CCCHARDSLAYTON&RobertW.WhetzelFIINJGER302-651-7634Whetzej@rlf.comDecember17,2008VIARANDDELIVERYTheHonorableFredS.SilvermanSuperiorCourtfortheStateofDelawareNewCastleCountyCourthouse500NorthKingStreetWilmington,Delaware19801L.Re:ConectivDelmarvaGeneration,Inc.v.JohnA.Hughes,theDepartmentofNaturalResources&EnvironmentalControlandeStateofDelawareCivilActionNo.07C-O1-204FSSCMDearJudgeSilverman:EnclosedpleasefmdacourtesycopyoftheStipulationofDismissalintheabovereferencedaction,theoriginalofwhichhasbeenfiledwithProthonotary.WehavealsoenclosedacopyoftheSettlementAgreementbetweentheparties,fortheCourt’sinformation.WeareappreciativeoftheCourt’seffortsinconnectionwiththismatter,andcounselareavailableattheconvenienceoftheCourtshouldYourHonorhaveanyquestionsconcerningtheenclosed.Respfilly,RobertRWW/lmgEnclosurescc:Prothonotary(byhand)ValerieM.Satterfield,Esq.(byhand)RLFI-3350674-1OneRodneySquare920NorthKingStreetiWilmington.DE19801Phone:302-651-7700Fax:302-651-7701CCINTHESUPERIORCOURTOFTHESTATEOFDELAWAREINANDFORNEWCASTLECOUNTYCONECTIVDELMARVAGENERATION,INC.,Plaintiff,NON-ARBITRATIONCASEV.C.A.No.()7C-OI-204FSSJOHNA.HUGHES,Secretary,StateofDelawareDepartmentofNaturalResources&EnvironmentalControl,DEPARTMENTOFNATURALRESOURCES&ENVIRONMENTALCONTROL,andSTATEOFDELAWARE,Defendants.STIPULATIONOFDISMISSALPursuanttoSuperiorCourtCivilRule41,theparties,byandthroughtheirrespectivecounselandsubjecttotheapprovaloftheCourt,doherebystipulateandagreeasfollows:1.Thisactionisdismissed.2.TheCourtretainsjurisdictionoverthisactionforpurposesofenforcingthesettlementagreementbetweentheparties.RLFI-3349046-1CkobertW.Whetzel(4’224ZRichards,Layton&OneRodneySqr(P0Box551Wilmington,Delaware19899(302)651-7700AttorneysforPlaintiffDated:December2008ValerieM.Satterfield,Esquire(LD.#3937)DeputyAttorneyGeneral102W.Waterst.,3rdFloorDover,DE19904(302)739-4636AttorneyforDefendantsDated:Decemberi2008SOORDEREDthis_____dayof,2008J.C6RLFI-3349O4-ICCSETTLEMENTAGREEMENTThisAgreement,madethe—dayofDecember,2008,byandbetweenPlaintiffConectivDelmarvaGeneration,LLC(“Conectiv”)andDefendantsSecretaryJohnA.Hughes,theDelawareDepartmentofNaturalResources&EnvironmentalControl(“DNREC”)andtheStateofDelaware(collectively,the“Parties”):WHEREAS,DNRECissuedOrderNo.2006-A-0056,effectiveDecember11,2006,whichadoptedasfinaltheElectricGeneratingUnit(“EGU”)Multi-pollutantRegulation(“theRegulation”)toreduceemissionsofmercury(“Hg”),SulfurDioxide(“SO2”)andNitrogenOxides(“NOx”);WHEREAS,theemissionlimitsestablishedbytheRegulationrequireaffectedelectricgeneratingunitstocomplywithreducedinitialshorttermemissionlimitsby2009(“PhaseI”)andwithfurtherreducedemissionlimitsby2012and2013(“PhaseII”);WHEREAS,onDecember31,2007,aspartofacorporaterestructuring,PlaintiffConectivDelmarvaGeneration,Inc.wasconvertedtoalimitedliabilitycompanyandbecameConectivDelmarvaGeneration,LLC;WHEREAS,Conectivownsandoperatesthreeunits(“EdgeMoor3,EdgeMoor4andEdgeMoor5”andcollectively,the“Units”)atitselectricgeneratingfacilityinEdgeMoor,Delaware,thatareidentifiedassubjecttotheemissionslimitsintheRegulation;WHEREAS,Conectivfiledacomplaintpursuantto29Del.C.