### BEFORETHEILLINOISPOLLUTION CONTROLBOARD MIDWEST GENERATION,LLC, Petitioner,

ILLINOISENVIROMMENTAL PROTECTIONAGENCY, Respondent. 

## 1 ) 

## 1 ) 

### PCB 13- ) 

### (Variance

# -Air) 

## 1 1 1 NOTICE

### OFFILING To: John

### T. Therriault,AssistantClerk IllinoisPollutionControlBoard James

### R. Thompson Center 

### Suite 1

### 1-500 

### 100WestRandolph Chicago,

### Illinois 

### 60601 JulieArmitage ActingGeneral Counsel IllinoisEnvironmental ProtectionAgency Divisionof

### Legal Counsel 1 

### 02

### 1North Gmd

### Avenue, East 

### P.O. Box 

### 19276 Springfield,Illinois 

### 62794-9276

PLEASETAKE

### NOTICEthat

### we have 

### today filedwith 

### the QEce

### of

### the CIerkofthe 

### Pollution Control Board

### aPETITION

### FORVARIANCEon

### behalfofMIDWEST GENERATION,LLC,

### with aREQUEST FORHEARTNG

### and

### theAPPEARANCES

### OF 

## KATHLEENC.BASSI, STEPHENJ. 

### BONEBRAKE,andANDlREW

### N. 

### SAWULA,copies ofwhich are

### herewith served upon you. 

# RECEIVED omion

# ofLegal 

## Counsel 

## Environmental

## Protection 

# Mew Attachment 1SCHIFF HARDIN LLP Attorneys for Midwest Generation, LLC Kathleen C. Bassi Stephen J. Bonebrake AndrewN. Sawula 233 South Wacker Drive, Suite 6600 Chicago, Illinois 60606 Phone: 312-258-5500 Fax: 312-258-5600 kbassi@schiffhardin.com sbonebrake@schiffhardin.com asawula@schiffhardin.comBEFORE THE ILLINOIS POLLUTION CONTROL BOARD
MIDWEST GENERATION, LLC, Petitioner,


### v. ILLINOIS ENVIRONMENTAL PROTECTION AGENCY, Respondent. ) ) ) ) ) PCB 13-----:---- ) (Variance- Air) ) ) ) )


### APPEARANCE I hereby file my appearance in this proceeding, on behalfofMidwest Generation, LLC.

athleen C. Bassi Dated: //

# ~~

# t,j/ ,1. Kathleen C. Bassi SCHIFFHARDIN, LLP 233 South Wacker Drive, Suite 6600 Chicago, Illinois 60606 312-258-5567 

### Fax: 312-258-5600 kbassi@schiftbardin.comBEFORETHE ILLINOIS POLLUTION CONTROLBOARD
MIDWEST GENERATION,LLC, Petitioner,


### v. ILLINOIS ENVIRONMENTAL PROTECTIONAGENCY, Respondent. ) ) ) ) ) ) ) ) ) )


### APPEARANCE PCB13-
__________ _ (Variance- Air)

I hereby file my appearance in this proceeding, on behalfofMidwest Generation, LLC.

Dated: Stephen J. Bonebrake SCHIFF HARDIN LLP 233 South Wacker Drive, Suite 6600 Chicago, Illinois 60606 312-258-5500 Fax: 312-258-5600 sbonebrake@schiffhardin.comBEFORE THE ILLINOIS POLLUTION CONTROL BOARD
MIDWEST GENERATION,LLC, Petitioner,


### v. ILLINOIS ENVIRONMENTAL PROTECTIONAGENCY, Respondent. ) ) ) ) ) ) ) ) ) )


## APPEARANCE PCB 13-
____ _ (Variance- Air)

I hereby file my appearance in this proceeding, on behalfofMidwest Generation, LLC.

# ~~ AndrewN. Sawula Dated: November 30, 2012 Andrew N. Sawula SCHIFF HARDIN LLP 233 South Wacker Drive, Suite 6600 Chicago, Illinois 60606 312-258-5500 Fax: 312-258-5600 asawula@schiffhardin.com

### BEFORE THE ILLINOIS POLLUTION CONTROL BOARD
MIDWEST GENERATION, LLC Petitioner, 

## v. ILLINOIS ENVIRONMENTAL PROTECTIONAGENCY, Respondent. ) ) ) ) ) ) ) ) ) ) 

### PCB13-
__ (Variance- Air)

PETITION FORVARIANCE NOW COMES Petitioner, MIDWEST GENERATION, LLC, ("Midwest Generation" or "Petitioner")by and through its attorneys, SCHIFFHARDIN LLP, and, pursuantto Sections 35 and 37 ofthe Environmental Protection Act, 415 ILCS 5/35, 37 (2010) ("Act"), and 35 Dl. Adm. CodePart 104, SubpartB, requests that the Board grant Petitioner a variance from provisions of the Combined Pollutant Standard ("CPS") 1 setforth at 35 

