### Exhibit 3 

# STATE OF CONNECTICUT DEPARTMENT OF ENVIRONMENTAL PROTECTION

In the matter of
The State of Connecticut
and 

### Norwalk Power LLC Trading Agreement and Order No. 8184

Whereas, the Commissioner of :Snvironmental Protection ("Commissioner") and Nor-

.....alk**~ower** LLC. ("Nptl) agree. that**i~** is**~n.** t;.he. public**int~rest tha~**  they work coooeratlvely to**~morove** tne**a~r** guallty wltnln the State**O~ COPJleC~lcut**  and thar. the use of emission reduction eredl. t· ("3:r?C") trading to reduce nitrQgen 

### oxide ("NOY.") emissions will achieve this =esult in a timely and cost·effecti,e manner:

A. At the request and with the agreement of NP, the Commissioner finds the 

### following:
1. N? is an exemot wholesale electric generating cortr.:lany with its 

### orincioal clace of business in Sewickley,**Pennsylvan~a.** On 

### or**before-Dece~ber** 31, 1939 NP 

### will Durchase from The Connecticut Light and Power Company and**~hen** 

### own one (1) 

### piece of fuel-burning equipment**("peak~ng unit~)** **iden~ified.in.Table** 1,**of~~his Tra~ing**  

### Agreement ana Order. IhlS peaklng un1t 19 a**co~~us~~on** 

### turb1ne. 2. On 

### or before December 31, 1999**N~G** 

### Norwalk Harbor Ooerations Inc. will operate the peaking unit identified in Table I-of this Trading Agreement and Order at N?'S 

### facility.

3. 

### Official U. S. 

### Environmental Protection Agency**("EP.~")** 

### Reference 

### Method 73 scack testing 

### Derformed 

### on the date 

### indicated 

### in Table I, 

### resulced in 

### a NCx emission rate 

### set forth in Table 

### 1.

Table 1 

# ""
- HOx EMISSION RATE: AND ?.ACT LIMIT (lbs/M!Gtu) ?eaki:J.g ?U:::L ?LER HOx RAeT Stack Stack Test Date of

Unit (lbs/MM3tu) Rate Test Rate Rate Stack Test (lbs/MM3tu) (?pmvd) (lbs/MM3tu)

/ ••No;"walk other 0.52 

# I 0.289 

# I 113.5 

# I 0.47 

# I 7/10/96

:lar.oor 10 

### oil •

4.

5. 

### The emission rate for the peakinq unit and fuel sgecified in Table 1 is in excess of Section 22a-174-22, Table 22-2, OI 

### the Regulations of Connecticut State Agencies ("Regulations"), NOx emission**ra~e** 

### limits (Reasonably Avallable Control Technology**"R~CT").** 

### ?ursuant to Section 22a-174-22 (b) of the Regulations, the oeaking unit is subject to Sections**22a-17~-22(d)** 

### through (k) of the Regulations, pertaining to the control of NOx emissions.
6. In accordance with Section 22a-174-22{j) of the Regylations, NP proposes that for the**pe~king** 

### unit identified in Table 1, N? shall
I

# InitialS~~ 79 Elm (?rinted on ReeyaJ:-d**P.p~r) Slre~!**  • r.utford. cr 06106

- 5127 http:!ld**~p.5I1te.** ct.\:5Norwalk ?ower LLC Trading Agreement and Order No. 8184

use ERC trading when burning "other oil", as th=.t term is defined in Section 22a-174-22 of the Regulations. 7, ?ursuant to the Department of**~nvironmental** Protection's**~Credit** 

### Trading ror Sources 

### with Irregular NOx**Emissions~** policy, with a revisea date of November 5, 1997, attached hereto and**inco~orated** by reference into this Tradinq Agreement and Order as Exhiblt 1, the peaking unit has peak daily 

### NOx emissions greater than tpxee times the average daily-emissions during the ozone season**a~d** is therefore considered a source with irregular NOx emissions.
8. 3ased on DE? anproved stack test data, it has been determined that the peaking uniE's emissions will not meet 

