STATE OF CONNECTICUT

DEPARTMENT OF ENVIRONMENTAL PROTECTION

In the matter of

The State ofConnecticut and

First Light Hydro Generating Company

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Trading Agreement

and Order No. 8279

Whereas, the Commissioner of Environmental Protection ("Commissioner") and First Light Hydro

Generating Company ("FLHGC") agree to the use of discrete emission reduction credit ("DERC")

trading in accordance with Subsections 22a-I74-22(d & j) ofthe Regulations ofConnecticut State

Agencies (RCSA) to comply with the nitrogen oxide ("NOx") emissions limits of Subsection 22aI 74-22(e) ofthe RCSA:

A. At the request and with the agreement of FLHGC, the Commissioner finds the following:

I. FLHGC is an exempt wholesale electric generating company with its principal place

of business in Hartford, Connecticut. On November 1,2006 FLHGC purchased from

NE Hydro Generating Company one piece of fuel burning equipment, ("peaking

unit") at Tunnel Road, Preston, CT. The peaking unit is a combustion turbine unit

identified in Table I ofthis Trading Agreement and Order.

Table 1

Facilityl Fuel Allowable FLER Allowable

Peaking Unit Limit Ibs/MMBtu Rate

(ppmvd) Ibs/MMBtu

Tunnel Road other oil 75 0.72 0.29

Preston-10

2. FLHGC's Full Load Emission Rate (FLER) exceeds the NOx allowable emission

rate for the peaking unit specified in Section 22a-174-22(e) ofthe Regulations.

3. Pursuant to Section 22a-1 74-22(j) ofthe Regulations, during the non-ozone season,

FLHGC intends to acquire and use approved DERCs until May 1,2010 for the

peaking unit. Pursuant to Section 22a-174-22(j) ofthe Regulations, during the ozone

season, FLHGC intends to acquire and use approved DERCs and/or budget emission

reduction credits ("BDERCs") until May I, 2010 for the peaking unit.

(Printed on Recycled Paper)

79 Elm Street • Hartford, CT 06106-5127

www.ct.gov/dep

An Equal Opportunity Employer
First Light Hydro Generating Company 2 Trading Agreement

and Order No. 8279

B. The Commissioner, in accordance with the provisions ofthis Trading Agreement and

Order, and pursuant to Section 22a-174-22G) ofthe Regulations, hereby allows FLHGC

to comply with Section 22a-174-22 ofthe Regulations through use of DERC and/or

BDERC trading.

C. With the agreement ofFLHGC, the Commissioner, acting under Sections 22a-6, 22a-171,

22a-174, 22a-176, and 22a-l77 ofthe Connecticut General Statutes, orders FLHGC as

follows:

I. Upon issuance ofthis Trading Agreement and Order, at the facility, FLHGC shall

comply with Section 22a-174-22 ofthe Regulations through DERC and/orBDERC

trading. Until FLHGC achieves permanent compliance with the emission standard in

Section 22a-174-22(e) ofthe regulation or by May 1,2010 whichever occurs earlier:

a. FLHGC shall use approved DERCs and/or BDERCs as required under this

Trading Agreement and Order;

b. FLHGC shall have in its possession sufficient approved DERCs and/or BDERCs

to meet applicable NOx emission limits as allowed under this Trading Agreement

and Order; and

c. FLHGC shall comply during operation ofthe peaking unit with the FLERS

shown in Table I ofthis Trading Agreement and Order.