### TIL Adm. Code§ 225.295(b)2for the two-year period beginningJanuary 1, 2015, and ending December 31,2016, andfrom Section 225.296(a)(2) for a period offive months, delaying that requirementuntil May 31, 2015, 

### and that the Board schedule ahearing in this matter. Additionally, to align with the variance requested in this Petition, Midwest Generation seeks a variance from the Board's OrderinMidwest Generation, LLC- Waukegan Generating Station v. Illinois EnvironmentalProtectionAgency, PCB 12-121 (August 23, 2012) ("Waukegan Order") atpage 20, where the Board ordered Midwest Generation to comply with the system-wide emission rates for sulfur dioxide ("S02"), or, in the alternative, Midwest
1Codified at 35 Ill. Adm. Code§§ 225.291-225.299 and 225.Appendix A.
2 Hereinafter, citations to the Board's regulations will be by section number only.

-I-Generation requests thatthe Board adjustthatportion ofthe Waukegan Ordertobeconsistent with the reliefrequested herein or specifically find that the variance requested here supersedes only that provision ofthe Waukegan Order thatrequires compliance with the system-wide S02 emissions rate but not the provisions regarding the retrofit ofthe hot-side precipitator and the installation ofthe flue gas desulfurization equipment orthe shutdown deadline as applicable to Waukegan Unit 7. This request for a variance is an option oflast resort that is intended to enable the company to manage through exceptionally difficult economic circumstances and financial hardship that couldnothave been foreseen when the CPS was adopted in 2007. Midwest Generation does not seekchanges to the CPS program for reducing S02 emissions in 2013 or 2014 orin 2017 or thereafterbut, rather' proposes a "pause" in the pace ofthe decline ofso2 emission rates in the middle ofthe program (2015-2016), accompanied by enforceable commitments to ensure that total S02 tons ofemissions are less than projected under the CPS during the period from 2013 through 2016. This requestfollows Midwest Generation's significant efforts to date to comply with the CPS, including major investments for pollution controls thatnow enable full compliance with CPS mercury and nitrogen oxide ("NOx") emission reduction requirements. Installation ofsuch controls atMidwest Generation's Crawford Station in late 2011, only to cease operation ofthat station by the end ofAugust 2012, provides clearevidence ofthe unforeseen economic circumstances now facing the company. Midwest Generation's record is one ofcontinuous improvement and national leadership among existing coal-fired generating stations in achieving significant emission reductions. The requested short "pause" in the decline ofCPS S02 system-wide emissionrates will cause no environmental harm and is needed to avoid arbitrary and unreasonable hardship.

-2-

### I. INTRODUCTION Midwest Generationhas already expended considerableresources to comply with the state's CPS rule, resources that competitors in other states generally have notbeen required to expend. Forinstance, Midwest Generation has installed activated carbon injection ("ACI") systems for mercury control at all ofits operating coal-fired units. Thecompanyhas installed selective non-catalytic reduction ("SNCR") systems to control NOx emissions in orderto comply with new NOx limits that took effectJanuary 1, 2012. To control S02 emissions, Midwest Generation uses ultra-low sulfurcoal and has begun installation ofdry sorbentinjection systems utilizing Trona. Midwest Generation has also begun related necessary upgrades ofits electrostatic precipitators ("ESPs") to control emissions ofparticulate matter ("PM") associated with theTrona injection systems. Midwest Generation has incurred more than $170 million in capital costs for this CPS compliance work to date. That is in addition to more than $160 million in capital costs that Midwest Generation spent on environmental improvement and control projects prior to the CPS. Midwest Generation is also expending tens ofmillions ofdollars per year on operating costs related to CPS compliance, includingfor the purchase ofurea for the SNCR systems to control NOx emissions and sorbent for use in the ACI systems to control mercury emissions, as well as for increased ash disposal costs caused by the use ofthese commodities. Even with approval ofthis requested variance, Midwest Generation currentlyplans to spend approximately $230 million on S02 emission controls and related PM controls in 2013 and 2014, including for Trona systeminstallations at Powerton Unit 6 and Waukegan Unit 7. However, to comply with the 2015 and 2016 CPS S02 system-wide rates and the CPS requirement to install flue gas desulfurization ("FGD") equipment on Waukegan Unit 8by the

-3-end of2014, Midwest Generation would be required to spend an estimated additional $210 million in 2013 and 2014. MidwestGeneration's ability to fund $210 million in additional controls costs in that timeframe has been impacted by a tsunami ofadverse developments, the impact ofwhich could not have been reasonably foreseen at the time that the CPS was adopted in 2007 orevenwhen Midwest Generation filed the Waukegan variance petition in April2012. 

