negative obligations will be in accordance with the rates calculated in Sections 2.5.28.1, 2.5.28.2, 2.5.28.3 and 2.5.28.4, except that a Scheduling Coordinator’s credit shall be reduced by the greater of: a) the amount of any self-provision scheduled from resources which are deemed to meet the ISO’s Ancillary Services standards, and which are not subject to the certification and testing requirements of the ISO Tariff; or b) if the ISO has no incremental requirement to be met in the Hour-Ahead Market for an Ancillary Service, the incremental 
amount of such service scheduled by that Scheduling Coordinator in the Hour-Ahead Market.
	The ISO will allocate the Ancillary Services capacity charges, for both Day-Ahead and Hour-Ahead Markets, on a Zonal basis if the Day-Ahead Ancillary Services market is procured on a Zonal basis.  The ISO will allocate the Ancillary Services capacity charges, for both the Day-Ahead and Hour-Ahead Markets, on an ISO Control Area wide basis if the Day-Ahead Ancillary Services market is defined on an ISO Control Area wide basis.
	(b) If, in any Settlement Period, no quantity of Regulation, Spinning Reserve, Non-Spinning Reserve or Replacement Reserve is purchased in the Day-Ahead Market or the Hour-Ahead Market due to the operation of Section 2.5.3.6, then in lieu of the user rate determined in accordance with Section 2.5.28.1, 2.5.28.2, 2.5.28.3, or 2.5.28.4, as applicable, the user rate for the affected Ancillary Service for that Settlement Period shall be determined as follows:
	(i)  If the affected market is a Day-Ahead Market, the user rate for the affected Ancillary Service shall be set at the lowest capacity reservation price for an unaccepted qualified capacity bid in the Day-Ahead Market for the same Settlement Period for that Ancillary Service or for another Ancillary Service that meets the requirements for the affected Ancillary Service.  If there are no such unaccepted bids, the user rate for the affected Ancillary Service shall be the lowest Market Clearing Price for the same Settlement Period established in the Day-Ahead Market for another Ancillary Service that meets the requirements for the affected Ancillary Service.
(ii) If the affected market is an Hour-Ahead Market, the user rate for the affected Ancillary Service shall be set at the lowest capacity reservation price for an unaccepted qualified capacity bid in the Hour-Ahead Market for the same Settlement Period for that Ancillary Service or for another Ancillary Service that meets the requirements for the affected Ancillary Service.  If there are no such unaccepted bids, the user rate for the affected Ancillary Service shall be the user rate for the same Ancillary Service in the Day-Ahead Market in the same Settlement Period.  
(c) With respect to each Settlement Period, in addition to the user rates determined in accordance with Sections 2.5.28.1 through 2.5.28.4 or Section 2.5.28(b), as applicable, each Scheduling Coordinator shall be charged an additional amount equal to its proportionate share, based on total purchases by Scheduling Coordinators of Regulation, Spinning Reserve, Non-Spinning Reserve and Replacement Reserve of the amount, if any, by which (i) the total payments to Scheduling Coordinators pursuant to Section 2.5.27.1 through 2.5.27.4, for the Day-Ahead Market and Hour-Ahead Market and all Zones, exceed (ii) the total amounts charged to Scheduling Coordinators pursuant to Section 2.5.28.1 through 2.5.28.4, for the Day-Ahead Market and Hour-Ahead Market and all Zones.  If total amounts charged to Scheduling Coordinators exceed the total payments to Scheduling Coordinators, each Scheduling Coordinator will be refunded its proportionate share, based on total purchases by Scheduling Coordinators of Regulation, Spinning Reserve, Non-Spinning Reserve and Replacement Reserve.

