# STATE OF CONNECTICUT DEPARTMENT OF ENVIRONMENTAL PROTECTION

STATE OF CONNECTICUT AND MIDDLETOWN POWER LLC TRADING AGREEMENT AND ORDER NO. 8215A MODlFlCAnON NO.2

TRADING AGREEMENT AND ORDER MODIFICAnON In the matter ofa Trading Agreement and Orderbetween the Commissioner ofEnvironmental Protection ("Commissioner") and Middletown Power LLC ("MP"). WHEREAS, the Commissioner and MP, having agreed to the terms and conditions set forth in Trading Agreement and OrderNo. 8215A issued on April 30, 2003, and a Modification thereto issued on September 16, 2004, do now, by mutual agreement, modify Trading Agreement and OrderNo. 8215A as follows: I. Delete the date September 30, 2004, and substitute therefor May I, 2009, in paragraphs A9., C.l., C.2., C.3.a., C.3.a. footnote 3, C.3.b., C.3.c., C.3.d., C.3.e., C.3.f., and C.6. 2. Delete paragraph A6. 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 4 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 Al

### O. in its entirety. 4. Delete paragraph RI. and substitute the following therefor: Comply with Section 22a-174-22(d)( I) 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:

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Middletown PowerLLC 2 Trading Agreement and Order No. 8215A 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 of0.15 IbIMMBtu. Priorto October 1,2006, October I, 2007, and October I, 2008, MP shall estimate and acquire the amount ofnon-ozone season DERCs or allowances needed to comply with 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 Ib/MMBtu))] + 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 the preceding 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 limitin IblMMBtu during October I through April 30

- (0.95 x 0.15 Ib/MMBtu))] + 2000 pounds/ton. 6. Delete paragraph C.IO. 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 afterissuance ofthis Trading Agreement and Order, MP shall provide to the Commissioner, arecord of each sale or othertransfer, 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 otherfacilities), 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 by8. Delete paragraph C.14. and substitute the following therefor:

9. Delete paragraph C.15. 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. Trading Agreement and Order No. 8215A Modification No.2 3

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. 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 authority to institute anyproceeding ortake any other action to require additional upward adjustment, based on the gravity of any alleged noncompliance or violation oflaw. MP shall permanentlyretire the quantity ofemissions causedbythe exceedance plus a 100% premium within sixty (60) days ofMP's discovery ofthe DERC shortfall. MP shall certify and report any such DERC retirementto the Commissioner in accordance with paragraph C.3I. ofthis Trading Agreement and Order. Middletown PowerLLC 

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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 arepresentative 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. II. 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, whichever is earlier. The date ofsubmission to the Commissionerof any document required by this Trading Agreement and Order shall be the dateMiddletown Power LLC 

### 5 Trading Agreement and Order No. 8215A Modification No.2 MP hereby consents to the entry ofthis modification to the Trading Agreement and Order without further notice. Middletown PowerLLC Signature:

# :D~**~~~** Type Name: Daniel 

## w. Ber<:eron Type Title: Plaut**M~u~g€lr** Date: June 13, 2006 

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amodification ofan Order ofthe CommissionerofEnvironmental Protection.

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