### In light ofsignificantly changed regulatory, market, and financial circumstances since the CPS was adopted, Midwest Generation seeks moretime to complete the additional pollution work in 2013 and 2014 thatwouldberequired to satisfy the CPS 2015 and 2016 system-wide S02 emission rates and the Waukegan Unit 8FGD equipment installation requirements while also maintaining adequate cash flow while it works through a financial restructuring. Recently, revenues have declined while costshave precipitously increased. Electricity prices have significantly declined due to weak demand and unprecedented natural gas production from shale gas reserves. On the otherhand, the cost ofcoal as delivered to Midwest Generation's coal-firedunits, the most significant element ofits production costs, rose earlier this yearunder a new rail contract for the transportation oflow sulfurcoal to those units. Reflecting these adverse developments, Midwest Generation has suffered a significant net loss of $63 million for the first three quarters of2012. These recent adverse revenue and cost developments are exacerbatedbythe need to compete againstpower generators in other states while Midwest Generation incurs substantial costs to comply with stringent Illinois-specific rules such as the CPS. This competitive disadvantage is even more pronounced given the remand or vacatur and resulting delays in implementation ofvarious rules adopted byU.S. Environmental Protection Agency ("USEPA") since the CPS was adopted in 2007. Forinstance, all ofMidwest Generation's units have been

-4-controlled for mercury emissions since 2009. Bycomparison, the control requirements for the current federal regulations for mercury emissions found in the Mercury and AirToxics Standards ("MATS") do not take effectuntil2015. USEPA's Cross StateAir Pollution Rule ("CSAPR"), addressing S02 and NOx emissions, was remanded by the court in EMEHomer City Generation, L.P. v. E.P.A., 11-1302, 2012 WL3570721 (D.C. Cir. August 21, 2012). Illinois' CPS rule required reductions in emissions ofNOx effective in January 2012 that are generally as demanding as CSAPR, and Midwest Generation's competitors benefit from the delay in CSAPR's implementation. The deferral offederal requirements has delayed the day when many competitors will need to incur comparable costs. The CSP AR remand and additional uncertainty about future federal limits on emissions ofS02 coincide with the need for Midwest Generation to make additional investments to comply with the S02 systememission rates ofthe CPS. In addition, Midwest Generation and its indirectparent corporation, Edison Mission Energy ("EME"), are facing significant credit and cash flow challenges. EME is currently attempting to negotiate a financial restructuring with various creditors. Any funding for pollution controls from EME is in serious doubt, and EME'sparent company, Edison International, has stated on numerous occasions that it will not fund additional pollution control costs for Midwest Generation given current market conditions. Given these various challenges, Midwest Generation and EMEhave publicly disclosed that they are working on a financial restructuring with creditors and may need to file for Chapter 11 bankruptcy, a form of bankruptcy that contemplates continuation ofthe business enterprise through and after the bankruptcyprocess. Notwithstanding its currentcash flow and credit challenges, Midwest Generation is not asking for relieffrom CPS provisions that will require itto spend approximately $230 million in

-5-2013 and 2014, including for planned controls at Powerton Unit 6 andWaukegan Unit 7 to comply with the CPS 2013 and 2014 S02 emissionrates and the Waukegan Unit 7 control equipmentrequirements. However, Midwest Generation has notbeen able to identify a viable current source offunding for the approximately $210 million in additional control installation costs that would berequired for it to complywith the CPS 2015 and 2016 S02system-wide rate requirements andWaukegan Unit 8 FGD installation requirements due bythe end of2014. To improveits ability to securerequisite financing, Midwest Generation needs timeto work through the financial restructuring process, including any Chapter 11 proceedings. This places a premiumon liquidity conservation in 2013 and 2014 to allow for a successful financial restructuring. The effect ofgranting the requested variance would beto shift around $210 million ofcapital expenditures outofthe critical period of2013 and 2014 to 2015 and 2016. Electricity capacity markets show some improvement in 2014 from 2013 and more improvement in 2015. Federal regulatory requirements that become effective in 2015, including the MATS,
are expected to help level the competitiveplaying field within this same timeframe. This additional time would provideMidwest Generation the opportunity to conduct its financial restructuring and benefit from marketrecovery. Midwest Generation respectfully requests a variance from the 2015 and 2016 CPS rates. Consistentwith this request for reliefwhile Midwest Generation addresses apotentialfinancial restructuring, it also seeks a delay offive months from the requirement to install FGD equipment atWaukegan Unit 8 byDecember 31, 2014. This reliefwould effectively provide a "pause" in
some additional major pollution control expenditures while Midwest Generation continues with significant elements ofits CPS compliance plan and works through its cash flow and financial

