# STATE OF CONNECTICUT DEPARTMENT OF ENVIRONMENTAL PROTECTION

In the matter of The State ofConnecticut and First Light Hydro Generating Company ) ) ) ) ) Trading Agreement and OrderNo. 8279

Whereas, the Commissioner ofEnvironmental Protection ("Commissioner") and First Light Hydro Generating Company ("FLHGC") agree to the use ofdiscrete 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 ofSubsection 22aI74-22(e) ofthe RCSA:

A. Atthe request and with the agreement ofFLHGC, the Commissioner finds the following:

I. FLHGC is an exemptwholesale electric generating company with its principal place ofbusiness in Hartford, Connecticut. On November 1,2006 FLHGC purchased from NE Hydro Generating Company one piece offuel 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. Pursuantto 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. Pursuantto 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 EmployerFirst Light Hydro Generating Company 2 Trading Agreement and OrderNo. 8279



### B. The Commissioner, in accordance with the provisions ofthis Trading Agreement and Order, and pursuantto Section 22a-174-22G) ofthe Regulations, hereby allows FLHGC to comply with Section 22a-174-22 ofthe Regulations through use ofDERC 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, atthe facility, FLHGC shall comply with Section 22a-174-22 ofthe Regulations through DERC and/orBDERC trading. Until FLHGC achieves permanentcompliance 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 underthis 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 underthis 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/orBDERC use

a. Until May I, 2010, before the first day ofeach month FLHGC shall have in its possession sufficientapproved DERCs and/or BDERCs for the current day for the peaking unitbased on the following calculations; Beforethe first day ofeach 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 OrderNo. 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 laterthan the twentieth day ofeach month, FLHGC shall calculate and permanently retire DERCs and/or BDERCs used in the preceding calendar month, as follows: Actual DERCs and/orBDERCs (in tons) = [((FLERin Ibs/MMBtu)

- (0.95 xNOx 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 laterthan December 31 steach year, FLHGC shall acquire and permanently retire seven ozone season DERCs and/or BDERCs 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 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 ofexcess NOx emitted from the peaking unit during such ozone seasonbased upon the actual emissions for each day that Connecticuteight hour ozone levels were forecasted to be "unhealthy for sensitive groups", "unhealthy", or "very unhealthy". Where: Actual ton ofexcess 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 ofexcess NOx emitted from the peaking unit during forecasted ozone exceedance days shall be multiplied by seven and then rounded to the next greaterwhole ton, to determine the number ofDERCs and/orBDERCs to be permanently retired. This requirement is in addition to the FLHGC's requirementtoFirst Light Hydro Generating Company 4 Trading Agreement and OrderNo. 8279 estimate excess emissions and subsequentpermanentretirement ofa sufficient number ofapproved DERCs and/orBDERCs in accordance with paragraph C.2.a.(i) ofthis Trading Agreement and Order. (iii) During the non-ozone season: Until May I, 20I0, from October I 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 limitofO.15Ib/MMBtu. Priorto October 1,2009, FLHGC 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 I through April 30 x (allowable emission rate in Ibs/MMBtu

- (0.95 x 0.15Ib/MMBtu))] -i- 2000 lbs/ton b. No laterthan May 31 of2009 and 20I0, in addition to the DERCs retired pursuantto 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 otherNOx budget program sources located in Connecticut. BDERCs shall only be used to offset ozone season excess emissions, and shall notbe 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 ofDERCs and/orBDERCs in its possession, created, purchased and used (by serial number ifassigned) each month in accordance with the appropriate emission rates and limits in this Trading Agreement and Order; the number ofDERCs and/orBDERCs used during the ozone season, and DERCs and/orAllowances used during the non-ozone season (the remainder ofthe year); during the ozone season, the ozone classification as forecasted by the Commissioneron the previous day; as well as documentation attesting to the fact that approved DERCs and/orBDERCs used during the ozone season were generated during the ozone season. Generator certification ofFirst Light Hydro Generating Company 