### the aoplicable reauirements of RACT contained in Section 22a-174:22 of the Regulations. 

### NP proposes to use a Full Load Emission Rate 

### ("FLER") identified in Table i for the purposes of calculating ERCs required.

9. NP intends to continue acquiring approved ERCs as needed.
10. Approved ERCs are defined for the puroose of this Trading Agreement ana Order as those for which the Commissioner has provided written authorization for use in comnliance with Section 22a-174-22 of the**~egulatio:1s.** - 3. The Commissioner, 

### in**accord~~ce** with the provisions of this Trading Agreement and Order, and Dursuant to Sect10n 22a-174-22 (j) of the Regulations hereby allows-NP to comply with Section 22a-174-22 of the Regulations through use of ERC trading referenced in Section 

### A( herein, to acnieve the**nitr~en** oxide emission reduction reauired by Sect10n 22a-174- 22 (d) (2) of the Regulations.

- C. With the agreement of NP, the Commissioner, acting under**Co~~ecticut** General Statutes Sections 22a-5, 22a-171, 22a-174, 22a-l76, and 22a-177, orders NP as follows: 1. Uoon issuance of this Trading Agreement and Order NP shall comoly**d~ring** operation of the peak1ng**~~it** with the 

### FL3R**show~** in Taole 1 aDove.

2.

3.

4.

5. On and after the date which NP purchases the neaking unit identified in Table 1 of this Trading Agreement and Order, N? shall have in its oossession sufficient apnroved ERCs to meet applicable aACT requirements and the requirements of this Traaing Agreement a:1d O=aer. 

### On and after the date which N? purchases the oeaking unit identified in Table 1 of this Trading Agreement and**Order~** NP shall, on a daily basis, document =.nd recorB tne·amounts of all**~uel** used by the oeaking unit each day and the number of ERCs used for the ozone season (from 

### May 1 tnrough September 30 of each year) and non-ozone season (the remainder·of the year). 

### On and after the date which 

### NP purchases the peaking unit identified in Table 1 of this Trading Agreement' and Order, pursuant to Section 22a-174-22{j) of the rtegulat10ns, NP shall aCQuire from The COIh.ecticut**~ight** and Power**Compa~y** sufficient approved non-ozone season ERCs In order to meet aoo11cable**R~CT** regulrements and the requirements of chis Trading Agreement and Order for the**o~eration** of the peaking**u-~it ident~f2ed**  in**T~ble** 1 of this Trading Agreement and Order durlng the montn of**Dece~Der,** 1999.

. Exceot as provided in paragraph C.4. of this Trading Agreement and Order( on and after the dace which NP ourchases the oeaking unit identlfied in Table 1 of this Trading Agreement and Order, pursuant to Section**22a-17~-22(j)** of the**Regulatlons~** 

### NP shall acauiie from The**Co~_~ecticut** Light and Power Comoany sufticient approved ozone and non-ozone season**~~CS** in order 

### to meet applicable·RACT

Initials -2-NOn-Talk Po·""er LLC Trading Agreement and Order No. 8184

reauirements and the requirements of this Trading Agreement and Order for the following montn's operation.
6. In accordance with Exhibit 1 of this Trading Agreement and Order, ozone season ERCs for use during the ozone season shall be purchased by NP pri·or to the beginning of the ozone season. 7. On and after the date which NP ourchases the oeaking unit identified in Table 1 of this Trading Agreement and Order, NP shall maintain and orovide the records**requ~red** by paragraoh C.3. of this Trading Agreement and Order 

### in accordance with tne rollowing and Section 22a-174-4 

### of the Regulations, and shall:

a. Have in its possession sufficient aooroved ERCs for the current daY j based on the following calculations (described also in**cxh~bit** 1); At all times (mass calculation): ERCs (in tons) ; (((FLER in**lbs/~~3tu)** - (0.95 x NOx**~~CT** in lbs/MM3tu)) 