-6-restructuring issues. Midwest Generation anticipates that following this "pause" in some expenditures, itcan complywith the CPS 

### SOz rate in 2017 and thereafter. Midwest Generation seeks this variance in order to avoid arbitrary and unreasonable hardship. With the variance, Midwest Generation will bebetter able to conserve cash and meet its obligations while it addresses its currentchallengingfinancial situation and works through financial restructuring and transitions to a new capital structure. Denial oftherequested variance would have a significant, adverse impact on Midwest Generation, its employees, and others. Absentrelief, Midwest Generation's cash flow preservation and restructuring efforts would be threatened by an additional expenditure ofapproximately $210 million in 2013 and 2014to comply with the CPS in addition to the approximately $230 million that Midwest Generation currently plans to spend in that period even ifthis variance is granted. IfMidwest Generation
were unable to fund those $210 million in additional control work in 2013 and 2014, for which Midwest Generationhas not yet identified a current viable source offunding, it would be required to significantly curtail generation from its fleet in at least 2015 and 2016. This would adversely impactMidwest Generation and its Stations as well as thejobs ofits employees. Others wouldbe adversely impacted as well, including lllinois businesses from which the companypurchases goods and services and recipients oftaxes resulting from operation ofthe Midwest Generation fleet. The requested temporary relieffrom the CPS rates in 2015 and 2016 and from therequirement for the installation ofFGD equipment onWaukegan Unit 8 by the end of2014 would significantlyreduce ifnot eliminate the depth and breadth ofpotential operational cutbacks and associatedjobreductions and other economic impacts that could otherwise arise. The requested variance from the system-wide S02 emission rates is for a period oftwo years, from January 1, 2015, through December 31, 2016, during which time Midwest

-7-Generation proposes to comply with a system-wide average annual emission rate of0.38 lb S02 /mmBtu rather than the emission rates required in Section 225.295(b) for those years.3 While greater than the rates in Section 225.295(b), the proposed rate is less than the CPS rate for 2014 of0.41 lb/mmBtu. Consistent with this relief, Midwest Generation also seeks a variance of five months, until May 31, 2015, from the requirement to install FGD equipment at orto permanently shut down Waukegan Unit 8 byDecember 31, 2014. Midwest Generation commits to not operate Waukegan Unit 8 after December 31, 2014, until theFGD equipment is installed and operational. The overall CPS system-wide rate programremains unchanged exceptfor years 2015 and 2016 and concludes on schedule with the installation ofFGD equipmenton designatedunits by the end of2018 and a final step-downin the so2 emission rate limit for calendar year 2019. Midwest Generation would resume the original CPS system-wide rate schedule in 2017, which is particularly noteworthy because it is anticipated that attainment ofboth the new national ambient air quality standard ("NAAQS") for one-hourS02 and the Best Achievable Retrofit Technology ("BART")/Regional Haze standards mustbe achieved by that year. As part ofthis request, Midwest Generation proposes additional compliance plan elements that wouldensure a net environmental benefit 

### ifthis variance is granted. Specifically, Midwest Generation will commitnotto operate the Crawford coal-fired units in 2013 and 2014.4 Itwill comply withregulatory CPS S02emissionrates in 2013 and 2014, and it will maintain

3 Ifthe Board believes it is necessary for Midwest Generation to explicitly meet the rates set forth in the CPS, ratherthan recognizing that they are subsumed by the more stringent rate, Midwest Generation offers an alternative compliance strategy, which is set forth in footnote 36 below. 4 In the Waukegan Order, the Board required Midwest Generation to shut down the Crawford Station by the end of2014; therefore, a commitment not to operate the Crawford Station in 2013 and 2014 represents voluntary reductions not otherwise required.

