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# STATE OF CONNECTICUT DEPARTMENT OF ENVIRONMENTAL PROTECTION

STATE OF CONNECTICUT AND NORWALK POWER LLC TRADING AGREEMENT AND ORDER NO_ 8184A MODIFICATION NO.2
TRADING AGREEMENT AND ORDER MODIFICATION In the matter ofaTrading Agreement and Orderbetween the CommissionerofEnvironmental Protection ("Commissioner") and NorwalkPowerLLC ("NP")_ WHEREAS, the Commissioner and NP, having agreed to the terms and conditions set forth in Trading Agreement and OrderNo_ 8184A signedby the Commissioneron April 22, 2003, and Trading Agreement and Order 8184A Modification 1 issued March 21, 2005 do now, by mutual agreement, modify saidTrading Agreement and Order No. 8184A as follows: L Delete paragraph k L and substitute the following therefore: This Trading Agreement and Order supersedes Trading Agreement and Order 8184 issued on January 12,2000. 2. Delete paragraph A.5. and substitute the following therefor: Reserved. 3. Delete the date May 1,2005, and substitute thereforMay 1,2009, in paragraphs k6. andC.L 4. Delete paragraph C.2.a. and substitute the following therefor: Until May 1,2009, before the first day ofeach month NP shall have in its possession sufficient approved DERCs for the current day for the peaking unit based on the following calculations; Before the first day ofeach month, NP shall estimate DERCs required for such month for the peaking unit as follows: (i) At all times: Estimated DERCs (in tons) use = [«FLER in IbslMMBtu)

- (0.95 x NOx allowable rate in lbslMMBtu)) x (estimated fuel use in MMBtu)] -;. 2000 pounds/ton

(Printed on Recycled Paper) 79 Elm Street • Hartford, CT 06106· 5127 An Equal Opportunity EmployerNorwalkPowerLLC 2 Trading Agreement and Order No. 8184A Modification No.2

No laterthan the twentieth day ofeach month, NP shall calculate and permanently retire DERCs used in the preceding calendarmonth, as follows: Actual DERCs (in tons) = [((FLER in IbslMMBtu)

- (0.95 x NOx allowable rate in IbsIMMBtu)) x (actual fuel use in MMBtu)] .;. 2000 pounds/ton Where: a. NOx allowable rate = allowable limitrate in IbslMMBtu shown in Table I of this Trading Agreement and Order. b. FLER

# = full load emission rate in IbslMMBtu as shown in Table I ofthis Trading Agreement and Order. c. Discount (0.95) = 5% design margin applied to the allowable limitrate. ii) During the ozone season only: No laterthan December 31 st each year, NP shall acquire and permanently retire seven ozone season DERCs for every actual ton ofexcess NOx emitted from the peaking unit during the previous ozone season based upon the actual emissions for each day that Connecticutone hour ozone levels were forecasted to be "moderate to unhealthful", "unhealthful", or "very unhealthful", until such time that the EPA revokes the I-hour standard. Upon such revocation, NP shall calculate and permanently retire seven ozone season DERCs for every actual ton ofexcess NOx emitted from the peaking unit during such ozone season based upon the actual emissions for each day that Connecticut eighthour ozone levels were forecasted to be "moderate to unhealthy for sensitive groups", "unhealthy for sensitive groups", "unhealthy", or "very unhealthy". Where: Actual ton ofexcess NOx emitted

# =[((FLER in IbslMMBtu)

- (0.95 x NOx allowable rate in IbslMMBtu)) x (actual fuel use in MMBtu)] .;. 2000 pounds/ton The total actual tons ofexcess NOx emitted from the peaking unit during forecasted ozone exceedance days shall be multipliedby seven and then rounded to the next greater whole ton, to determine the number ofDERCs to be permanentlyretired. This requirementis in addition to the NP's requirementto estimate excess emissions and subsequentpermanentretirement ofa sufficient number ofapproved DERCs in accordance with paragraph C.2.a.(i) ofthis Trading Agreement and Order.Norwalk PowerLLC 3 Trading Agreement and Order No. 8184A Modification No.2