### 5 Trading Agreement and OrderNo. 8279 this fact shall be sufficient. FLHGC shall maintain and submit suchrecords 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 Commissionerwithin thirty (30) days ofreceipt ofa written request from the Commissioner. 6. Annual Emission Statement. No laterthan March I forthe previous calendaryear and July 30, forthe Octoberthrough April time period, ofevery year after issuance ofthis Trading Agreement and Order, FLHGC shall provide to the Commissioner, arecord of each sale orothertransfer, and use ofany and all ofthe DERCs and/orBDERCs approved within and subsequentto issuance ofthis Trading Agreement and Orderuntil all such DERCs and/orBDERCs have been used or are no longerin FLHGC's possession. FLHGC shall also include actual NOx emissions from the peaking unit and the amount ofall DERCs and/orBDERCs used (including serial numbers (ifassigned) and approved DERCs and/orBDERCs generated and/orpurchased from other facilities), generated and/or approved for the previous calendar year and Octoberthrough April time period. These reports shall be on aform prescribed by the Commissionerand shall be in monthly increments, and by ozone and non-ozone seasons. 7. Allowance Use. Pursuantto Section 22a-174-22(d)(3) ofthe Regulations, FLHGC may use NOx allowances, until May I, 2010, for the peaking unitpursuant to 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 subjectto all otherrestrictions and/orrequirements 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 oruse an existing compliance account oroverdraft 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 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 RetirementAccount (Account ID CT0000000300 in the NATS).First Light Hydro Generating Company 6 Trading Agreement and OrderNo. 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 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 ortake any other action to require additional upward adjustment, based on the gravity ofany alleged noncompliance orviolation oflaw. 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/orBDERC shortfall. FLHGC shall certify and report any such DERC and/or BDERC retirementto the Commissioner in accordance with paragraph C.30. of this Trading Agreement and Order. 9. Vintage Restriction. Forthe purposes ofcompliance with Section 22a-174-22 ofthe Regulations, DERCs/allowances shall only remain valid for five (5) calendaryears from the year ofthe generation/allocation ofsuch DERCs/allowances. DERCs/allowances olderthan five (5) calendaryears 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 afterMay 1,2010. BDERCs are subjectto the vintage restriction provided in paragraph C.3. ofthis Trading Agreement and Order. 10. FLERExceedance. Noncompliance with an established FLER shall subject FLHGC to make restitution by matching the quantity ofemissions ("true up") caused by the exceedance plus a 100% premium. The true up in tons ofDERCs and/or BDERCs shall be equal to the FLERexceedance in IbslMMBtu, multipliedby the total heat input during the period ofnoncompliance divided by 2000 Ibs/ton. Ifthe period ofnoncompliance is notknown, the time period from the completion of the last/previous Commissionerwitnessed emission testthrough 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 ortake any other action to require additional upward adjustment, based on the gravity ofany alleged noncompliance orviolation oflaw. 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 FLERexceedance. FLHGC shall report any FLER exceedance to the Commissioner in accordance with paragraph C.30. ofthis Trading Agreement and Order. 11. FLERModification. FLERs set forth in Table 1 ofthis Trading Agreement and Order may be modified only afterthe consent ofthe Commissionerby written modification of this Trading Agreement and Order. 12. Emissions Testing. Pursuantto Section 22a-174-22(k) ofthe Regulations, FLHGC shall conductNOx emission tests ofthe peaking unit at least once every five yearsFirst Light Hydro Generating Company 7 Trading Agreement and OrderNo. 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 laterthan May 1,2010, with respect to the peaking unit, FLHGC shall comply with the requirements ofSections 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 orbefore 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 Orderuntil 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 Commissionernotifies FLHGC that any document or other action is deficient, and does not approve it with conditions ormodifications, it is deemed disapproved, and FLHGC shall correctthe deficiencies and resubmit it within the time specified by the Commissioneror, ifno time is specified by the Commissioner, within 30 days ofthe Commissioner's notice ofdeficiencies. In approving any document or other action under this Trading Agreement and Order, the Commissioner may approve the document or other action as submitted orperformed or with such conditions ormodifications as the Commissioner deems necessary to carry out the purposes ofthis Trading Agreement and Order. Nothing in this paragraph shall excuse noncompliance ordelay. 17. 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 periodMay I through September 30 in any given calendar year. 18. Dates. The date of"issuance" ofthis Trading Agreement and Orderis the date the Trading Agreement and Order is deposited in the U.S. mail orpersonally delivered, whichever is earlier. The date ofsubmission to the Commissionerof any documentrequired by this Trading Agreement and Order shall be the date such document is received by the Commissioner. The date ofany notice by theFirst Light Hydro Generating Company 8 Trading Agreement and OrderNo. 8279 Commissioner under this Trading Agreement and Order, including but not limited to notice ofapproval or disapproval 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 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 not a Saturday, Sunday or Connecticut or federal holiday 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 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 1certify, 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 ofmy knowledge and belief. 1understand 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 Commissionerwith 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 Orderis 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 laterthan fifteen (15) days after transferring all or any portion ofany ofthe facilities, the operations, the sites orthe 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 otherperson ormunicipality.First Light Hydro Generating Company 9 Trading Agreement and OrderNo. 8279