### x (actual fuel use in lbs!MM3tu)) + 2000 pounds/ton During the ozone season only (peak day calculation) : the maximum actual excess NOx emissions (in los) on any of the days oroiected by the Commissioner to be**~moderate** to unnealthrul,H**~~,hea!thfu!,"** or "very**~-healthful** " divided by 3 and then divided by 13 (with the result in**tons~** : ERCs (in tons) : [(Maximum excess NOx in lns) + 3J + [13 lbs/day/tonl; b. At a minimum, adjust upwards by lOOt the ERCs required if**E~Cs** are not in NP's possession prior to use;

c. As described in**By~ibit** 1 of this Trading Agreement and Order, to the extent that ERCs used to offset on a Deak day basis during che ozone season exceed the total mass excess emissions, remaining ERCs may be used in the non-ozone season in the same or subsequent years until May 1, 2003; d. Document and record daily fuel use, excess NOx emissions and, during the ozone season, the ozone classification as**forecas~ed** by the Commissioner on the previous day;

e. No later than March l( 2000, 2001, 2002, 2003 and 2004, include with its annual**emiss~ons** reoort to the**Com~issioner, E~C9**  used (calculated as described'in section C.7.a. above), by ozone and non-ozone seasons, for the previous calendar year; f.**f~tain th~** **re~ords a~d.suppo~t~~g**  documentation**a~** descriped in**~n~s sect~on** **~or** a**m~n~mum** OI**I~ve** years,**commenc~ng** on tne date sucn records**a~e** created;

. g. Maintain documentation to attest to the fact that ERCs used during the ozone season were generated during the ozone season. The ozone season is from May 1 through Seotember 30 in any calendar year.**G~nerator certificat~on**  or this fact shall be sufficient; and
h. Provide the records soecified above to the Commissioner within thirty f30) days of receipt of a written request from the**Comm~ssJ.oner.**

-)- 8. Pursuant to the intent of Section 22a-174-22a(f) (4) of the Regulations, NP may, for a budoet source, use allowances acquired pursuant to. the**PFovi~~ons** of**~~ction.22a-174-22a** of**~he Regul=tio~s**  to comoly**w~th** SUDseCCJ.on (e) or**Sect~on** 22a-174-22 or the**P.e~ulations** pursuant to the provisions of subsection (j) of Section



# -,**~n1C1a_s** __

### Norwalk ?ower LLC Trading Agreement and Order No. 8184

9.

10.

11.

12.

13. 

### 22a-174-22 'of the Regulations as long as NP remains an 

### owner of that budget source, for Qurposes of this Trading**Agreem~nt** 

### and Order. Pny allowance used ror compliance with subsection (e) 

### of Section 22a-174-22 9f the**Regula~ions** 

### shall be**subje~t** 

### to.all**~estrictions** 

### and/or requlrements appl1cable to ERCs**con~alned** 

### 1n th1S Trad2ng Agreement and Order and/or Section 22a-174-22a of the Regulations. The terms and conditions established by this Trading Agreement**~d** 

### Order shall become effective on the date 

### NP purchases the oeaking unit identified in Table 1 

### of this Trading Agreement and Order, and upon issuance of this Trading Agreement and Order. No later than May 1, 2003, NP shall comoly with the requirements of Section 22a-174-22(d} (2) of the Regulations. However, after full orogram review of this and other Trading Agreements and Orders and, 

### if determined to be aoorooriate, the Commissioner may grant a written extension of this-Trading Agreement and Order. Defip.iq,ons. As used in this o:::-der, "Commissioner" means the CommlSS10ner of Environmental Protection or an agent of the Commissioner. "Other oil" means a fuel that is**li~id** 

### at standard conditions and is not residual oil.**"~esidual** 

### oil' means**~~y** 

### fuel oil 

### qf**~o.** 

### 4, No.5, or No. 6 grades, as defjned by**Co~ercial** 

### Stanaard. C.S. 12-48. "Ozone season" means tne Der10d rrom May 1 through SeDtember 30 in any given calendar year": "ISsuance" means the date this Trading Agreement and Order is deoosited in the u.s. Mail or the date it lS 

### personally delivered, whIchever is earlier.**Ngt~f~caa~sn** 

### of noncompliance. In the**~vent** 

### that NP becomes aware t ac**~t** 

### not or may not comoly, or**d~d** 

### not or may not comoly on time, with any reauirement of th1S Trading Agreement and Order-or of any document required hereunder, NP shall 