5. Delete paragraphs C.2.b. and substitute the following therefor: Reserved. 6. Delete paragraph C.2.c. and substitute the following therefor: During the non-ozone season: Until May 1,2009, from October 1 through April 30, inclusive, each year, the peaking unit 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 of0.15 Ib/MMBtu. Priorto October 1, 2006, 2007, and 2008, NP shall estimate and acquire the amount ofDERCs or allowances required for such non-ozone season needed to comply with Section 22a-174-22(e)(3) ofthe Regulations as follows: Estimated DERCs (tons) use

# =[Estimated fuel use in MMBtu from October 1 through April 30 x (allowable emission rate in IbslMMBtu

- (0.95 x 0.15 Ib/MMBtu))] + 2000 lbs/ton 7. Delete paragraph C.2.d. and substitute the following therefor: No laterthan May 31 of2007,2008, in addition to the DERCs retired pursuant to paragraph C.2.a. ofthis Trading Agreement and Order, NP shall calculate and permanently retire DERCs used in the preceding non-ozone season as follows: Actual DERCs (tons) used = [Actual fuel use in MMBtu from October 1 through April 30 x (allowable emission rate in Ibs/MMBtu

- (0.95 x 0.15 Ib/MMBtu))] + 2000 lbs/ton 8. Delete paragraph C.6. and substitute the following therefor: (a) Annual DERC Report. No laterthan March 1 ofevery year after issuance ofthis Trading Agreement and Order, NP shall submit in writing to the Commissioner, arecord ofeach sale or othertransfer ofDERCs for the previous calendaryear. NP shall also include actual NOx emissions from the peaking unit and the amount ofall DERCs used (including serial numbers (if assigned) and DERCs purchasedfrom otherfacilities). These reports shall be on forms prescribed by the Commissioner and shall be in monthly increments, and by ozone and non ozone seasons. (b) Forthe Non-ozone season: No laterthan July 30 ofevery year afterissuance"

10. Delete paragraph e.S. and substitute the following therefor: 9. Delete paragraph C.7. and substitute the following therefor:

a. In orderfor NP to use NOx allowances, NP shall create a general account oruse an existing compliance account or overdraft account in EPA's NOx Allowance Tracking System ("NATS"); and Trading Agreement and Order

No. SIS4A Modification No.2 4

DERC Shortfall. At a minimum, DERCs required shall be adjusted upwards by 100% ifDERCs are not in NP'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 authority to institute any proceeding or take any other action to require additional upward adjustment, based on the gravity of any alleged noncompliance or violation oflaw. NP shall permanently retire the quantity ofDERCs equivalentto the excess emissions plus a 100% premium within sixty (60) days ofNP's discovery ofthe DERC shortfall. NP shall certify and report any such DERC retirement to the Commissionerin accordance with paragraph C.30. ofthis Trading Agreement and Order. ofthis Trading Agreement and Order, NP shall submit in writing to the Commissionerthe non-ozone season fuel consumption and amount ofall DERCs used (including serial numbers (ifassigned) and approved DERCs purchased from otherfacilities) for the peaking unit during the Octoberthrough April time period in the previous calendaryear. These reports shall be on a form prescribed by the Commissioner.

b. Each allowance used for compliance with Section 22a-174-22 ofthe Regulations shall be equivalentto one discrete emission reduction credit. Allowances shall be considered used for compliance with Section 22a174-22 ofthe Regulations when they are transferred from the facility's NOx general account in the NATS orthe facility's NOx compliance account in the NATS to the CT State NOx Retirement Account (Account ID CT0000000300 in the NATS). Allowance Use. Pursuantto Section 22a-174-22(d)(3) ofthe Regulations, NP may use NOx allowances, until May 1,2009, for the peaking unit pursuantto Section 22a-174-22(j) ofthe Regulations to achieve all or aportion ofthe reductions required by Section 22a-174-22 ofthe Regulations. Any allowance used for compliance with Section 22a-174-22(e) ofthe Regulations shall be subject to all restrictions and/orrequirements applicable to DERCs contained in this Trading Agreement and Order; Norwalk PowerLLCNorwalk PowerLLC 5 Trading Agreement and Order No. 8184A Modification NO.2

