Reserved.

TRADING AGREEMENT AND ORDER MODIFICATION

TRADING AGREEMENT AND

ORDER NO. 8183A

MODIFICATION NO.2

(i) At all times:

Before the first day of each month, MPLLC shall estimate DERCs required for

such month for the peaking units as follows:

Until May 1,2009, before the first day of each month MPLLC shall have in its

possession sufficient approved DERCs for the current day for the peaking units

based on the following calculations;

(Printed on Recycled Paper)

79 Elm Street • Hartford. CT 06106-5127

An Equal Opportunity Employer

Estimated DERCs (in tons) use:: [«FLER in IbslMMBtu) - (0.95 x NOx

allowable rate in IbsIMMBtu» x (estimated

fuel use in MMBtu)] -:- 2000 poundslton

This Trading Agreement and Order supersedes Trading Agreement and Order

8183 issued on January 12,2000.

STATE OF CONNECTICUT

DEPARTMENT OF ENVIRONMENTAL PROTECTION

3. Delete the date April 30, 2007 and substitute therefor May 1, 2009, in paragraphs

A.6. and C.I.

4. Delete paragraphs C.2.a. and substitute the following therefor:

1. Delete paragraph A.I. and substitute the following therefor:

2. Delete paragraph A.5. and substitute the following therefor:

WHEREAS, the Commissioner and MPLLC, having agreed to the terms and conditions set

forth in Trading Agreement and Order No. 8183A signed by the Commissioner on April 22,

2003, and Trading Agreement and Order 8183A Modification I issued March 21, 2005 do now,

by mutual agreement, modify said Trading Agreement and Order No. 8183A as follows:

AND

MONTVILLE POWER LLC

In the matter of a Trading Agreement and Order between the Commissioner of Environmental

Protection ("Commissioner") and Montville Power LLC ("MPLLC").

STATE OF CONNECTICUT
Montville Power LLC 2 Trading Agreement and Order

No. 8183A Modification No.2

No later than the twentieth day of each month, MPLLC shall calculate and

permanently retire DERCs used in the preceding calendar month, as follows:

Actual DERCs (in tons) =[((FLER in IbslMMBtu) - (0.95 x NOx allowable rate

in Ibs/MMBtu)) x (actual fuel use in MMBtu)] -;- 2000

pounds/ton

Where:

• NOx allowable rate = allowable limit rate in IbslMMBtu shown in Table I of

this Trading Agreement and Order.

• FLER =full load emission rate in IbslMMBtu as shown in Table I of this

Trading Agreement and Order.

• Discount (0.95) =5% design margin applied to the allowable limit rate.

ii) During the ozone season only:

No later than December 31st each year, MPLLC shall acquire and permanently

retire seven ozone season DERCs for every actual ton of excess NOx emitted

from the peaking units 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, MPLLC shall

calculate and permanently retire seven ozone season DERCs for every actual ton

of excess NOx emitted from the peaking units during such ozone season based

upon the actual emissions for each day that Connecticut eight hour ozone levels

were forecasted to be "moderate to unhealthy for sensitive groups", "unhealthy

for sensitive groups", "unhealthy", or "very unhealthy".

Where:

Actual ton of excess NOx emitted = [((FLER in IbslMMBtu) - (0.95 x

NOx allowable rate in IbslMMBtu)) x (actual

fuel use in MMBtu)] -;- 2000 pounds/ton

The total actual tons of excess NOx emitted from the peaking units during

forecasted ozone exceedance days shall be multiplied by seven and then rounded

to the next greater whole ton, to determine the number of DERCs to be

permanently retired. This requirement is in addition to the MPLLC's requirement

to estimate excess emissions and subsequent permanent retirement of a sufficient

number of approved DERCs in accordance with paragraph C.2.a.(i) of this

Trading Agreement and Order.
.'

.

•

Montville Power LLC 3 Trading Agreement and Order

No. 8183A Modification No.2

5. Delete paragraphs C.2.b. and substitute the following therefor:

Reserved.

6. Delete paragraph C.5. and substitute the following therefor:

Annual DERC Report. No later than March 1 of every year after issuance of this

Trading Agreement and Order, MPLLC shall submit in writing to the

Commissioner, a record of each sale or other transfer of DERCs for the previous

calendar year. MPLLC shall also include actual NOx emissions from the peaking

units and the amount of all DERCs used (including serial numbers (if assigned)

and DERCs purchased from other facilities). These reports shall be on forms

prescribed by the Commissioner and shall be in monthly increments, and by ozone

and non ozone seasons.