23. Commissioner's powers. Nothing in this Trading Agreement and Order shall affectthe Commissioner's authority to institute any proceeding ortake any other action to prevent or abate violations oflaw, preventor abate pollution, recover costs and natural resource damages, and to impose penalties for past, present, orfuture violations oflaw. Ifat any time the Commissionerdetermines thatthe actions taken by FLHGC pursuant to this Trading Agreement and Order have successfully corrected all violations, fully characterizedthe extent ordegree ofany pollution, or successfully abated orprevented pollution, the Commissionermay 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 ofother 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 Commissionerthatthe actions taken by FLHGC pursuantto this Trading Agreement and Orderwill result in compliance orprevent or abate pollution. 26. Access to facility. Any representative ofthe Department ofEnvironmental Protection may enter any ofthese facilities without prior notice for the purposes ofmonitoring and enforcing the actions required or allowedby this Trading Agreement and Order. 27. No effect on rights ofother persons. This Trading Agreement and Orderneither creates nor affects any rights ofpersons ormunicipalities that are not parties to this Trading Agreement and Order. 28. No Creation ofProperty Rights. This Trading Agreement and Orderdoes not create any property rights with respectto these DERCs and/or BDERCs. 29. Notice to Commissionerofchanges. Within fifteen (I 5) days ofthe date FLHGC becomes aware ofa change in any information submitted to the Commissionerunder this Trading Agreement and Order, orthat any such information was inaccurate or misleading orthat any relevant information was omitted, FLHGC shall submitthe corrector omitted information to the Commissioner. 30. Notification ofnoncompliance. In the eventthat FLHGC becomes aware that it did not ormay not comply, ordid not ormay not comply on time, with any requirement ofthis Trading Agreement and Orderorofany document required hereunder, FLHGC shall immediately notify by telephone the individual identified in the nextparagraph and shall take all reasonable steps to ensure that any noncompliance or delay is avoided or,

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First LightHydro Generating Company 10 Trading Agreement and OrderNo. 8279 ifunavoidable, 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 notexcuse noncompliance or delay, and the Commissioner's approval ofany compliance dates proposed shall not excuse noncompliance or delay unless specifically so stated by the Commissioner in writing. 31. Submission ofdocuments. Any documentrequired to be submitted to the Commissionerunderthis Trading Agreement and Order shall, unless otherwise specified in this Trading Agreement and Order or in writing by the Commissioner, be directed to: Department ofEnvironmental Protection Bureau ofAir Management Engineering and Enforcement Division Emissions and CreditTrading Section 79 Elm Street Hartford, CT 06106First Light Hydro Generating Company II Trading Agreement and OrderNo. 8279 FLHGC consents to the issuance ofthis Trading Agreement and Orderwithout 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**~+.r** Signature:

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Issued as a final orderofthe Commissioner ofEnvironmental Protection on

Date

CITY OF PRESTON LAND RECORDS MAILED CERTIFIED MAIL, RETURN RECEIPT REQUESTED Certified DocumentNo.