-8-mass emission levels at 57,000 tons in 2013 and 54,000tons in 2014, which are mass emissions levels lowerthan anticipated basedon average historic system-wide 2008-2011 heatinput and CPS emission rates. Finally, Midwest Generation will manage operation ofits fleet to ensure
mass so2 emission levels ofno greater than 39,000 tons in 2015, stepping down to 37,000 tons in 2016. MidwestGeneration will thereafter comply with the CPS system-wide S02emission rates, starting with the CPS rate of0.15 lb/mmBtu in 2017. The neteffect ofthese proposed commitments is early and cumulative decreases ofS02 emissions so that so2emissions from 2013-2016 will be 3,181 tons less than expectations under the CPS ifthis variance is granted. Although not included in the 3,181 tons, any environmental impact from so2 emissions that might otherwise occurby granting this variance compared to reasonable expectations under the CPS is also mitigated by the emissionreductions realized by Midwest Generation's early shutdown ofthe Fisk Station at the end ofAugust 2012, four months priorto the date required in the Waukegan Order. Importantly for overall environmental benefit, Midwest Generation's facilities have also achieved significantreductions in S02emissions in 2012 that would not have been anticipated but for its decision to transition to a lower sulfur coal in preparation for compliance with the CPS in 2013. Indeed, Midwest Generation's coal-fired fleet-wide S02 emissionrate in 2011 was below the CPS 2013 emission rate. These commitments would also have the effect ofdecreasing emissions ofother pollutants, including NOx, carbon dioxide ("C02"), PM, and mercury. These substantial reductions go beyond the reductions Midwest Generation has already achieved. Midwest Generation has already fully achieved the CPS emissions limitation for NOx. It has achieved the CPS requirements that are in effect up to 2015 for mercury control at all operating coal-fired units through the installation ofACI systems. Seven ofits nine operating coal-fired units (all but

-9-the two units with hot-side ESPs, 

### i.e., Waukegan Unit 7 andWill County Unit 3) already comply with the 2015 mercury emissionrate limits setforth in the CPS and with the mercury emission rate limits ofthe federal MATS. Compliance with the MATS is not due until April2015, even assuming that the MATS survives the pending appeal, further exacerbating the company's current competitive disadvantage with power generators in other states. In short, granting this Petition would cause no net adverse environmental impact; instead, the complianceplan would result in a net environmentalbenefitfor years 2013-2016. Absent a variance, by about Apri12013, Midwest Generation must begin implementing, and thus funding, the additional $210 million in control work necessary to comply with the CPS rates for 2015 and 2016 and the CPS requirement to install FGD equipment at Waukegan Unit 8 by the endof2014. Consequently, time is ofthe essence and MidwestGeneration seeks this reliefnow. Midwest Generation did not foresee the extent ofits current financial challenges, the invalidation offederal rules that would have helped to level the competitiveplaying field orthe level ofdeclining powermarket prices and is further hamperedby increases in as-delivered coal prices. Moreover, it was unable to predict, and couldnothave beenreasonably expected to foresee, that these changed conditions collectively wouldhave such a significant impact on Midwest Generation's ability to comply with the 2015 and 2016 S02 system-wide emission rates and control equipment installationrequirements. Under these circumstances and given that Midwest Generation's proposed compliance plan would ensure a net environmental benefit, denial ofthis variance request and enforcement ofthe CPS system-wide S02emission rates of0.28 and 0.195 lb/mmBtu in 2015 and 2016, respectively, and the requirement thatMidwest Generation install FGD equipment onWaukegan

-10-Unit 8 byDecember 31, 2014, would impose undue and arbitrary hardship onMidwest Generation. Midwest Generation, therefore, respectively requests a variance from those rates and thecontrol equipment installation requirement. To align with the variancerequested in this Petition, Midwest Generation also seeks a variance from or adjustmentto the Waukegan Order where the Board orders Midwest Generation, at Condition l(a), to comply with the system-wide S02 emission rates setforth in Section 225.295(b). Additional circumstances have arisen or clarified since MidwestGeneration obtained theWaukegan variance, causing the need for Midwest Generation to seek this additional variance. In support ofits Petition, Midwest Generation states as follows: 

### II. BACKGROUND (§§ 104.204(b)(l), (2), (3), (4),(5), (6), (7), (8)) 1. As of2013, MidwestGeneration will orlegally could generate electricity from coal-frred units at five electric generating stations5 in illinois, all subjectto the CPS, namely the Crawford Generating Station located in CookCounty, the Joliet Generating Stationlocated in Will County, the Powerton Generating Station located in Tazewell County, the Waukegan Generating Station located in Lake County, and theWill County Generating Station located in Will County. 2. The Crawford Generating Station ("Crawford"), AgencyI.D. No. 031600AIN, is
an electric generating station owned byMidwest Generation. The two coal-fired electric

5 Midwest Generation also operated the coal-fired EGU at the Fisk Generating Station, Unit 19. However, as discussed elsewhere in this Petition, the Board orderedMidwest Generation to shut down Fisk Unit 19 by the end of2012 in the Waukegan Order. Midwest Generation continues to operate the gas-fired combustion turbines at Fisk Station. Fisk Station is not affected by this requested variance.