§10141(“Complaint”)seekingreviewoftheRegulationandclaimingthattheRegulationisarbitrary,capriciousandotherwisenotinaccordancewithlaw;WHEREAS,thePartieshaveagreedtocertainearlyemissionsreductionsassetforthbelow;RLFI-3349046-ICCWHEREAS,thePartieshaveagreedthatthisAgreementwasnegotiatedatarmslengthandingoodfaith,willavoidprotractedlitigationoverthevalidityandlegalityoftheRegulationandisfair,reasonableandintheinterestoftheParties.NOWTHEREFORE,inconsiderationofthemutualcovenantsandagreementscontainedhereinandothergoodandvaluableconsideration,thereceiptandsufficiencyofwhichareherebyacknowledged,thePartiesintendingtobelegallyboundandtobindtheirrespectiverepresentatives,successorsandassignsherebycovenantandagreeasfollows:1.TheElectricGeneratingUnitMulti-pollutantRegulationa.OnorbeforeJanuary1,2012,ConectivwilloperateEdgeMoor3andEdgeMoor4sothatmercuryemissionsdonotexceed0.6lb/tBtuheatinputonaquarterlyaveragebasis.b.DNRECshallamendandre-promulgatetheRegulationwitharevisedannualSO2massemissionlimitforEdgeMoor5(the“AmendedRegulation”)fortheEdgeMoorfacility.TheAmendedRegulationshallmodif,’theannualmassemissionlimitofSO2associatedwithEdgeMoorUnit5(ascontainedinTable2oftheRegulation)from2,427tpyto4,600tpy,providedthatDNRECmayamendormodi1’thisamountbasedoninformationordataobtainedduringthepublichearingprocess.DNRECshallproposetheamendmentassoonaspracticableandshallissueanorderfmalizingtheprocessbynolaterthanAugust2009.c.DNREChasdeterminedthatthemodifiedannualSO2massemissionlimitforEdgeMoor5assetforthinthisdocumentisnotinconsistentwithanyfederallyorstateenforceableplans,submissionsorotherdocumentssubmittedtodate.2.ClaimsandLitigation—UponthesigningofthisAgreement,thepartiesshallsignandfilethestipulationofdismissalattachedheretoasExhibitA.3.NoAdmission/ReservationsofRights—ThisAgreementdoesnotconstituteanadmissionbyanyoftheParties,andmaynotbeusedinanyjudicialoradministrativeproceedingexceptasmaybenecessarytoenforcethetermsofthisAgreementortoobtainreliefnecessarytofulfilltheobjectivesofthisAgreement.Exceptasexpresslyprovidedherein,RLFI-3349046-1CCnothingcontainedinthisAgreementshalllimit,diminish,orwaiveanyrightofappealorreviewthatConectivhasormayhavewithrespecttotheactionsofanyagency,includingEPA.Exceptasotherwiseprovidedherein,thisAgreementshallnotbeinterpretedtomeanthatDNRECislimitedorinanywayprecludedfromseekingcompliancewithanymatters,statutoryprovisions,regulatoryrequirements,orpermitsthatarenotthesubjectofthisAgreement.4.Termination—ConectivmayterminatethisAgreement,sothatitshallbecomenullandvoid,upontheoccurrenceofanyofthefollowing;(a)DNRECamendsormodifiestheannualmassemissionlimitsetforthinparagraphI.b.;(b)DNRECmakesanymodification,revision,oramendmenttotheproposedAmendedRegulationbasedoninformationorconsiderationsobtainedthroughthepublichearingorpubliccommentprocess,asprovidedforinparagraph8;or(c)afinalregulationthatmodifiestheannualmassemissionlimitassetforthinparagraphI.bdoesnotbecomefinalandeffective.TerminationunderthisparagraphshallbeeffectiveuponsubmissionofnoticetoDNREC,whichshallbeprovidedinwritingasfollows:ValerieM.Satterfield,DeputyAttorneyGeneralAuMirzakhalili,AdministratorOfficeoftheAttorneyGeneralPriscillaBuilding102W.WaterStreet3”’Floor156S.StateStreetDover,Delaware19904Dover,Delaware19901Uponreceiptoftherequisitenoticeandresultingtennination,thePartiesshallbereleasedfromallduties,termsandconditionsofthisAgreementexceptonceDNREChasfulfilleditsobligationtoamendtheannualmassemissionslimitunderthisOrder,thenConectiv’sabilitytoterminatethisAgreementshallceaseandbecomenullandvoid.Further,nothinginAgreementshalllimitDefendants’futureregulatoryactions,andDefendants’abilitytoundertakeanyfutureregulatoryactionsshallnotbeboundinanywaybythetermsofthisAgreement.Conectiv’srightstocommentonorseekjudicialreviewofanysuchfutureactionbyDefendantsisexpresslyreservedandshallnotbelimitedinanywaybythisAgreement.RLFI-3349046-1C5.EffectofTerminationShouldthisAgreementbeterminatedpursuanttoParagraph4,Conectivmayre-instateorreopenitsappealandseekjudicialreviewoftheRegulation,andDNRECwillnotassertanydefenseorobjectionbasedonthepassageoftimeincludingwithoutlimitationanystatuteoflimitationsorlathesdefense.6.GoverningLaw—ThisAgreementshallbegovernedbyandconstruedinaccordancewiththelawsoftheStateofDelaware.7.Authority—EachoftheundersignedrepresentativesofthePartiesrepresentsthatheorsheisfullyauthorizedtoenterintoandexecutethisAgreementexceptDefendant’sabilitytobindtheStateofDelawareislimitedtotheextentthattheStateofDelawareactsbyandthroughorwassuedwithrespecttotheactionsofDNRECandJohnA.Hughes.8.PublicComment—AllactionsanddutiesrequiredofDNRECunderthisAgreement,thatarepotentiallysubjecttopublichearingorpubliccomment,includingthepromulgationoftheAmendedRegulation,aresubjecttoreview,modification,revision,amendmentordenialbyDNREC,basedoninformationorconsiderationsobtainedthroughthepublichearingorpubliccommentprocess,inDNREC’ssoleregulatorydiscretion.RLFI-3349046-112112/200815:473027396264DNREC/OTSCPAGE02CONECT!VDELMARVAGENERATJONU-CDated:ByE’-AlbertF.KirbyVicePresidentJOHNAUGHESSTATEOFDELAWAREDEPARTMENTOFNATURALRESOURCESANDENVLRONMEflALCONTROLANDSTATEOFDELAWAREDedBy:________JonA.I-ghes,Secrct3ryRLFI-346-p.C’C]NTHESUPERIORCOURT01?THESTATEOFDELAWAREINAN])FORNEWCASTLECOUNTYCONECTIVDELMARVAGENERATION,INC.,PlaintiffNON-ARBITRATIONCASEV.C.A.No.07C-O1-204FSSJOHNA.HUGHES,Secretary,StateofDelawareDepartmentofNaturalResources&EnvironmentalControl,DEPARTMENTOFNATURALRESOURCES&ENVIRONMENTALCONTROL,andSTATEOFDELAWARE,Defendants.STIPULATIONOFDISMISSALPursuanttoSuperiorCourtCivilRule41,theparties,byandthroughtheirrespectivecounselandsubjecttotheapprovaloftheCourt,doherebystipulateandagreeasfollows:I.Thisactionisdismissed.2.TheCourtretainsjurisdictionoverthisactionforpurposesofenforcingthesettlementagreementbetweentheparties.RLFI-3349046-IRobertW.Whetzel(#2288)Richards,Layton&FingerOneRodneySquareP.O.Box551Wilmington,Delaware19899(302)651-7700AttorneysforPlaintiffDated:December_,2008ValerieM.Satterfield,Esquire(I,D.#3937)DeputyAttorneyGeneral102W.WaterSt.,3rdFloorDover,DE19904(302)739-4636AttorneyforDefendantsDated:December—,2008-ISOORDEREDthis____dayof,2008J.IIRLFI-3349046-1