II. Delete paragraph C.1O. and substitute the following therefor: FLERExceedance. Noncompliance with an establishedFLER shall subject NP to make restitution by matching the quantity ofemissions ("true up") caused by the exceedance plus a 100% premium. The true up in tons ofDERCs shall be equal to the FLER exceedance in IbslMMBtu, multiplied by the total heat input during the period ofnoncompliance divided by 2000 lbs/ton. Ifthe period of noncompliance is not known, the time period from the completion ofthe last/previous Commissionerwitnessed 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 affectthe Commissioner's authority to institute any proceeding ortake any other action to require additional upward adjustment, based on the gravity ofany alleged noncompliance or violation oflaw. NP shall permanently retire DERCs calculated in accordance with the above plus a 100% premium within sixty (60) days ofNP's discovery ofthe FLER exceedance. NP shall report any FLER exceedance to the Commissionerin accordance with paragraph C.30. ofthis Trading Agreement and Order. 12. Delete paragraph C.13. and substitute the following therefor: Extension. No laterthan May 1,2009, with respect to the peaking unit, NP shall comply with the requirements ofSections 22a-174-22(d)(I) and 22a-174- 22(d)(2)(A) ofthe Regulations. There is no assurance that the Commissionerwill grant a written extension ofthis Trading Agreement and Order. 13. Delete paragraph C.14. and substitute the following therefor: Future Compliance Report. On orbefore September I, 2008, NP shall submit a report in writing to the Commissioner, as directed in paragraph C.31. ofthis Trading Agreement and Order, indicating how the facility shall comply with Section 22a-174-22 ofthe Regulations with respect to the peaking unit on and afterMay I, 2009. 14. Delete paragraph C.17. and substitute the following therefor: Definitions. As used in this Trading Agreement and Order, "ApprovedDERCs" are those for which the Commissionerhas provided written authorization for use in compliance with Section 22a-174-22 ofthe Regulations; "Commissioner"'

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NorwalkPowerLLC 

### 6 Trading Agreement and Order No. 8184A Modification No, 2

means the Commissioneror arepresentative ofthe Commissioner; "Non-ozone season" means the period from October 1 through April 30 in any given calendar year; "Ozone season" means the periodMay 1 through September 30 in any given calendaryear. 15. Delete paragraph C18. 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 Commissionerofany documentrequired by this Trading Agreement and Order shall be the date such document is received by the Commissioner. The date ofany notice by the Commissionerunderthis Trading Agreement and Order, including butnot limited to notice ofapproval or disapproval ofany document or other action, shall be the date such notice is deposited in the U.S. mail oris 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 by this Trading Agreement and Orderto be submitted orperformed by a date which falls on a Saturday, Sunday or a Connecticut orfederal holiday shall be submitted orperformedby the next day which is not a Saturday, Sunday orConnecticutorfederal holiday. 16. Delete the word "individual" and substitute therefore the word "Section" in paragraph C30. 17, Delete the name "Mr. Michael LaFleur" in paragraph C31, All otherterms and conditions ofTrading Agreement and Orderno. 8184A and Modification 1 issued by the Commissioner acting under Chapter446c, Sections 22a-6, 22a-171, 22a-174, 22a176, and 22a-l77 ofthe ConnecticutGeneral Statutes shall remain in effect.'I

Norwalk PowerLLC 7 Trading Agreement and Order No. 8184A Modification No.2
NP hereby consents to the entry ofthis modification to the Trading Agreement and Order without further notice.
Signature: Type Name: Type Title: Date: 

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Issued as a modification ofan Orderofthe CommissionerofEnvironmental Protection.

GinaMcCarthy Commissioner
MAILED CERTIFIED MAIL,

RETURN RECEIPT REQUESTED CertifiedDocumentNo. Date