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 of a Trading Agreement and Order between the Commissioner of Environmental

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 Order No. 8215A issued on April 30, 2003, and a Modification

thereto issued on September 16, 2004, do now, by mutual agreement, modify Trading Agreement

and Order No. 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 Commissioner has 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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79 Elm Street • Hartford. CT 06106 - 5127

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Middletown Power LLC 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-hour emission limit in

Table 22-1 of Section 22a-174-22 ofthe Regulations, meet a non-ozone season

emission limit of 0.15 IbIMMBtu. Prior to October 1,2006, October I, 2007, and

October I, 2008, MP shall estimate and acquire the amount of non-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 or the

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 later than 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 or the proportioned

24-hour allowable emission limit in IblMMBtu during October I through April 30

- (0.95 x 0.15 Ib/MMBtu))] + 2000 pounds/ton.

6. Delete paragraph C.I O. and substitute the following therefor:

Annual Emission Statement and Non-Ozone Season Emission Statement. No later

than March I for the previous calendar year and July 30 (for the October through

April time period only starting in 2003) of every year after issuance ofthis

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

each sale or other transfer, and use of any 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 longer in MP's possession. MP shall also

include actual NOx emissions from the boiler and the amount of all DERCs used

(including serial numbers (if assigned) and approved DERCs 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. Delete paragraph C.12. and substitute the following therefor:

DERC Shortfall. At a minimum, DERCs required shall be adjusted upwards by
8. Delete paragraph C.14. and substitute the following therefor:

9. Delete paragraph C.15. and substitute the following therefor:

Extension. No later than May I, 2009, with respect to the boiler, MP shall comply

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

the Regulations. There is no assurance that the Commissioner will grant a written

extension ofthis Trading Agreement and Order.

Trading Agreement and Order

No. 8215A Modification No.2

3

Future Compliance Report. On or before 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 comply with

section 22a-174-22 ofthe Regulations with respect to the boiler on and after May

1,2009.

100% ifDERCs are not in MP'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. MP shall permanently retire the

quantity of emissions caused by the exceedance plus a 100% premium within

sixty (60) days ofMP's discovery ofthe DERC shortfall. MP shall certify and

report any such DERC retirement to the Commissioner in accordance with

paragraph C.3I. ofthis Trading Agreement and Order.

Middletown Power LLC

·-, .

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 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.

II. Delete paragraph C.19. and substitute the following therefor:

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
Middletown 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 Power LLC

Signature: :D~~~~

Type Name: Daniel w. Ber<:eron

Type Title: Plaut M~u~g€lr

Date: June 13, 2006

•

a modification ofan Order ofthe Commissioner of Environmental Protection.

Date

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