7. Delete paragraph C.6. and substitute the following therefor:

Allowance Use. Pursuant to Section 22a-174-22(d)(3) of the Regulations,

MPLLC may use NOx allowances, until May 1,2009, for the peaking units

pursuant to Section 22a-174-22U) of the Regulations to achieve all or a portion of

the reductions required by Section 22a-174-22 of the Regulations. Any allowance

used for compliance with Section 22a-174-22(e) of the Regulations shall be

subject to all restrictions and/or requirements applicable to DERCs contained in

this Trading Agreement and Order;

a. In order for MPLLC to use NOx allowances, MPLLC shall create a general

account or use an existing compliance account or overdraft account in

EPA's NOx Allowance Tracking System ("NATS"); and

b. Each allowance used for compliance with Section 22a-174-22 of the

Regulations shall be equivalent to one discrete emission reduction credit.

Allowances shall be considered used for compliance with Section 22a174-22 of the Regulations when they are transferred from the facility's

NOx general account in the NATS or the facility's NOx compliance

account in the NATS to the CT State NOx Retirement Account (Account

ill CT0000000300 in the NATS).

8. Delete paragraph C.7. and substitute the following therefor:

DERC Shortfall. At a minimum, DERCs required shall be adjusted upwards by
Montville Power LLC 4 Trading Agreement and Order

No. 8183A Modification No.2

100% if DERCs are not in MPLLC'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. MPLLC shall

permanently retire the quantity ofDERCs equivalent to the excess emissions

plus a 100% premium within sixty (60) days of MPLLC's discovery of the

DERC shortfall. MPLLC shall certify and report any such DERC retirement to

the Commissioner in accordance with paragraph C.29. of this Trading

Agreement and Order.

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

FLER Exceedance. Noncompliance with an established FLER shall subject

MPLLC to make restitution by matching the quantity of emissions ("true up")

caused by the exceedance plus a 100% premium. The true up in tons of DERCs

shall be equal to the FLER exceedance in IbslMMBtu, multiplied by the total heat

input during the period of noncompliance divided by 2000 lbs/ton. If the period

of noncompliance is not known, the time period from the completion of the

last/previous Commissioner witnessed emission test through 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 or take any other action to

require additional upward adjustment, based on the gravity of any alleged

noncompliance or violation of law. MPLLC shall permanently retire DERCs

calculated in accordance with the above plus a 100% premium within sixty (60)

days of MPLLC's discovery of the FLER exceedance. MPLLC shall report any

FLER exceedance to the Commissioner in accordance with paragraph C.29. of

this Trading Agreement and Order.

10. Delete paragraph C.12. and substitute the following therefor:

Extension. No later than May 1, 2009, with respect to the peaking units, MPLLC

shall comply with the requirements of Section 22a-174-22(d)(1) of the

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

extension of this Trading Agreement and Order.

11. Delete paragraph C.13. and substitute the following therefor:

Future Compliance Report. On or before September 1, 2008, MPLLC shall

submit a report in writing to the Commissioner, as directed in paragraph C.30. of
15. Delete the name "Mr. Michael Lafleur" in paragraph C30.

13. Delete paragraph C17. and substitute the following therefor:

12. Delete paragraph C16. and substitute the following therefor:

Trading Agreement and Order

No. 8183A Modification No.2

5

this Trading Agreement and Order, indicating how the facility shall comply with

Section 22a-174-22 of the Regulations with respect to the peaking units on and

after May 1,2009.

Dates. The date of "issuance" of this Trading Agreement and Order is the date the

Trading Agreement and Order is deposited in the U.S. mail or personally

deli vered, whichever is earlier. The date of submission to the Commissioner of

any document required by this Trading Agreement and Order shall be the date

such document is received by the Commissioner. The date of any notice by the

Commissioner under this Trading Agreement and Order, including but not limited

to notice of approval or disapproval of any 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 Order means calendar day.

Any document or action which is required by this Trading Agreement and Order

to be submitted or performed by a date which falls on a Saturday, Sunday or a

Connecticut or federal holiday shall be submitted or performed by the next day

which is not a Saturday, Sunday or Connecticut or federal holiday.

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 of the Regulations; "Commissioner"

means the Commissioner or a representative of the Commissioner; "Non-ozone

season" means the period from October 1 through April 30 in any given calendar

year; "Ozone season" means the period May 1 through September 30 in any given

calendar year.

14. Delete the word "individual" and substitute therefore the word "Section" in

paragraph C29.

All other terms and conditions of Trading Agreement and Order no. 8183A and Modification 1

issued by the Commissioner acting under Chapter 446c, Sections 22a-6, 22a-171, 22a-174, 22a176, and 22a-177 of the Connecticut General Statutes shall remain in effect.

Montville Power LLC
..

Montville Power LLC 6 Trading Agreement and Order

No. 8183A Modification No.2

MPLLC hereby consents to the entry of this modification to the Trading Agreement and Order

without further notice.

Signature:

Type Name:

Type Title:

Date:

Montville Power LLC

Stanley

-!£f~ Saska

Operations and Maintenance Manager

(;-'23-0(;

Issued as a modification of an Order of the Commissioner of Environmental Protection.

Date

MAILED CERTIFIED MAIL,

RETURN RECEIPT REQUESTED

Certified Document No.