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# STATE OF CONNECTICUT DEPARTMENT OF ENVIRONMENTAL PROTECTION

In the maner of The State ofConnecticut and MiddletownPowerLLC 

### ) ) ) ) ) Trading Agreement and Order No. 8182 A

Whereas, the Commissioner ofEnvirorunental Protection ("Commissioner") and Middletown PowerLLC ("11P") agree that it is in the public interest that they work cooperatively to improve the air quality within the State ofConnecticut and that the use ofdiscrete emission reduction credit ("DERe") trading to reduce nitrogen oxide (''NOx'') emissions 

### will achieve this result in a timely and cost-effective manner:

A. At the request and with the agreement ofMP, the Commissioner finds the following: 1. This Trading Agreement and Order 5upercedes Trading Agreement and Order 8182 issued on January 12,2000. 2. 

### :MP is an exempt wholesale electric generating company with its principal place of business in Sewickley. Pennsylvania. MP owns one (1) piece offuel-burning equipment ("peaking unit'') identified in Table 1 ofthis Trading Agreement and Order. This peaking unit is a combustion turbine operated at 1866 River Road, Middletown, CT ("facility"). 3. Emission testing performed on the dates indicated in Table 1, resulted in a NOx emission rates as follows: 

## Table 1 Facility/ Fuel Heat Input StackTest FLER Allowable Date of Next Peaking Unit 

### MMBruIbr (ppmvd) 

### IbsIMMBtu Rate Stack Stack 

### IbsIMMBtu Test Test Due Middletown- #2 oil 256 148.8 0.67 0.29 6111/01 6111/06 10

l.:..•. ,•• (Prillted 011 Recycled Papcr) 79 Elm Streel • Hanford, CT 06J06

- 5127 hltp:lldep.$llle,cl.U$ lin Equal OppoNunily EmployerMiddletown PowerLLC 2 Trading Agreement and Order No. 8182 A



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# . ; ..

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# .' 4. MP exceeds the NOx allowable emissionrate for the peaking unit specified in Section 22a-174-22(e) ofthe Regulations as shown in Table 1 ofthis Trading Agreement and Order. 5. Pursuant to the Department ofEnvironmentaJ Protection's 

### "Credit Trading/or Sources with**Irr~gular** 

### NOxEmissions" policy, with a revised date ofFebruary 27, 2001, attached-hereto and incorporated by reference into this Trading Agreement and Order as Exhibit I, the pea.1dng units have peak daily NOx emissions greater than three times the average daily emissions during the ozone season and are therefore 

### considered sources with 

### irregularNOx emissions. 6. Pursuant to Section 22a-174-22(j) ofthe Regulations, during the 

### non-Olone season, MP intends to acquire approved DERCs until May I, 2005 for the peaking units. Pursuant to Section 22a-174-22(j) ofthe Regulations, during the ozone season, 

### rvf.P intends to acquire approved Budget discrete emission reduction credits ("BDERCs") until May I, 2005 for the peaking uruts. B. The Commissioner, 

### in accordance with the provisions ofthis Trading Agreement and Order, and pursuant to Section 22a-174-220) ofthe Regulations, hereby allows MP to comply with Section 22a-174-22 ofthe Regulations through use ofDERC and BDERC trading. C. With the agreement ofMP, the Commissioner, acting under Sections 22a-6, 22a-171, 22a·174, 22a-176, and 22a·l77 ofthe Connecticut General Statutes, orders MP as follows: 1. Upon issuance ofthis Trading Agreement and Order, at the facility, 

### 1vfP shall comply with Section 22a-174-22 ofthe Regulations through DERC trading. Until MP 

### achieves permanent compliance with 

### the emission standard in 

### Section 22a-174-22(e) ofthe regulation orby May 1, 2005 whichever occurs earlier:
a. MP shall use approved DERCs as required under this Trading Agreement and Order; b. MP shall have in its possession sufficient approved DERCs to meet applicable NOx emission limits as allowed under this Trading Agreement and Order; and

c. 

### 1v1P shall comply during operation ofthe peaking units with the FLERS shown in Table 1 oftrus Trading Agreement and Order.

### Middletown Power LLC 3 

### TradingAgreement and OrderNo. 8182 A

I**"-~** ..... 3. 