-II-generating units ("EGUs") at Crawford went onlinebetween 1958 and 1961. Crawford is located at 3501 South Pulaski Road, Chicago, Cook County, lllinois 60623-4987. CookCounty is designated nonattainment for 2008 ozone and 1997 annual PM2.56 and attainment or unclassifiable for all otherNAAQS. Itis a maintenance area for the 1997 8-hour ozone standard. The lllinois Environmental Protection Agency ("Agency" or "lllinois EPA") has proposed that Cook Countybe designated unclassifiable for the 1-hour S02 NAAQS.7 The two coal-fired boilers at Crawford were designed to fire at various modes that include the combination ofcoal and natural gas as principal fuels and natural gas as auxiliary fuel during startup and for flame stabilization. Therewas also associated coal handling, coal processing, and ash handling equipment at Crawford. There was a 550-gallon gasoline tank located at Crawford to provide fuel for Station vehicles. Midwest Generation employed approximately 108 people at the Crawford Station. Inthe Waukegan Order, the Board ordered Midwest Generation to shut down the coal-fired units at the Crawford StationbyDecember 31, 2014. Midwest Generation actually ceased operation ofthose coal-fired units by the end ofAugust 2012, over two years early. However, Midwest Generation maintains the permits issued to Crawford and could legally generate electricity from these coal-fired units through the end of2014. 3. TheJoliet Generating Station ("Joliet"), Agency l.D. No. 197809AAO, is an electric generating station operated by Midwest Generation. The Joliet coal-fired EGUs went onlinebetween 1959 and 1966. Joliet is located at 1800 Channahon Road, Joliet, Will County, Illinois 60436, within the Chicago 2008 ozone and 1997 annual PM2.5 nonattainment areas.

6 Particulate matter less than 2.5 microns in aerodynamic diameter.
7 Letterto Cheryl Newton, Director, Office ofAir and Radiation, USEPA Region 5, from Laurel Kroack, Chief, Bureau ofAir, Illinois EPA (June 2, 2011). Midwest Generation can provide the Board with a copy ofthis letter ifthe Board so requires.

-12-Will Countyis designated attainment orunclassifiable for all other NAAQS and is a maintenance
area for the 1997 8-hour ozone standard. The lllinois EPA has proposed thatWill County (exceptfor Lockport and DuPageTownships; Joliet Station is notlocated in either ofthese townships) be designated unclassifiable for the 1-hour S02 NAAQS.7 Midwest Generation employs 253 people at Joliet. Midwest Generation operates five coal-firedboilers at Joliet that have the capabilityto fire at various modes that include the combination ofcoal ornatural gas 8

as their principal fuels. In addition, the boilers fire natural gas as auxiliary fuel during startup and for flame stabilization. Midwest Generation also operates associated coal handling, coal processing, and ash handling activities. There are two 1,500-gallon gasoline tanks located at Joliet to provide fuel for Station vehicles. 4. ThePowerton Generating Station ("Powerton"), Agency I.D. No. 179801AAA, is
an electric generating station operated byMidwest Generation. The Powerton EGUs went online between 1973 and 1976. Powertonis located at 13082East Manito Road, Pekin, Tazewell County, lllinois 61554. The areais currently designated attainmentorunclassifiable for all NAAQS. However, Illinois EPA has proposed that Pekin Township, which includes Powerton, be designated nonattainment for the 1-hourS02 standard.7 Midwest Generation employs approximately 181 people at Powerton. Midwest Generation operates four coal-fired boilers and
an auxiliary boiler at Powerton that have the capabilityto fire at various modes that include the combination ofcoal and/or natural gas9 as their principal fuels. In addition, the boilers fire natural gas as auxiliary fuel during startup and for flame stabilization. Midwest Generation also

8 TheTitle V permitissued to Joliet Station identifies fuel oil as an optional fuel, but Midwest Generation does not use fuel oil at the Station. 9 TheTitle V permit issued to Powerton Station identifies fuel oil as an optional fuel, but Midwest Generation does not use fuel oil at the Station.