2. DERC and/or BDERC use

a. Until May I, 2010, before the first day of each month FLHGC shall have in its

possession sufficient approved DERCs and/or BDERCs for the current day for

the peaking unit based on the following calculations;

Before the first day of each month, FLHGC shall estimate DERCs and/or

BDERCs required for such month for the peaking unit as follows:
First Light Hydro Generating Company

(i) At all times:

3 Trading Agreement

and Order No. 8279

Estimated DERCs and/or BDERCs (in tons) use = [((FLER in Ibs/MMBtu) - (0.95 x

NOx allowable rate in Ibs/MMBtu)) x (estimated fuel use in MMBtu)] -;. 2000

pounds/ton

No later than the twentieth day of each month, FLHGC shall calculate and

permanently retire DERCs and/or BDERCs used in the preceding calendar month, as

follows:

Actual DERCs and/or BDERCs (in tons) = [((FLER in Ibs/MMBtu) - (0.95 x NOx

allowable rate in Ibs/MMBtu)) x (actual fuel use in MMBtu)] -;. 2000 pounds/ton

Where:

• NOx allowable rate = allowable limit rate in Ibs/MMBtu shown in Table I ofthis

Trading Agreement and Order.

• FLER = full load emission rate in Ibs/MMBtu as shown in Table I ofthis

Trading Agreement and Order.

• Discount (0.95) = 5% design margin applied to the allowable limit rate.

ii) During the ozone season only: No later than December 31 st each year, FLHGC

shall acquire and permanently retire seven ozone season DERCs and/or BDERCs for

every actual ton of excess NOx emitted from the peaking unit during the previous

ozone season based upon the actual emissions for each day that Connecticut one 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, FLHGC shall calculate and permanently retire seven ozone season

DERCs and/or BDERCs for every actual ton of excess NOx emitted from the

peaking unit during such ozone season based upon the actual emissions for each day

that Connecticut eight hour ozone levels were forecasted to be "unhealthy for

sensitive groups", "unhealthy", or "very unhealthy".

Where:

Actual ton of excess NOx emitted = [((FLER in Ibs/MMBtu) - (0.95 x

NOx allowable rate in Ibs/MMBtu)) x (actual

fuel use in MMBtu)] -;. 2000 pounds/ton

The total actual tons of excess NOx emitted from the peaking unit during forecasted

ozone exceedance days shall be multiplied by seven and then rounded to the next

greater whole ton, to determine the number of DERCs and/or BDERCs to be

permanently retired. This requirement is in addition to the FLHGC's requirement to
First Light Hydro Generating Company 4 Trading Agreement

and Order No. 8279

estimate excess emissions and subsequent permanent retirement of a sufficient

number of approved DERCs and/or BDERCs in accordance with paragraph C.2.a.(i)

ofthis Trading Agreement and Order.

(iii) During the non-ozone season: Until May I, 20 I0, from October I through

April 30, inclusive, each year, the peaking unit shall, in addition to meeting the 24-

hour emission limit in Table 22-1 of Section 22a-174-22 ofthe Regulations, meet a

non-ozone season emission limit ofO.15Ib/MMBtu. Prior to October 1,2009,

FLHGC shall estimate and acquire the amount of DERCs 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 I

through April 30 x (allowable emission rate in

Ibs/MMBtu - (0.95 x 0.15Ib/MMBtu))] -i- 2000

lbs/ton

b. No later than May 31 of 2009 and 20 I0, in addition to the DERCs retired pursuant to

paragraph C.2.a. ofthis Trading Agreement and Order, FLHGC 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 I through

April 30 x (allowable emission rate in IbslMMBtu

- (0.95 x 0.15 Ib/MMBtu))] -i- 2000 Ibs/ton

3. BDERCs are subject to all DERC requirements set forth in this Trading Agreement and

Order except as expressly indicated. BDERCs shall only be used by other NOx budget

program 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 only be used through the following

ozone season.

4. FLHGC shall make and keep records of: daily fuel use and fuel type; excess NOx

emissions; the number of DERCs and/or BDERCs 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 number of DERCs

and/or BDERCs used during the ozone season, and DERCs and/or Allowances used

during the non-ozone season (the remainder ofthe year); during the ozone season, the

ozone classification as forecasted by the Commissioner on the previous day; as well as

documentation attesting to the fact that approved DERCs and/or BDERCs used during

the ozone season were generated during the ozone season. Generator certification of
First Light Hydro Generating Company 5 Trading Agreement

and Order No. 8279

this fact shall be sufficient. FLHGC shall maintain and submit such records to the

Commissioner in accordance with Section 22a-1 74-22 ofthe Regulations.