### Until May 1, 2005, before the first day ofeach month, 

### 1vfP shall have in its possession sufficient approved DERCs for the peakingunits based on the following calculations. Before the first day ofeach month, 1vfP 

### shall estimate DERCs required for such month for the peaking units as follows. i. 

### At all times (mass calculation):

Estimated DERCs (in 

### tons) = 

### {(estimated fuel use in 

### MMBtu) x «FLER)

- (0.95 x NOx allowable emission limit))}**~2000** 

### pounds/ton


### Where: -Allowable emission limit= in 

### IbsfM}..1Bru as sho\Vl1 in Table 1ofthis



### TradingAgreement and Order.

•**FLER~** 

### full load emission rate in IbsIMMBtu as shown in Table I of this

Trading Agreement and Order.



### • Discount (.95)= %5 designmargin applied to the allowable limit.

ii. 

### Duringthe ozone season only (peak. day calculation): themaximwn"actual excess NOx 

### emissions (in 

### lbs) on any ofthe 

### days 

### projecteq. by 

### the Commissionerto be "moderate to unhealthful," "unhealthful;' or "veryunhealthful," divided by 3 and then divided by 13 

### (with the result in ton·s): Estimated DERCs (in tons) [(Maximwn estimated excess NOx in Ibs) 3J**~[13** 

### Ibs/day/ton]
b. No laterthan October30 of2003, and 2004 calculate and permanentlyretire the 

### DERCs used in the precedingozone season as the greaterof: 

### i. the actual total excess emissions for the ozone season in tons, as follows:
DERCs (in tons) «actual fuel use in MMBtu) x «FLER)

- (0.95 xNOx allowable emission**limit)))~** 

### 2000 pounds/ton



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### MiddletownPower LLC

OR 4 

### Trading Agreement and OrderNo. 8182 A



### ('"'\ 

### -..J c. 11. 

### the maximwn actual excess NOx emissions (in 

### lbs) on any ofrhe days projected bythe Commissionerto be "moderate to 

### unhealthful", "unhealthful", or "very unhealthful", divided by 3 and then divided by 13 

## , (with th.e result in tons):
Actual DERCs (tons) used [(Actual excess NOx in Ibs) +3J + [13 lbs/day/ton]
As 

### described in Exhibit 1ofthis TradingAgreement and Order, to**~e** 

### extent thal DERCs used to offset onpeak daybasis exceed the total mass excess emissions, remaining DERCs maybe used in the non-ozone season in the same or subsequent years through May 1, 2005. Duringthe non-ozone season starting on October 1. 

### 2003: In 

### addition to meetingthe 24-houremission limit in Table22-1 ofSection 

### 22a174-22 ofthe Regulations, meet anon-ozone season emission limit of0.15 IblMMBtu. Prior to October I, 2003 and October I, 2004, MP shall estimate 

### and acquire sufficientDERCs and/orallowances needed to comply 

### with Section 22a-174-22(e)(3) ofthe Resulations as follows: Estimated DERCs (tons) [Estimated fuel use in MMBtu from October I 

### through April 30x (Estimated maximum emission rate in IblMMBtu during October 1 through April 30

- (0.95 x 0.15 IblMMBtu))J ) + 2000 

### pounds/ton.



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# ,. -,.,1 

### d. No later thanMay 31 of2004, calculate and permanently retire DERCs used in the precedingnon-ozone season as follows: Actual DERCs (tons) = 

### [Actual fuel use in MMBtu from October I through 

### April 30x (average emission rate in 

### IbJM:MBtu during October I through April 30

- (0.95 x 0.15 IblMMBtu))] + 2000 pounds/ton
.Middletown PowerLLC 

### 5 Trading Agreement and Order No. 8182 A

3. BDERCs shall only be used by other NOx budgetprogram sources located in Connecticut. 

### BDERCs shall only be used to offset ozone season excess emissions, and shall not be used for compliance during the non·ozone season. BDERCs generated during a given year shall onlybe used through the following ozone season. BDERCs are subject to all DERC 

### requirements set forth 

### in this Trading Agreement and Order except for those requirements pertaining solely to non-ozone season DERCS and as otherwise maybe provided. 4. MP shall make and keep records of: 

### daily fuel use and fuel type; excess NOx emissions; the number ofDERCs in its possession, created, purchased and used 

### (by serial number

### if assigned) each month in accordance with 

### the appropriate emission rates and limits in 

### this Trading Agreement and Order; the numberofDERCs used during the ozone season and non-ozone season (the remainder ofthe year); during the ozone season, the ozone classification as forecasted by the Commissioner on theprevious day; as well as documentation anesting to the fact that approved DERCs used during the ozone season were generated during the ozone season. Generatorcertification ofthis fact shall be sufficient. MP shall maintain and submit such records to the Corrunissioner 

### in accordance with Section 22a-174-22 ofthe Regulations. 5. Record Keeping. shall retain records and supporting documentation as described in this TradingAgreement and Order for a minimum offive years. commencing on the date such records were created. MP shall provide the records specified above to the Commissioner

### within thirty (30) days ofreceipt ofa wrinen request from the Commissioner. 6. Annual Emission Statement. No laterthan March 1 ofevery year after issuance ofthis Trading Agreement and Order, MP shall include with the Annual Emission Statement provided to the Cornmissioner 1 arecord ofeach sale or othertransfer, and use ofany and all ofthe DERCs approved 

### within and subsequent to issuance ofthis Trading Agreement and Orderuntil all such DERCs have been used or are no longer in MP's possession. MP shall also include actual NOx emissions from the peaking units and the amount ofall DERCs used (including serial numbers (ifassigned) and approved DERCs generated and/or purchased from other facilities), generated and/or approved for the previous calendar year. These reports shall be on a fonn prescribed by the Commissioner and shall be in r.nonthly increments. Should 

### M:P choose to discontinue the generation ofDERCs, 11P will notify the Commissionerupon discontinuance. 7. Allowance Use. Pursuantto Secrion 22a-174-22(d)(3) ofthe Regulations, MP may use NOx allowances, pursuant to Section 22a-174-22(j) oftheRegulations to achieve all or a portion ofthe reductions required by Section 22a-174-22 ofthe Regulations
.. A.ny allowance used for compliance with Section 22a-174-22(e) ofthe Regulations shall be

### Middletown Power LLC 6 • 

### Trading Agreement 

### and OrderNo. 8182 A



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# '- subject to all restrictions andlorrequirements applicable to DERCs contained in this TradingAgreement and Order. Each allowance used for compliance with 

### Section 223- 174-22 ofthe Regulations shall be equivalent to one discrete emission reduction credit and shall be deducted from :MP's NOx Budget Program compliance account upon such use. Allowances shall be considered used for compliance with 

### Section 22a-174-22 ofthe 

### Regulations when they are transferred from the facility's compliance account oroverdraft accountto a State ofConnecticut NOx allowance retirement account, account ID CTOO00000300 in the NOx Allowance Tracking System. 8. PERC Doubling. At aminimum, DERCs required shall be adjusted upwards by 100% if DERCs are not 

### in !viP's possession for use priorto the first day ofeach month or applicable season. Howeverbased on the gravity ofthe noncompliance. the Commissionermayrequire additional upwards adjustment. 9. Vintage Restriction. Forthepurposes ofcompliance with Section 22a-174-22 ofthe Regulations, DERCs/allowances shall only remain valid for five (5) calendar years from the year ofthe generation/allocation ofsuch DERCs/allowances. DERCs/allowances olderthan five (5) calendar years from their creation/allocation are not valid foruse for compliance with Section 22a-174-22 ofthe Regulations. Notwithstanding the above, DERCsiallowances generated/allocatedpriorto calendar year 2000 are valid for use for compliance with Section 22a-174-22 ofthe Regulations up to and including December 31, 

### 2004 10. FLERExceedance. Noncompliance with 

### an established FLER shall subject MP to make restitution by matching the quantityofemissions ("true up'') causedby the exceedance 

### plus a 100% premium. The true up 

### in tons ofDERCs shall be equal to the FLER exceedance 

### in lbs&11v1Btu, multiplied bythe total heat input during the period of noncompliance divided by 2000 lbs/ton. lfthe period ofnoncompliance is not knO\VIl., 

### the time period from the completion ofthe last/previous Department witnessed emission test through the date the FLER compliance is achieved as approved by the Commissioner shall be used. However. nothing in this Trading Agreement and Order shall affect the Commissioner's authority to institute anyproceeding ortake any other action to require additional upward adjustment, based on the gravity ofany alleged noncompliance or violation oflaw. 

### 11. FLERModification. FLERs set forth 

### in Table 1 ofthis Trading Agreement and Order maybe modified only afterthe consent ofthe Commissionerby wrinen modification of this Trading Agreement and Order. 12. Emissions Testin2. Pursuant to Section 22a·174-22(k) ofthe Regulations, 

### :MP shall conduct NOx emission tests ofthe peaking units at least once every five years

### Middletown Power LLC 7 Trading Agreement 

### and OrderNo. 8182 A commencing from the dates ofthe NOx emission tests for the peaking Wlits as provided in Table 1 ofthis Trading Agreement and Order. 13. Extension. No laterthan May 1, 2005, with respect to the peaking units, MP shall comply 