# br telephone immediately nocifv the 3ureau of Air Management and sha 1 take all reasonable. steos·to ensure that any noncomoliance or delay is avoided or, if unavoidable, is minimized to the greatest extent oossible. NP shall also notify the**Com~issioner** 

### in writing within ten days of becoming aware of tne noncomoliance or potential noncomoliance stating the date, time, and duration of che noncomDliance,-the reasons for the noncomoliance or delay and all activitIes which N? and its agents,**e~ployees** 

### an¢ representatives**~?ok** 

### to avoi¢ or repair the results of tne noncomollance and orevent**~ne** 

### noncomollance, and Drooose, ror the review· and written-aooroval of the Commissioner, aates by which comoliance will be achieved. NP shall comoly with any dates which may-be aooroved in writing by the**Com~i3sioner.** 

### Notification by N? shall not-excuse**noncomol~ance** 

### or delay, and the Commissioner's aooroval of any comoliance dates oroDosed shall not excuse noncomoliance or delay unless soecifically so stated by the Commissioner in writing. Nothing herein shall negate NP's obligation to comply**w~th** 

### Section 22a-174-7 of the Regulations. To the extent that the orovisions of Section 22a-174-7 are inconsistent with the provisions of this Trading Agreement and Order, the more**stri~gent-of** 

### the provisions in the Trading Agreement and Order or**Sect~on** 

### 22a-174-7 shall control.**Certificat~Qn** 

### of 90Ruments.**P~y** 

### document, inclUding Dut not limited to any**not~ce,** 

### Wh1C. is required to be submitted to the Commissioner under this Trading Agreement and Order shall be signed by the resoonsible corporate officer of NP or a duly authorized representative of such officer, as those terms are defined in Section 22a-430-3(b) (2) of the Regulations, and by the individual or individuals resoonsible for actually preoaring such document, each of whom shall examine and be familiar with the information submitted in 

### the document and all attachments thereto! and shall make inquiry of those individuals resoonsible for**obtain~ng·** 

### the information to determine that the information is true, accurate, and complete, and each of whom shall certify in writing as follows: "I have oersonally examined and am familiar with the information submittea in this document and all attachments thereto, and I



### Initials -4-**Nor~aly.** 

### Power LLC Trading Agreement and Order No. 

## a184

14. certify that based on reasonable investigation, including my inquiry of those individuals resoonsible for obtaining the**informat~on,** 

### the submitted information is-true, accurate and comolete to the best of my knowledge and belief. I 

### understand that any- false statement made in the submitted information may be punishable as a criminal offense under Section 22a-17S of the**Cop~,ect~cut** 

### General Statutes or, in accordance with Section 22a-6 

### of the Connecticut General Statutes, under Section 53a-lS7b of the Connecticut General Statutes, and in accordance with any other applicable statute _"**F~nat** 

### Aoreement ang**Qr~er!** 

### This Trading Agreement and Order is the**f~na_** 

### agreement an or er by and between the Commissioner and 

### NP with reSDect to the matters addressed herein, and shall not be modified-without the written agreement of both parties. 15. False statements. 

### Any false statement in any information submicted pursuant to**Ch~s Trad~ng**  

### Agreement and Order may be punishable as a criminal offense under Seccion 22a-17S of the**CO~Jlecticut** 

### General Statutes or, in accordance with Section 22a-6, under Section 53a-157b of the Connecticut General Statutes.
16.

17. 

### Notlle of**tr~ns~:r;** 

### liability of NP and**Q8h~rs!** 

### Until NP has fully como**~ea w~c**  c**~s Traa~ng**  

### Agreemenc andr er, NP shall notify the Commissioner in writing no later than fifteen (15) days after transferring all or any portion of the facility, the operations, the site or the business wnich are the subject of t.his Traaing**A~reement** 