-13-operates associated coal handling, coal processing, and ash handling activities at Powerton. There is a 1,500-gallon gasolinetanklocated at Powerton to provide fuel for Station vehicles. 5. TheWaukegan Generating Station ("Waukegan"), Agency I.D. No. 097190AAC, is an electric generating station owned andoperatedbyMidwestGeneration. TheWaukegan Generating Stationis located at401 East Greenwood Avenue, Waukegan, Lake County, lllinois 60087, within the Chicago 2008 ozone and 1997 annual PM2.5 nonattainment areas. Lake County is designated attainment orunclassifiable for all other NAAQS and is a maintenance area for the 1997 8-hour ozone standard. lllinois EPA has proposed that Lake Countybedesignated unclassifiablefor the 1-hour S02NAAQS? The EGUs at theWaukegan Stationwent online between 1958 and 1962. Midwest Generation employs approximately 149 people at the Station. Midwest Generation operates two electric generating units at Waukegan with the capability to fire coal, or a mixture ofgas and coal, as their primary fuel. In addition, the boilers fire natural gas as auxiliary fuel during startup and for flame stabilization. 10 Midwest Generation also operates associated coal handling, coal processing, and ash handling activities at Waukegan Station. In addition to the boilers, Midwest Generation operates four oil-fired turbines at Waukegan Station, used during peak demand periods. Pursuant to the CPS, Section 225.297(a)(1), Midwest Generation permanently retiredWaukegan Unit 6 by December 31, 2007. 6. TheWill County Generating Station ("Will County"), Agency I.D. No. 197810AAK, is an electric generating station owned and operatedbyMidwest Generation. The Will CountyEGUs went onlinebetween 1957 and 1963. Will County is located at 529East I35 1 h Road, Romeoville, Will County, Dlinois 60446, within the Chicago 2008 ozone and 1997
10 TheTitle V permit issued to Waukegan Station identifies fuel oil as an optional fuel, but Midwest Generation does not use fuel oil at the Station.

-14-annual PM2.5 nonattainment areas. Will County is designated attainment orunclassifiable for all otherNAAQS and is a maintenance area for the 1997 ozone standard. lllinois EPA has proposed that Lockport Township, which includes the Will County Station, be designated nonattainment for the 1-hour

### SOz NAAQS.7 Midwest Generation employs approximately 156 people atWill County. Midwest Generation operatestwo coal-firedboilers atWill County that have the capability to fire at various modes that include the combination ofcoal, petroleum coke, and/or fuel oil as their principal fuels. In addition, the boilers fire fuel oil as auxiliary fuel during startup and for flame stabilization. Midwest Generation also operates associated coal handling, coal processing, and ash handling activities at Will County. There is a 1,500-gallongasoline tank located at Will County to provide fuel for Station vehicles. Midwest Generation permanentlyretired Will County Units 1and 2 pursuant to the CPS, Section 225.297(a)(2) in December 2010. 7. Midwest Generation plans to comply with the CPS S02rate standards, as well as the CPS requirement to install FGD equipment on designated units by certain dates, through the
use ofultra-low sulfur coal and dry sorbentinjection ofTrona. Dry sorbent injection is an air pollution control system in which Trona, a mineral used in the production ofsodiumbicarbonate
orbaking soda, is injected into the flue gas upstream ofa PM control device, such as an ESP. The injected material reacts with and neutralizes acid gases, such as S02, forming a dry powder that maybe removed bythePMcontrol device. When the sorbent is delivered to a station, it will be off-loaded into bulk storage silos and subsequently conveyed through a metered system that blows the sorbent through a mill and into the flue gas duct work using injection lances. Thus,
use ofdry sorbent injection requires various construction activities at the Stations, including storage silos, mills, and injection ports. PM emissions from each coal-fired boiler inthe

-15-Midwest Generation system are controlled by an ESP. Injection ofTrona increases the particulate loadingto the ESPs such that Midwest Generation must also upgrade its ESPs or undertake other PM control measures on a number ofits EGUs. 8. The locations and functions ofambient air quality monitoring stations operatedby the Agency across the state are provided in Exhibit 1, an excerptfrom the Agency's40thAnnual Air Quality Report (2010) ("2010 AQ Report"). Exhibit 1also includes the Agency's map ofthe air quality monitoring stations with the locations ofMidwest Generation's electric generating stations superimposed. The entire 2010 AQ Report is available on the Agency's website at 

### <http://www.epa.state.il.us/air/air -quality-report/201 0/index.html 

### >. 9. Each ofMidwest Generation's generating stations is a major source subject to the Clean Air Act Permitting Program ("CAAPP"). 415 ll..,CS 5/39.5 (2010). The Agency has issued a number ofoperating and construction permits relative to airpollution control. The current permits are listed in Exhibit 2, including the type ofpermit (i.e., operating or construction), the date ofissuance, whether the permit was appealed, and, ifso, the status ofthe permit appeal. Because the CAAPP permits have been appealed and stayed, the sources currently operate pursuant to the authority granted in their last operatingpermits and, in some cases, construction permits issued since 2005. Some ofthe construction permits that have been issued are for projects necessary for Midwest Generation to comply with the CPS. To the extent that it is necessary, ifthe Board grants the requested relief, Midwest Generation will seek extensions ofconstruction permits from the Agency. The operatingpermits, including the CAAPP permits, and any appeals ofthose permits have no direct relevance to this Petition for variance, and so no related documents are attached as exhibits hereto. Midwest Generation has included PCB docket numbers for those permits that are appealed; such permits are readily

