December 17, 2008

VIA RAND DELIVERY

The Honorable Fred S. Silverman

Superior Court for the State of Delaware

New Castle County Courthouse

500 North King StreetWilmington, Delaware 19801 L.

Re: Conectiv Delmarva Generation, Inc. v. John A. Hughes, the

Department of Natural Resources & Environmental Control andeState of DelawareCivil Action No. 07C-O1-204 FSS

CM

Dear Judge Silverman:

Enclosed please fmd a courtesy copy ofthe Stipulation of Dismissal in the above

referenced action, the original of which has been filed with Prothonotary. We have also enclosed

a copy ofthe Settlement Agreement between the parties, for the Court’s information.

We are appreciative ofthe Court’s efforts in connection with this matter, and counsel are

available at the convenience ofthe Court should Your Honor have any questions concerning the

enclosed.

Resp filly,

Robert

RWW/lmg

Enclosures

cc: Prothonotary (by hand)

Valerie M. Satterfield, Esq. (by hand)

RLFI-3350674-1

One Rodney Square 920 North King Street i Wilmington. DE 19801 Phone: 302-651-7700 Fax: 302-651-7701
CONECTIV DELMARVA GENERATION,

INC.,

Plaintiff, NON-ARBITRATION CASE

V.

C.A. No. ()7C-OI-204 FSS

JOHN A. HUGHES, Secretary, State of

Delaware Department ofNatural Resources

& Environmental Control,DEPARTMENT OF NATURAL

RESOURCES & ENVIRONMENTALCONTROL, and STATE OF DELAWARE,

Defendants.

STIPULATION OF DISMISSAL

Pursuant to Superior Court Civil Rule 41, the parties, by and through their respective

counsel and subject to the approval ofthe Court, do hereby stipulate and agree as follows:

1. This action is dismissed.

2. The Court retains jurisdiction over this action for purposes of enforcing the

settlement agreement between the parties.

RLFI -3349046-1
kobert W. Whetzel (4’224Z

Richards, Layton &

One Rodney Sqr(P0 Box 551

Wilmington, Delaware 19899

(302) 651-7700

Attorneys for Plaintiff

Dated: December 2008

Valerie M. Satterfield, Esquire (LD. #3937)

Deputy Attorney General

102 W. Water st., 3rd Floor

Dover, DE 19904

(302) 739-4636

Attorney for DefendantsDated: December i2008

SO ORDERED this

day of , 2008

J.

RLFI -3349O4-I
the Delaware Department of Natural Resources & Environmental Control (“DNREC”) and the

State of Delaware (collectively, the “Parties”):

WHEREAS, DNREC issued Order No. 2006-A-0056, effective December 11, 2006,

which adopted as final the Electric Generating Unit (“EGU”) Multi-pollutant Regulation (“the

Regulation”) to reduce emissions of mercury (“Hg”), Sulfur Dioxide (“SO 2”) and Nitrogen

Oxides (“NOx”);

WHEREAS, the emission limits established by the Regulation require affected electric

generating units to comply with reduced initial short term emission limits by 2009 (“Phase I”)and with further reduced emission limits by 2012 and 2013 (“Phase II”);

WHEREAS, on December 31, 2007, as part of a corporate restructuring, Plaintiff

Conectiv Delmarva Generation, Inc. was converted to a limited liability company and became

Conectiv Delmarva Generation, LLC;

WHEREAS, Conectiv owns and operates three units (“Edge Moor 3, Edge Moor 4 and

Edge Moor 5” and collectively, the “Units”) at its electric generating facility in Edge Moor,

Delaware, that are identified as subject to the emissions limits in the Regulation;

WHEREAS, Conectiv filed a complaint pursuant to 29 Del. C. § 10141 (“Complaint”)

seeking review of the Regulation and claiming that the Regulation is arbitrary, capricious and

otherwise not in accordance with law;

WHEREAS, the Parties have agreed to certain early emissions reductions as set forth

below;

RLFI-3349046-I
NOW THEREFORE, in consideration of the mutual covenants and agreements contained

herein and other good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, the Parties intending to be legally bound and to bind their respective

representatives, successors and assigns hereby covenant and agree as follows:

1. The Electric Generating Unit Multi-pollutant Regulation

a. On or before January 1, 2012, Conectiv will operate Edge Moor 3 and

Edge Moor 4 so that mercury emissions do not exceed 0.6 lb/tBtu heatinput on a quarterly average basis.

b. DNREC shall amend and re-promulgate the Regulation with a revised

annual SO2 mass emission limit for Edge Moor 5 (the “Amended

Regulation”) for the Edge Moor facility. The Amended Regulation shallmodif,’ the annual mass emission limit of SO2associated with Edge Moor

Unit 5 (as contained in Table 2 of the Regulation) from 2,427 tpy to 4,600

tpy, provided that DNREC may amend or modi1’ this amount based on

information or data obtained during the public hearing process. DNREC

shall propose the amendment as soon as practicable and shall issue anorder fmalizing the process by no later than August 2009.

c. DNREC has determined that the modified annual SO2 mass emission

limit for Edge Moor 5 as set forth in this document is not inconsistent with

any federally or state enforceable plans, submissions or other documents

submitted to date.