### and Order, or obtaining a new mailing or location address.**.~y** 

### license**tr~~sfer** 

### shall be conducted**~n** 

### accordance with Section 22a60 

### of che Connecticut General Statutes. NP's obligations**~,der** 

### this Trading Agreement and Order snafl not be**affecte~ ~y** **t~e** 

### passage of**t~tle** 

### to any property to any otner person or**mun~c~pal~ty. CP~Iss~Qner's**  

### powers. Nothing in this Trading Agreement and Order sna**a~tect** 

### the**Co~~~ssioner's** 

### authority to**inst~tute** 

### any oroceeding or take any other action to orevent or abate**v~olations** 

## of law, orevent or abate pollution, recover costs and natural resource-damages and to imoose penalties for violations of law which are willfui or criminally negligent or for which penalcies have not been**s~ecifically** 

### orovidea in this Trading Agreement and Order, including but not limited to violations of any oermit issued 

### by the**Co~~issioner.** 

### If at 

### any time the Commissioner aetermines tnat the actions taken bv 

### NP pursuant to this Trading Agreement and Order have not fully achieved-compliance with Section 22a-174-22 of the Regulations, the Commissioner-may institute any proceeding asainsc NP and/or require NP to undertake further**~nvestigation** 

### or further action.

. 18. SP's**Oblio~tiOrs** 

### und&,**l~w** 

### ..**Noth~ng** 

### in. this Trading**Agre~ment** 

### rqer snal re**~eve o~**  

### otner**ool~gat~ons ~~der** **appl~caole** 

### feoeral, state and local law. and

19.

20. 

### gccess to**re~Q~ds** 

### and facititv,**~~y** 

### re?resentative of the**:ep~r~ment** 

### or.**;nv~ronmenca: ?rotect~on** **~ay.** 

### enter and.**~n!?pect** 

### the**rac~l~ty** 

### and**~nspect** 

### and copy records**w~tn~n** 

### normal**Dus~ness** 

### hours without orior noEice for the ourooses of monitoring and enforcing the actions required or allowed oy this Trading Agreement and Oraer.**~o effe~t**  

### on**r~abts** 

### of other**per~9ns.** 

### This Trading Agreement and**rd~r.sna+l.ne~th~r** 

### create**~or a~~ect**  

### any. rights 9:<: 

### persons who**o~ mun~c~pal~t~es** **wh~ch** 

### are not**part~es** 

### to**cn~s Trad~ng**  

### Agreement ano Order.
21. 

### go Creation 

### of Property Riahts:**,This.~!ading** 

### Agreemept and Order oes noe create any property**r~gnts w~cn**  

### respect co tnes: ERCs.



### Date -5- 22.**Notic~** 

### tp Commissioner 

### Qf**ch~o:s.** 

### Within fifteen (15) days of the date 

# N? oecomes aware or a c noe in any information**submi~ted** 

### to the**Co~~issioner** 

### under this Trading Agreement and Order, or that any such information was inaccurate or misleading or that any relevant



### .. 1 

# '7i?!t**!n~t1a** 

### sNorwalk Power LLC Trading Agreement and Order No. 8184

23. information was omitted{ NP shall submit the correct or omitted information to the**Comm~ssioner. S~bm~ssi9n**  of dOCUIDaPts, Any document required to be submitted to cne**omm~ss~oner** un er chis**Tradi~g** Agreement and Order shall, unless otherwise snecified in**writ~ng** by the**CO~~is5ioner,** be directed to:

. Mr. David Jawin Department of Environmental Protection Bureau of Air Manaqement Comoliance and Fie!d Ooerations Division Emissions and Credit Trading Section 

### 79 Elm Street Hartford, Connecticut 06106



### Initials

# ~~ -5- Date

# ~qq

### NorHalk Power LLC Trading Agreement and Order No. 8184



### NP consents to the issuance of this Trading Agreement and Order without further**~otice** 

### .. The**u~dersigned** 

### certifies that he/she 

### is fully**authorize~** 

### co enter**~nto th~s**  

### Tradlng Agreement and Order and to legally blnd N? 

### to tne terms and conditions of che Trading Agreement and Order.



### Signature: Norwalk Power LLC

# '11~**~tt·M,,~** Type Name: Robert S. Evans II


### Type Title: Executive Director, Environmental Services !'JAG Enerev , I DC • 

### Date:


# ) Arcnur J.**rtocqu~ commissiO~**  

### . CITY OF NORW.:IU,K L.!l.ND**~=:CO:mS** 

### rssued as a final consent**orde~the** 

### Commissioner

# ~nvironment.l Protection on 

# VI1w-<3'I'l- 20 O.**~~~!L=:D** 

### C3RTIFI3D**YL~ILt ?3TulL~** **~SCSI?T** R2QUESTED 

### Certified Document

### Exhibit 1 

### Trading Agreement and Order No. 8184

# STATE OF CONNECTICUT DEPARTMENT OF ENVIRONMENTAL PROTECTION

REVISED 11/5/97 

### CreditTrading for Sources with Irregular NOx Emissions

The following outlines the Deparllllent's concerns and methodologyfor dealing with

### NOx compliance pursuantto §22a-174.22G), Regulations ofConnecticutState Agencies ("Regulations"), emission trading for "peakers" and other sources that have peak emissions that

are substantiallyhigher than their average daily emissions. Forpurposes ofthis protocol, peaking units afe defined as sources with peak daily NOx emissions greater than three times their 

### average daily emissions during the ozone season.

The basic concept ofthe trading program is that sources \\lith 

### excess NOx emissions (arate that exceeds the rate limits in L1.e Regulations) may obtain NOx emission reduction credits ("ERCs") from sources thathave Ilover-controlled" theirNOx emissions. Although typical sources can obtain credits on a mass basis (one ton ofERCs to offset one ton ofexcess emissions) with an acceptable environmental outcome, sources with large vatiations in emissions from day to day pose an additional problem for ozone attainmentplanning.

The mostco:nmon peaking units or "peakers" are electricity generating units that run during times ofhigh electricity consumption. Electricity demand is often the highestduring hot, humid days ofthe summer when the potential for ozone formation is also high. Peakers frequently have high errtlssion rates. To t.1.e extentthat these u..-uts produce emissions at exactly the time when emissions need to be reduced to limitozone formation, allowing peakers to continue to comply with new rate limits through the use ofERCs on a ton-for-ton basis 

### will exacerbate this effect. On the ot1:ler hand, ifit can be demonstrated that the ERCs being used by peakers were.generated

on a comparable basis (i.e., during days ofhigh ozone potential), then ton-for-ton use by peakers would be appropriate.

The full impact ofthe NOx emissions from these types offacilities during summer operation
must consider temporal variability as well as mass ofexcess emissions. AnyERC trade must consider equivalency to the NOx**r~uctions** that control equipment would produce on an ozone day on both a temporal and a mass basis. The protocol below places appropriate requirements

onpeaking units to reflect the greaterimpact ofNOx emitted under this type ofusage pattem. Attach.i'uent I piOvides a detailed example ofthis issue.



### NOx Emissions Reduction Credit Use Computation ForPeakers

Peaking

### unit's are only considered to be atemporal issue for the ozone season months. .Allexcess NOx emissions during the winter (non-ozone season) need only be offset by ERCs on a mass basis.

• Prior to each ozone season there will be a prospective calculation to detennine how many tons ofERCs must be lion hartd" during the ozone season. A retrospective calculation will determine how many ERCs were actually "used" during the ozone season.**(Prinf~d o~**  Recycled hper) 19 Elm**Slr~el** • Hluford. CT 06106·5121 ht!y:lldcp.s:,ue. Cf.IlS J_**r:~** ,•. ,,

__ ••...

_

### 2

For EReuse during the ozone season:



### 1. Prosoective calculation determines thenumber ofERCs that mustbe provided for the



### ozone season. (Beginning in 

### 1996, theERCs mustbe in placeno later than May I,)

ERCs required for the ozone season shall be calculatedbased on: (a) amass basis (total anticipated excess NOx emissions overthe ozone season) and (b) 

### apeak-day basis (maximum excess emissions for 

### anydayduring the ozone season). Sources will be required to provide credits equal to the**~reater** 

### ofthe amount calculated on amass or peak-daybasis. The timing ofactual credit provision will be governed

### by the :enns ofthe 

### specific trading orderissued. forthat source.
(a) Mass basis: ERCs required will be equal to the total number oftons ofanticipated