5. Record Keeping. FLHGC shall retain records and supporting documentation as

described in this Trading Agreement and Order for a minimum offive years,

commencing on the date such records were created. FLHGC shall provide the records

specified above to the Commissioner within thirty (30) days ofreceipt of a written

request from the Commissioner.

6. Annual Emission Statement. No later than March I for the previous calendar year and

July 30, for the October through April time period, of every year after issuance ofthis

Trading Agreement and Order, FLHGC shall provide to the Commissioner, a record of

each sale or other transfer, and use of any and all ofthe DERCs and/or BDERCs

approved within and subsequent to issuance ofthis Trading Agreement and Order until

all such DERCs and/or BDERCs have been used or are no longer in FLHGC's

possession. FLHGC shall also include actual NOx emissions from the peaking unit and

the amount of all DERCs and/or BDERCs used (including serial numbers (if assigned)

and approved DERCs and/or BDERCs generated and/or purchased from other facilities),

generated and/or approved for the previous calendar year and October through April

time period. These reports shall be on a form prescribed by the Commissioner and shall

be in monthly increments, and by ozone and non-ozone seasons.

7. Allowance Use. Pursuant to Section 22a-174-22(d)(3) ofthe Regulations, FLHGC

may use NOx allowances, until May I, 2010, for the peaking unit pursuant to

Section 22a-174-22(j) ofthe Regulations to achieve all or a portion 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 other restrictions and/or requirements applicable to DERCs contained in

this Trading Agreement and Order;

a. In order for FLHGC to use NOx allowances, FLHGC shall create a general

account or use an existing compliance account or overdraft account in EPA's

NOx Allowance Tracking System ("NATS"); and

b. Each allowance used for compliance with Section 22a-174-22 ofthe

Regulations shall be equivalent to 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 or the facility's NOx compliance

account in the NATS to the CT State NOx Retirement Account (Account ID

CT0000000300 in the NATS).
First Light Hydro Generating Company 6 Trading Agreement

and Order No. 8279

8. DERC Shortfall. At a minimum, DERCs and/or BDERCs required shall be adjusted

upwards by 100% ifDERCs and/or BDERCs are not in FLHGC's possession for use

prior to the first day of each 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 of law. FLHGC shall

permanently retire the quantity ofDERCs and/or BDERCs equivalent to the excess

emissions plus a 100% premium within sixty (60) days ofFLHGC's discovery ofthe

DERC and/or BDERC shortfall. FLHGC shall certify and report any such DERC

and/or BDERC retirement to the Commissioner in accordance with paragraph C.30. of

this Trading Agreement and Order.

9. Vintage Restriction. For the purposes of compliance 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

older than five (5) calendar years from their creation/allocation are not valid for use for

compliance with Section 22a-174-22 ofthe Regulations. Notwithstanding the above,

DERCs will not be valid for use after May 1,2010. BDERCs are subject to the vintage

restriction provided in paragraph C.3. ofthis Trading Agreement and Order.

10. FLER Exceedance. Noncompliance with an established FLER shall subject

FLHGC to make restitution by matching the quantity of emissions ("true up")

caused by the exceedance plus a 100% premium. The true up in tons of DERCs and/or

BDERCs shall be equal to the FLER exceedance in IbslMMBtu, multiplied by the total

heat input during the period of noncompliance divided by 2000 Ibs/ton. Ifthe

period of noncompliance is not known, the time period from the completion of

the last/previous Commissioner 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 any proceeding or take any other action to

require additional upward adjustment, based on the gravity of any alleged

noncompliance or violation of law. FLHGC shall permanently retire DERCs and/or

BDERCs calculated in accordance with the above plus a 100% premium within sixty

(60) days ofFLHGC's discovery ofthe FLER exceedance. FLHGC shall report any

FLER exceedance to the Commissioner in accordance with paragraph C.30. ofthis

Trading Agreement and Order.

11. FLER Modification. FLERs set forth in Table 1 ofthis Trading Agreement and Order

may be modified only after the consent ofthe Commissioner by written modification of

this Trading Agreement and Order.