2.5.28.1	Regulation.  Regulation Up and Regulation Down charges shall be calculated separately.  The user rate per unit of purchased Regulation service for each Settlement Period in the Day-Ahead Market for each Zone shall be calculated by dividing the total Regulation capacity payments by the ISO’s total MW purchases of Regulation for that Settlement Period for that Zone which has not been self provided by Scheduling Coordinators.  The ISO will calculate the user rate for Regulation Up in each Zone for each Settlement Period as:
RegRateUpDA ($/MW) = AGCUpPayDA /AGCUpPurchDA
where:
AGCUpPayDA = Total Regulation Up payments for the Settlement Period in the Day-Ahead Market for the Zone.
AGCUpPurchDA = the total ISO Regulation Up MW purchases in the Day-Ahead Market for the Settlement Period for the Zone, excluding that which has been self provided by Scheduling Coordinators.
The ISO will calculate the user rate for Regulation Down in each Zone for each Settlement Period as:
RegRateDownDA ($/MW) = AGCDownPayDA /AGCDownPurchDA
where:
AGCDownPayDA = Total Regulation Down payments for the Settlement Period in the Day-Ahead Market for the Zone.
AGCDownPurchDA = the total ISO Regulation Down MW purchases in the Day-Ahead Market for the Settlement Period for the Zone, excluding that which has been self provided by Scheduling Coordinators.
For each Settlement Period, each Scheduling Coordinator shall pay to the ISO a sum calculated as follows for each Zone:
RegRateUpDA * AGCUpOblig
where AGCUpOblig is the Scheduling Coordinator’s obligation for Regulation Up in the Zone in the Settlement Period for which it has not self provided.
RegRateDownDA * AGCDownOblig
where AGCDownOblig is the Scheduling Coordinator’s obligation for Regulation Down in the Zone in the Settlement Period for which it has not self provided.
2.5.28.2	Spinning Reserve.  The user rate per unit of purchased Spinning Reserve for each Settlement Period in the Day-Ahead Market for each Zone shall be calculated by dividing the total capacity payments for Spinning Reserve by the ISO’s total MW
purchases of Spinning Reserve for that Settlement Period for that Zone which has not been self-provided by Scheduling Coordinators.  The ISO will calculate the user rate for Spinning Reserve in each Zone for each Settlement Period as:

where:
SpinPayDA = Total Spinning Reserve payments for the Settlement Period in the Market for the Zone Day-Ahead.  
SpinPurchDA = the total ISO Spinning Reserve MW purchases in the Day-Ahead Market for the Settlement Period for the Zone, excluding that which has been self provided by Scheduling Coordinators.
For each Settlement Period, each Scheduling Coordinator shall pay to the ISO a sum calculated as follows for each Zone:
SPRateDA * SpinOblig
where SpinOblig is the Scheduling Coordinator’s obligation for Spinning Reserve in the Zone in the Settlement Period for which it has not self-provided.
2.5.28.3	Non-Spinning Reserve.  The user rate per unit of purchased Non-Spinning Reserve for each Settlement Period in the Day-Ahead Market for each Zone shall be calculated by dividing the total capacity payments for Non-Spinning Reserve by the ISO’s total MW purchases of Non-Spinning Reserve for that Settlement Period for that Zone which has not been self provided by Scheduling 
Coordinators.  The ISO will calculate the user rate for Non-Spinning Reserve in each Zone for each Settlement Period as:

where:
NonSpinPayDA = Total Non-Spinning Reserve payments for the Settlement Period in the Day-Ahead Market for the Zone. 
NonSpinPurchDA = the total ISO Non-Spinning Reserve MW purchases for the Settlement Period for the Zone, excluding that which has been self-provided by Scheduling Coordinators.
For each Settlement Period, each Scheduling Coordinator shall pay to the ISO a sum calculated as follows for each Zone:
NonSpRateDA * NonSpinOblig
where NonSpinOblig is the Scheduling Coordinator’s obligation for Non-Spinning Reserve in the Zone in the Settlement Period for which it has not self provided.
2.5.28.4	Replacement Reserve.  The user rate per unit of purchased Replacement Reserve for each Settlement Period for each Zone shall be as follows:

where
ReplPayTotalDAxt = Total Replacement Reserve payments for the Settlement Period t in the Day-Ahead Market for the Zone x.  
ReplPayTotalHAxt = Total Replacement Reserve payments for the Settlement Period t in the Hour-Ahead Market for the Zone x. 
ReplBuyBackTotal = payments from Scheduling Coordinators buying back Ancillary Service capacity sold in the Day-Ahead Market or replacing capacity that was self-provided in the Day-Ahead Market.
ReplObligTotalxt = the total ISO Replacement Reserve requirement procured in the Day-Ahead Market and Hour-Ahead Market for the Settlement Period t for the Zone x less that which has been self provided by Scheduling Coordinators.
	For each Settlement Period, each Scheduling Coordinator shall pay to the ISO a sum calculated as follows for each Zone:
ReplRatext*ReplOblig 
where 
ReplOblig = DevReplOblig + RemRepl – SelfProv
DevReplOblig is the Scheduling Coordinator’s obligation for deviation Replacement Reserve in the Zone in the Settlement Period and RemRepl is the Scheduling Coordinator’s obligation for remaining Replacement Reserve.
Deviation Replacement Reserve for Scheduling Coordinator j in Zone x for Settlement Period t is calculated as follows:
If ReplObligTotalxt > DevReplObligxt  then:
	
If ReplObligTotalxt < DevReplObligxt  then: