# STATE OF CONNECTICUT DEPARTMENT OF ENVIRONMENTAL PROTECTION

STATE OF CONNECTICUT AND MIDDLETOWN POWER LLC TRADING AGREEMENT AND ORDER NO. 8214A MODIFICATION NO.2

TRADING AGREEMENT AND ORDERMODIFICATION In the matter ofa Trading Agreement and Orderbetween the Commissioner ofEnvironmental Protection ("Commissioner") and Middletown PowerLLC ("MP"). WHEREAS, the Commissioner and MP, having agreed to the tenns and conditions set forth in Trading Agreement and OrderNo. 8214A issued on April 30, 2003, and a Modification thereto issued on September 16,2004, do now, bymutual agreement, modify Trading Agreement and Order No. 8214A as follows: I. Delete the date September 30,2004, and substitute therefor May 1,2009, in paragraphs A.9., Cl., C.2., C3.a., C.3.a. footnote 3, C.3.b., C.3.c., C.3.d., C3.e., C.3.f., and C6. 2. Delete paragraph A.6. and substitute the following therefor: Pursuant to Section 22a-174-22(j) ofthe Regulations, MP intends both to acquire and generate approved DERCs until May I, 2009 for boiler 3 at the facility. Approved DERCs are defined for purposes ofthis Trading Agreement and Order as those for which the Commissionerhas provided written authority for use in compliance with Section 22a-174-22 ofthe Regulations. 3. Delete paragraph A.IO. in its entirety. 4. Delete paragraph B.I. and substitute the following therefor: Comply with Section 22a-174-22(d)(l) ofthe Regulations through use ofBudget Discrete Emission Reduction Credit ("BDERC") and DERC trading. 5. Delete paragraph C.6.b. and substitute the following therefor: During the non-ozone season:

( Printed on Recycled Paper) 79 Elm Street • Hartford. CT 06106 - 5127 An Equal Opportunity EmployerMiddletown PowerLLC 2 Trading Agreement and Order No. 8214A Modification No.2 During the period from October I through April 30, inclusive, each year until May 1,2009, the boiler shall, in addition to meeting the 24-houremission limit in Table 22-1 ofSection 22a-174-22 ofthe Regulations, meet a non-ozone season emission limit ofO.15Ib/MMBtu. Priorto October I, 2006, October I, 2007, and October I, 2008, MP shall estimate and acquire the amount ofnon-ozone season DERCs or allowances needed to complywith Section 22a-174-22(e)(3) ofthe Regulations as follows: Estimated DERCs (tons) = [Estimated fuel use in MMBtu from October I through April 30 x (lower ofthe estimated seasonal average NOx emission rate orthe proportioned 24-hour allowable emission limit in IblMMBtu during October I through April 30

- (0.95 x 0.15 IbIMMBtu))] + 2000 pounds/ton. No laterthan May 31 of2007, 2008, and 2009, in addition to the DERCs retired pursuant to paragraph C.6.a. ofthis Trading Agreement and Order, MP shall calculate and permanently retire DERCs used in thepreceding non-ozone season as follows: Actual DERCs (tons) = [Actual fuel use in MMBtu from October I through April 30 x (lower ofthe actual seasonal average NOx emission rate orthe proportioned 24-hour allowable emission limit in IblMMBtu during October I through April 30

- (0.95 x 0.15Ib/MMBtu))] + 2000 pounds/ton. 6. Delete paragraph C.I

## o. and substitute the following therefor: Annual Emission Statement and Non-Ozone Season Emission Statement. No later than March I for the previous calendaryear and July 30 (forthe Octoberthrough April time period only starting in 2003) ofevery year after issuance ofthis Trading Agreement and Order, MP shall provide to the Commissioner, arecord of each sale orothertransfer, and use ofany and all ofthe DERCs approved within and subsequent to issuance ofthis Trading Agreement and Order until all such DERCs have been used or are no longerin MP's possession. MP shall also include actual NOx emissions from the boiler 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 calendaryear and Octoberthrough April time period. These reports shall be on a form prescribedbythe Commissioner and shall be in monthly increments, and by ozone and non-ozone seasons. 7. Delete paragraph C.12. and substitute the following therefor: DERC Shortfall. At aminimum, DERCs required shall be adjusted upwards byMiddletown PowerLLC 3 Trading Agreement and Order No. 8214A Modification No.2 100% ifDERCs are not in MP's possession for use priorto the first day ofeach month or applicable season. However, nothing in this Trading Agreement and Order shall affect the Commissioner's authorityto institute anyproceeding ortake any other action to require additional upward adjustment, based on the gravity of any alleged noncompliance or violation oflaw. MP shall permanently retire the quantity ofemissions caused by the exceedance plus a 100% premium within sixty (60) days ofMP's discovery ofthe DERC shortfall. MP shall certify and report any such DERC retirement to the Commissioner in accordance with paragraph C.3l. ofthis Trading Agreement and Order. 8. Delete paragraph C.14. and substitute the following therefor: Extension. No laterthan May I, 2009, with respect to the boiler, MP shall comply with the requirements ofSections 22a-174-22(d)(1) and 22a-174-22(d)(2)(A) of the Regulations. There is no assurance that the Commissionerwill grant awritten extension ofthis Trading Agreement and Order. 9. Delete paragraph C.IS. and substitute the following therefor: Future Compliance Report. On orbefore September I, 2008, MP shall submit a report in writing to the Commissioner, as directed in paragraph C.32. ofthis Trading Agreement and Order, indicating how the facility shall complywith section 22a-174-22 ofthe Regulations with respect to the boiler on and afterMay 1,2009. 10. Delete paragraph C.18. and substitute the following therefor: Definitions. As used in this Trading Agreement and Order, "Approved DERCs" are those for which the Commissionerhas provided written authorization for use in compliance with Section 22a-174-22 ofthe Regulations; "Commissioner" means the Commissioneror a representative ofthe Commissioner; "Non-ozone season" means the period from October I through April 30 in any given calendar year; "Ozone season" means the period May I through September 30 in any given calendaryear. 11. Delete paragraph C.19. and substitute the following therefor: Dates. The date of"issuance" ofthis Trading Agreement and Orderis the date the Trading Agreement and Orderis deposited in the U.S. mail orpersonally delivered, whicheveris earlier. The date ofsubmission to the CommissionerofMiddletown PowerLLC 4 Trading Agreement and Order No. 8214A Modification No.2 any document required bythis Trading Agreement and Order shall be the date such document is received by the Commissioner. The date ofany notice bythe Commissionerunder this Trading Agreement and Order, including but not limited to notice ofapproval ordisapproval ofany document or other action, shall be the date such notice is deposited in the U.S. mail or is personally delivered, whichever is earlier. Except as otherwise specified in this Trading Agreement and Order, the word "day" as used in this Trading Agreement and Ordermeans calendarday. Any document or action which is required bythis Trading Agreement and Order to be submitted orperformedby adate which falls on a Saturday, Sunday, or a Connecticut or federal holiday shall be submitted orperformedbythe next day which is not a Saturday, Sunday, or Connecticut orfederal holiday. 12. Delete the word "individual" and substitute therefor the word "section" in paragraph C.31. 13. Delete the name "Mr. Michael LaFleur" in paragraph C.32.

All otherterms and conditions ofTrading Agreement and Orderno. 8214A issued bythe Commissioner acting under Chapter446c, Sections 22a-6, 22a-171, 22a-174, 22a-176, and 22a177 ofthe Connecticut General Statutes shall remain in effect.Middletown Power LLC 

### 5 Trading Agreement and Order No. 82l4A Modification No.2 MP hereby consents to the entry ofthis modification to the Trading Agreement and Order without further notice. Middletown PowerLLC Signature:

# ~v-:J~ Type Name: Daniel W. oeri:eron Type Title: Plant Manager Date: June 13.200S

a modification ofan Order ofthe CommissionerofEnvironmental Protection.

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