### excess NOx emissions overthe entire ozone season, calculated in 

### the same
marmerused for other sources using ERCs (i.e., including anydiscounts).
(b) Peak (daily rate) basis: ERCs (in tons) required will be calculated bydividing one·tl'ilrd ofthe maximum dailyexcess emissions'" (in pounds) by 

### 13 pounds/day/ton:

ERes required (tons) = [(Maximum Estimated Excess NOx in Ibs.) + 3J + [13 Ibs./day/tonj



### "'Where maximum.dailyexcess NOx emissions are the difference between the maximum estimatedhours ofoperation perday at the full-Ioad-emission-rate and 95% ofthe allowable NOx emissions under Section 22a-174-22(e) ofthe Regulations.

2. Retrosoective calculation will 

### determine the actual credituse and the ERe surplus, ifany. At the end ofthe ozone season, the calculations required in item 1 above will be repeated using (a) the actual total excess emissions for the ozone season, a...,d (b) 

### the maximum actual excess NOx emissions on anyofthe days projectedbythe Commissionerto be "moderate to unhealthful", "unhealthful", or "very unhealthful". The actual "ERes 

### required" 

### will be the greater oftheERCs calculated on the basis oftotal mass or maximum (peak) day. To the extentthat the number of ERCs used to offsetpeakday emissions exceed**th~** 

### total mass ofexcess NOx emissions for the ozone season, the remaining mass value ofsuch ERCs maybe carried forward [oruse in the winter (nonozone season). Any

### unused ERCs maybe carned forward until May I, 1999, except as maybe limited bythe trading agreement and order, orby regulation.

### 3

Exhibit 1 ERe 

### Calculationfor Peaking Units

Unless 

### it can be demonstrated otherwise, ERCs are assumed to be created by relatively small 

### dailyreductions in NOx emissions overthe courseofan entireozoneseason (153 days). The
average daily NOx emissions reduction represented by one ton ofcredit is 13 pounds/day 

### calculated as follows:

(1 ton) x (2000 pounds/ton) + 153 days 13 pounds/day/ton

Thus, an ERe (ton) would be equivalent to a reduction in NOx emissions of 13 pounds/day.


### Ex..4.J\1PLE. If

### a ·peaking" source wereto emitoneton ofexcess iOX 

### perdaywhen 

### operating, but only operates for five days during the ozone season, the owner/operator ofthe source would nominally need to obtain five tons ofERCs. However, those ERCs are likely to have been**creat~** by relatively small daily reductions 

### in NOx emissions over the course ofan entire ozone
season (153 days). In this example, assuming apurchase offive tons ofERCs, that calculate!>out to a dailv NOx reduction ofapproximately 65 pounds.

(5 tons x 2000 pounds/ton) + 153 days = 65 pounds/day

Clearly, on any daythat the "pea.lcing" unit operates, there is much more excess NOx emissions that 

### will not have been offset, on the orderof 1,935 pounds:

(1 ton x 2000 pounds/ton) - ( 65 pounds credit) = 1,935 pounds excess NOx emissions

While the total amount ofNOx emitted would be controlled on a seasonal average basis, on the ·pea.lcing" day there would be apotentially significant increase in NOx emitted. and thus an increase 

### in potential ozone creation. 

### 1., order to achieve a commensuratereduction 

### in ozone creation potential for peakers, an adjustment in the calculation ofrequired ERes is needed. One approach would be to require ERCs in aquantity that would ensure that the daily**ave~'age** reduction represented by those ERCs would equal the maxiinumdaily excess NOx emissions from the pea.1::ing source on any day that it ran. On this basis, apeaking source 

### with; a maximum 24-hour excess NOx emission ofone ton would be required to purchase 153 tons ofERCs.

1 (ton)/day X 153 days/season = 153 tons

This 153 tons ofERCs wouldbe adequate to "offset" excess emissions ofone ton perday for as many days as the source operated during aparticular ozone season

.. This has been deemed to be unduly stringent, given some diversity in operation ofthese sources. In light**oft.~e** foregoing, Ibis requirement is adjusted downward 

### by two-thirds.