12. Emissions Testing. Pursuant to Section 22a-174-22(k) ofthe Regulations, FLHGC shall

conduct NOx emission tests ofthe peaking unit at least once every five years
First Light Hydro Generating Company 7 Trading Agreement

and Order No. 8279

commencing from the dates ofthe NOx emission tests for the peaking unit as provided

in Table I ofthis Trading Agreement and Order.

13. Extension. No later than May 1,2010, with respect to the peaking unit, FLHGC shall

comply with the requirements of Sections 22a-174-22(d)(1) and 22a-174-22(d)(2)(A) of

the Regulations and amendments thereto. There is no assurance that the Commissioner

will grant a written extension ofthis Trading Agreement and Order.

14. Future Compliance Report. On or before September I, 2009, FLHGC shall submit a

report in writing to the Commissioner, as directed in paragraph C.3I. 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

after May 1,2010.

15. Full compliance. FLHGC shall not be considered in full compliance with this Trading

Agreement and Order until all actions required by this Trading Agreement and Order

have been completed as approved and to the Commissioner's satisfaction.

16. Approvals. FLHGC shall use best efforts to submit to the Commissioner all documents

required by this Trading Agreement and Order in a complete and approvable form. If

the Commissioner notifies FLHGC that any document or other action is deficient, and

does not approve it with conditions or modifications, it is deemed disapproved, and

FLHGC shall correct the deficiencies and resubmit it within the time specified by the

Commissioner or, if no time is specified by the Commissioner, within 30 days ofthe

Commissioner's notice of deficiencies. In approving any document or other action

under this Trading Agreement and Order, the Commissioner may approve the document

or other action as submitted or performed or with such conditions or modifications as

the Commissioner deems necessary to carry out the 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, "Approved DERCs"

are those for which the Commissioner has provided written authorization for use

in compliance with Section 22a-174-22 ofthe Regulations; "Commissioner"

means the Commissioner or 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 calendar year.

18. Dates. The date of "issuance" ofthis Trading Agreement and Order is the date

the Trading Agreement and Order is deposited in the U.S. mail or personally

delivered, whichever is earlier. The date ofsubmission to the Commissioner of

any document required by this Trading Agreement and Order shall be the date

such document is received by the Commissioner. The date of any notice by the
First Light Hydro Generating Company 8 Trading Agreement

and Order No. 8279

Commissioner under this Trading Agreement and Order, including but not limited

to notice of approval 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, whichever

is earlier. Except as otherwise specified in this Trading 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 Order to

be submitted or performed by a date which falls on a Saturday, Sunday or a

Connecticut or federal holiday shall be submitted or performed by the next day which

not a Saturday, Sunday or Connecticut or federal holiday

19. Certification of documents. Any document, including but not limited to any notice,

which is required to be submitted to the Commissioner under this Trading Agreement

and Order shall be signed by FLHGC or, ifFLHGC is not an individual, by an

individual who is an authorized representative ofthe Respondent, in accordance with

Section 22a-174-2a(a) ofthe Regulations ofConnecticut State Agencies, and by the

individual(s) responsible for actually preparing such document, and each such

individual shall certify in writing as follows:

"I have personally examined and am familiar with the information submitted in this

document and all attachments thereto, and 1 certify, based on reasonable investigation,

including my inquiry ofthose individuals responsible for obtaining the information, that

the submitted information is true, accurate and complete to the best of my knowledge

and belief. 1 understand that any false statement made in the submitted information is

punishable as a criminal offense under Section 53a-157b ofthe Connecticut General

Statutes and any other applicable law."

20. Noncompliance. This Trading Agreement and Order is 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 FLHGC to an injunction and penalties.

21. False statements. Any false statement in any information submitted pursuant to this

Trading Agreement and Order is punishable as a criminal offense under Section 53a157b ofthe Connecticut General Statutes and any other applicable law.