2. Claims and Litigation — Upon the signing ofthis Agreement, the parties shall sign

and file the stipulation of dismissal attached hereto as Exhibit A.

3. No Admission/Reservations of Rights — This Agreement does not constitute an

admission by any of the Parties, and may not be used in any judicial or administrative

proceeding except as may be necessary to enforce the terms of this Agreement or to obtain reliefnecessary to fulfill the objectives of this Agreement. Except as expressly provided herein,

RLFI-3349046-1
limited or in any way precluded from seeking compliance with any matters, statutory provisions,

regulatory requirements, or permits that are not the subject ofthis Agreement.

4. Termination — Conectiv may terminate this Agreement, so that it shall become

null and void, upon the occurrence of any of the following; (a) DNREC amends or modifies the

annual mass emission limit set forth in paragraph I .b.; (b) DNREC makes any modification,revision, or amendment to the proposed Amended Regulation based on information or

considerations obtained through the public hearing or public comment process, as provided forin paragraph 8; or (c) a final regulation that modifies the annual mass emission limit as set forth

in paragraph I .b does not become final and effective. Termination under this paragraph shall be

effective upon submission of notice to DNREC, which shall be provided in writing as follows:

Valerie M. Satterfield, Deputy Attorney General Au Mirzakhalili, Administrator

Office ofthe Attorney General Priscilla Building

102 W. Water Street 3”’ Floor 156 S. State Street

Dover, Delaware 19904 Dover, Delaware 19901

Upon receipt of the requisite notice and resulting tennination, the Parties shall be released from

all duties, terms and conditions of this Agreement except once DNREC has fulfilled its

obligation to amend the annual mass emissions limit under this Order, then Conectiv’s ability to

terminate this Agreement shall cease and become null and void. Further, nothing in Agreementshall limit Defendants’ future regulatory actions, and Defendants’ ability to undertake any future

regulatory actions shall not be bound in any way by the terms of this Agreement. Conectiv’s

rights to comment on or seek judicial review of any such future action by Defendants is

expressly reserved and shall not be limited in any way by this Agreement.

RLFI-3349046-1
including without limitation any statute of limitations or lathes defense.

6. Governing Law — This Agreement shall be governed by and construed in

accordance with the laws ofthe State of Delaware.

7. Authority — Each of the undersigned representatives of the Parties represents that

he or she is fully authorized to enter into and execute this Agreement except Defendant’s ability

to bind the State of Delaware is limited to the extent that the State of Delaware acts by andthrough or was sued with respect to the actions of DNREC and John A. Hughes.

8. Public Comment — All actions and duties required of DNREC under this

Agreement, that are potentially subject to public hearing or public comment, including thepromulgation of the Amended Regulation, are subject to review, modification, revision,

amendment or denial by DNREC, based on information or considerations obtained through the

public hearing or public comment process, in DNREC’s sole regulatory discretion.

RLFI -3349046-1
CONECT!V DELMARVA G

N

JON 

Dated: ByE’ -

Albert F. KirbyVice President

JOHN A UGHES STATE OF DELAWARE

DEPARTMENT OF NATURAL RESOURCES ANDENVLRONMEflALCONTROL AND STATE OF DELAWARE

Ded By:________

Jo n A. I-ghes, Secrct3ry

RLFI -346-
INC.,

Plaintiff NON-ARBITRATION CASE

V.

C.A. No. 07C-O1-204 FSS

JOHN A. HUGHES, Secretary, State of

Delaware Department ofNatural Resources

& Environmental Control,

DEPARTMENT OF NATURAL

RESOURCES & ENVIRONMENTAL

CONTROL, and STATE OF DELAWARE,

Defendants.

STIPULATION OF DISMISSAL

Pursuant to Superior Court Civil Rule 41, the parties, by and through their respective

counsel and subject to the approval ofthe Court, do hereby stipulate and agree as follows:

I. This action is dismissed.

2. The Court retains jurisdiction over this action for purposes of enforcing the

settlement agreement between the parties.

RLFI -3349046-I
Richards, Layton & FingerOne Rodney Square

P.O. Box 551

Wilmington, Delaware 19899

(302) 651-7700

Attorneys for Plaintiff

Dated: December_, 2008

Deputy Attorney General

102 W. Water St., 3rd Floor

Dover, DE 19904

(302) 739-4636Attorney for DefendantsDated: December —,2008

SO ORDERED this 

day of ,2008

J.

II

RLFI-3349046-1