Notional spell level at that point in the calculation, apparently. I think it's clear from the examples -- though one should never have to rely on examples to understand the Letter of the Rules.
See the discussion I've been having in your: thread on personal range.
So, if I understand this, if you have (say) a MuCo spell to change someone else's appearance it might have a level of 6 which would be worked out as a base of 3 (see MuCo guidelines) +1M for "Touch" +2M for "Sun" +0 for "Individual".
There:
3L+1M=4 (increase Range to Touch)
4L+1M=5 (increase Duration to Concentration)
5L+1M=10 (increase Duration to Sun)
If you wanted to reduce the cost by, say, reducing the duration to "concentration" you would be reducing a level 10 spell by 1 magitude, giving 1. If you then wanted to apply the spell to yourself ("Personal") rather than another character ("Individual") you would be reducing a level 5 spell by one magnitude and getting 4.
I don't like the sudden irrational jump in cost at level 5. It strikes me that this is a rules crock to prevent changes in Range, Duration and Target from being too extreme for very low-level spells. It would have been simpler and more easily understandable to say that the spell cost was increased by (say) 50% for each extra jump in RD&T ... though that would make boosting very high level spells really expensive (which might not be a bad thing).
... however, them's the rules.