22. Notice oftransfer; liability ofFLHGC and others. Until FLHGC has fully complied

with this Trading Agreement and Order, FLHGC shall notify the Commissioner in

writing no later than fifteen (15) days after transferring all or any portion of any 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. FLHGC's

obligations under this Trading Agreement and Order shall not be affected by the

passage oftide to any property to any other person or municipality.
First Light Hydro Generating Company 9 Trading Agreement

and Order No. 8279

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 of law, prevent or abate pollution, recover costs and natural resource

damages, and to impose penalties for past, present, or future violations oflaw. If at any

time the Commissioner determines that the actions taken by FLHGC pursuant to this

Trading Agreement and Order have successfully corrected all violations, fully

characterized the extent or degree of any pollution, or successfully abated or prevented

pollution, the Commissioner may institute any proceeding to require FLHGC to

undertake further investigation or further action to prevent or abate violations or

pollution.

24. FLHGC's obligations under law. Nothing in this Trading Agreement and Order shall

relieve FLHGC of other obligations under applicable federal, state and local law.

25. No assurance by Commissioner. No provision ofthis Trading Agreement and Order

and no action or inaction by the Commissioner shall be construed to constitute an

assurance by the Commissioner that the actions taken by FLHGC pursuant to this

Trading Agreement and Order will result in compliance or prevent or abate pollution.

26. Access to facility. Any representative ofthe Department of Environmental Protection

may enter any ofthese facilities without prior notice for the purposes ofmonitoring and

enforcing the actions required or allowed by this Trading Agreement and Order.

27. No effect on rights of other persons. This Trading Agreement and Order neither creates

nor affects any rights of persons or municipalities that are not parties to this Trading

Agreement and Order.

28. No Creation of Property Rights. This Trading Agreement and Order does not create any

property rights with respect to these DERCs and/or BDERCs.

29. Notice to Commissioner of changes. Within fifteen (I 5) days ofthe date FLHGC

becomes aware of a change in any information submitted to the Commissioner under

this Trading Agreement and Order, or that any such information was inaccurate or

misleading or that any relevant information was omitted, FLHGC shall submit the

correct or omitted information to the Commissioner.

30. Notification of noncompliance. In the event that FLHGC becomes aware that it did not

or may not comply, or did not or may not comply on time, with any requirement ofthis

Trading Agreement and Order or of any document required hereunder, FLHGC 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,
••

First Light Hydro Generating Company 10 Trading Agreement

and Order No. 8279

if unavoidable, is minimized to the greatest extent possible. Within five (5) days ofthe

initial notice, FLHGC 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 written approval ofthe Commissioner, dates by which compliance will be

achieved, and FLHGC shall comply with any dates which may be approved in writing

by the Commissioner. Notification by FLHGC shall not excuse noncompliance or

delay, and the Commissioner's approval of any compliance dates proposed shall not

excuse noncompliance or delay unless specifically so stated by the Commissioner in

writing.

31. Submission of documents. Any document required to be submitted to the

Commissioner under this Trading Agreement and Order shall, unless otherwise

specified in this Trading Agreement and Order or in writing by the Commissioner, be

directed to:

Department of Environmental Protection

Bureau of Air Management

Engineering and Enforcement Division

Emissions and Credit Trading Section

79 Elm Street

Hartford, CT 06106
First Light Hydro Generating Company II Trading Agreement

and Order No. 8279

FLHGC consents to the issuance ofthis Trading Agreement and Order without further notice.

The undersigned certifies that he/she is fully authorized to enter into this Trading Agreement

and Order and to legally bind FLHGC to the terms and conditions ofthe Trading Agreement

and Order.

First Light Hydro

n ~+.rSignature: _--A~~~~LA~~LP~~~~~_

Name: __lQ,Cfi~,---A.----,(.jri~:ttL__

Title: VI'(f' £esidcnt,

Date: _4-.:.I.=...d'-O'-10C1=---'-- _

Issued as a final order ofthe Commissioner of Environmental Protection on

Date

CITY OF PRESTON LAND RECORDS

MAILED CERTIFIED MAIL,

RETURN RECEIPT REQUESTED

Certified Document No.