### with the requirements ofSection 22a-174-22(d)(J) ofthe Regulations. However, after full. programreview of

### thiS' and otherTrading Agreements and Orders and, ifdetennined to be 

### appropriate, the Commissionermay grant awritten extension ofthis Trading Agreement and Order. 14. Future Compliance Report. On orbefore September 1, 2004, MP shall submit areport indicating how the facility shall comply with section 22a-174-22 ofthe Regulations with 

### respectto the Peaking units on and afterMay 1, 2007. 15. Full compliance. 

### 1v1P shall notbe considered in full compliance with this Trading Agreement and Orderuntil all actions required by this Trading Agreement and Orderhave been completed as approved and to the Commissioner's satisfaction. 16. Approvals. MP shall use best efforts to submit to the Commissioner all documents required bythis Trading Agreement and Orderin a complete and approvable form. 

### Ifthe Commissionernotifies 

## M:P that any document or other action is deficient, and does not approve it with conditions or modifications, it is deemed disapproved, and 

### :M:P shall correctthe deficiencies and resubmit it within the time specified by the Commissioner or, ifno time is specifiedby the Commissioner, within 30 days ofthe Conunissioner's notice ofdeficiencies. 

### In approving any document or other action ill1derthis Trading Agreement and Order, the Commissionermay approve the document or other action as submitted or performed or with such conditions ormodifications as the Commissioner deems necessary to carry outthe purposes ofthis Trading Agreement and Order. Nothing 

### in this paragraph shall excuse noncompliance or delay. 17. Definitions. As used in this Trading Agreement and Order, "Commissioner" means the Commissioner ofEnvironmental Protection or an agent ofthe Commissioner. "Ozone season" means the period from May 1 through September 30 in any given calendaryear. The date of"issuance" ofthis Trading Agreement and Order is the date the Trading Agreement and Order is deposited in the U.S. mail orpersonally delivered, whichever is earlier. 18. Dates. The date ofsubmission to the Commissioner ofany document required by this Trading Agreement and Order shall be the date such document is received by the Commissioner. The date ofany notice by the Commissioner under this Trading Agreement and Order, including but not limited to notice ofapproval or disapproval of any document or other action, shall be the date such notice is deposited in the U.S. mail or is personally delivered, whicheveris earlier. Except as othenvise specified in this Trading

/Middletown PowerLLC 8 Trading Agreement and Order No. 8182 A



# () Agreement and Order, the word "day" as used in this Trading Agreement and Order means calendar day. Any document or action which is required by this Trading Agreement and Orderto be submitted orperformed by a date which falls on a Saturday, Sunday or a Connecticut or federal holiday shall be submitted orperformed by the next day which is not a Saturday, Sunday or Connecticut or federal holiday I 19. Certification ofdocuments. Any document, including but not limited to any notice, which is required to be submitted to the Commissionerunder this Trading Agreement and Order shall be signed 

### by:rv1P or, ifMP is not an individual, 

### by MP's chiefexecutive officer or a duly authorized representative ofsuch officer, as those terms are defined in Section 22a430-3(b)(2) ofthe Regulations, and bythe individual(s) responsible for actually preparing such document, and MP orMP's chiefexecutive officer and each such individual shall certify in writing as follows:



### "Ihave personally examined and am familiar with 

### the infonnation submitted 

### in this document and all attachments thereto, and I certify, based on reasonable investigation, including my inquiry ofthose individuals responsible for obtaining the infonnation, that 

### the submitted. information is true, accurate and complete to the best ofmy lmowledge and belief. I understand that any false statementmade 

### in the submitted information is pwrishable as a criminal offense under Section 53a-157b ofthe Connecticut General Statutes and any other applicable law." 

### 20.

21.



### 22. Noncompliance. This Trading Agreement and Orderis a final order ofthe Commissioner with respect to the matters addressed herein, and is nonappealable and immediately enforceable. Failure to comply with this Trading Agreement and Order may subject l\.1P to an injunction and penalties. False statements. My false statement in any infonnation submitted pursuant to this Trading Agreement and Order is punishable as a criminal offense under Section**53a~157b** ofthe Connecticut General Statutes and any other applicable law. Notice oftransfer; liability ofMP and others. Until MP has fully complied with this Trading Agreement and Order, NIP shall notify the Commissionerin writing no later than fifteen (15) days after transferring all or anyportion ofany ofthe facilities, the operations, the sites or the businesses which are the subject ofthis Trading Agreement and Order or after obtaining a new mailing or location addresses. MP's obligations under this Trading Agreement and Order shall not be affected. by the passage oftitle to any property to any otherperson or municipality. 23. Commissioner's powers. Nothing 

### in this Trading Agreement and Order shall affect the Commissioner's authority to institute any proceeding or take any other action to prevent or abate violations oflaw, prevent or abate pollution, recover costs and natural resourceMiddletown PowerLLC 

### 9 Trading Agreement and OrderNo. 8182 A



# C) <,

# - damages, and to impose penalties for past, present, orfuture violations oflaw. Ifat any 

### time the Commissionerdetennines that the actions taken 

### bylvfP pursuant to this Trading Agreement and Orderhave successfully corrected all violations, fully 

### characterized the extent or degree ofany pollution, or successfully abated orprevented pollution, the Conunissionermay institute anyproceeding to require 

### !viP to undertake further investigation orfunher action to prevent or abate violations orpollution. 

# , 24. MP's 

### obli23tions under law. Nothing 

### in this Trading Agreement and Order shall relieve MP ofother obligations under applicable federal, state and local law. 25. No assurance 

### by Commissioner. No provision ofthis Trading Agreement and Order and no action orinaction by the Commissioner shall be construed to constitute an assurance by the Commissionerthat the actions taken by:MP pursuantto this Trading Agreement and Order will result 

### in compliance orprevent or abate pollution. 26. Access to facility. Any representative ofthe Department ofEnvironmental Protection may enter any ofthese facilities without priornotice for the purposes ofmonitoring and enforcing the actions required or allowed by this Trading Agreement and Order. 27. No effect on rights ofotherpersons. This Trading Agreement and Order neither creates nor affects any

### rights ofpersons or municipalities that are not parties to this Trading Agreement and Order. 28. No Creation ofPropertY

### Riehts. This Trading Agreement and Order does not create any property 

### rigbts with respect to these DERCs. 29. Notice to Commissioner ofchanges, Within fifteen (15) days ofthe date MP becomes aware ofa change in any information submitted to the Corrunissionerunder this Trading Agreement and Order, orthat any such infonnation was inaccurate or misleading or that any relevant information was omitted, :MP shall submit the correct or omitted information to the Commissioner. 30. Notification ofnoncompliance. 

### In the event that MP becomes aware that it did not or may not comply, or did not or may not comply on time, 

### with anyrequirement ofthis Trading Agreement and Order or ofany document required hereunder, MP shall immediately notify by telephone the individual identified in the next paragraph and shall take all reasonable steps to ensure that any noncompliance or delay is avoided or, if unavoidable, is minimized to the greatest extentpossible. Within ti"ve (5) days ofthe initial notice, :MP shall submit 

### in writing the date, time, and duration ofthe noncompliance and the reasons for the noncompliance or delay and propose, for the review and wrinen approval ofthe Commissioner, dates by which compliance will be achieved, and MP shall comply with any dates which may be approved in writing by the



# ,

### Middletown Power LLC 10 

### TradingAgreement and OrderNo. 8182 A



## (') J Commissioner. Notification byMP shall not excuse noncompliance ordelay, and the Commissioner's approval ofany compliance dates propos.ed shall not excuse noncompliance or delay unless specificallyso stated by 

### the Commissioner in 

### writing. 31. 

### Submission ofdocuments. Any 

### document required to besubmined to the Commissioner underthis Trading Agreement and Ordershall, unless otherwise specified in this Trading 

### Agreement and

## order or in WTiting by

### the Commissioner, be directed to: Mr. 

### Michael lafleur 

### Department ofEnvirorunental Protection Bureau of

### Air Management Compliance and Field Operations Division Emissions and CreditTrading Section 79 Elm Street Hartford, CT 06106

### Middletown PowerLLC 

### 11 Trading Agreement and OrderNo. 8182 A

, j 

### 1vfP 

### consents to the issuance ofthis 

### TradingAgreement and Orderwithout further notice. The W1dersigned certifies that he/she is fully authorized to enter into this Trading Agreement and 

### Order and to legallybind MP to the terms and conditions ofthe 

### TradingAgreement and Order. Middletown Power LLC

:i::nue

# /=c.~ Title 

# £eslC?na! 

# mCLf\28eL
Date 

# G/-Cf-D3
Issued as afinal order ofthe 

### Commissioner ofEnvironment

# --1=1~:-''L<'1f------'p.-=---, 2003.

CITY OFMIDDLETOWN LAND RECORDS MAILED CERTIFIED MAIL, RETURN RECEIPT REQUESTED 

### CertifiedDocumentNo.