-16-available to the Board ifthe Boardis interested in them. Midwest Generation canprovide copies ofpermits thathave notbeen appealed ifthe Board finds them relevant and ofinterest. 10. In addition to permits issued relative to air pollution control, the Agencyhas issued National PollutantDischargeElimination System (NPDES) permits for each Station and a landfill permitfor bottom ash at theJoliet Station. The Army Corps ofEngineers has issued maintenance dredging permits at the Crawford, Joliet, Powerton, and Waukegan Stations. 11. As further discussed in the Affidavit ofDouglas McFarlan,11 which is attached hereto as Exhibit 3, notwithstanding the appeals and Board-issued stays ofcertain provisions of the construction permits authorizing the installation ofthe ACI systems to control mercury emissions, Midwest Generation has operated the ACI systems since their installation beginning in July 2008, significantlyreducing mercury emission since that time. Thecompanyhas notified the Agency that Joliet Units 6, 7, and 8, Powerton Units 5 and 6, Waukegan Unit 8, and Will County Unit 4 will comply with the emission limit of0.0080 lb mercury/GWh as offall 2012,
over two years before the regulations require. 12. The Board grantedMidwest Generation a variance from certain provisions ofthe CPS related solely to the Waukegan Station onAugust 23, 2012 (the "Waukegan variance"). 12 This variance allowed Midwest Generation an extra year (1) to convert the hot-side ESP on Waukegan Unit 7 to a cold-side ESP and (2) to install FGD equipment on Unit 7 or (3) to shut down the unit. Even though Midwest Generation seeks a variance in this Petition from the requirement to install FGD equipment on Waukegan Unit 8 by December 31, 2014, the variance requested in this Petition does not impact any provisions ofthe Waukegan variance except for

11 Citations to affidavits will be indicated as"-- Aff." and to exhibits as "Exh.
__ ". 12Midwest Generation, LLC- Waukegan Generating Station v. Illinois Environmental Protection Agency, PCB 12-121.

-17-

### the condition ofthat variance that requires Midwest Generation to comply with the system-wide annual S02 

### emission rates at Section 225.295(b), which is the subject ofthis Petition for variance. The variance requested herein is needed due to additional circumstances that have arisen since the Waukegan variance was granted. 13. 

### In the Waukegan variance proceeding, Midwest Generation had stated that one factor in support ofits request was the alignment ofdeadlines for work on both Waukegan units for internal decision-making on capital investments, workforce planning, and efficiency of project management and construction. However, Midwest Generation does not envision the simultaneous outage ofbothWaukegan units for an extended period in the fall of2014. 

### In its current financial condition with its urgent need to conserve cash and defer capital expense out of 2013-2014, Midwest Generation can best mitigate its financial hardship by doing the Waukegan Unit 7retrofitwork as late as practicable in 2014, recognizing that it must complete the project by the end of2014 to comply with the CPS rule. As Midwest Generation now begins detailed planning for execution ofthe pollution control work atWaukegan, Midwest Generation believes it wouldbeboth afinancial hardship and physical challenge to complete the pollution control work on both Waukegan units simultaneously by the end of2014. 14. Circumstances have changed since the Waukegan variance petition was filed in April 2012. Financial circumstances have deteriorated. EME, Midwest Generation's indirect parent company, has begun negotiations with advisors to its noteholders on financial restructuring and has indicated that such restructuring could be implementedby a filing for Chapter 11 protection under the U.S. Bankruptcy Code, as discussed in more detail elsewhere in this Petition and in the Affidavit ofWilliam M. Petmecky III, attached hereto as Exhibit4. A $97 million interest payment on unsecured EME bonds due November 15, 2012, was not made

-18-byEME. The need for financial restructuring and the current market outlookfor energyprices place an urgent premium on conserving cash in the 2013-2014 timeframe, the time during which Midwest Generation would have to expend funds to accomplish the installation ofFGD equipment onboth WaukeganUnits 7 and 8 in orderto comply with the CPS. This Petition recognizes that Midwest Generation must meet its deadlines to comply with the CPS requirements byDecember 31, 2014, at Waukegan Unit 7, as established in the Waukegan Order, but requests an additional five months to complete the FGD equipmentinstallation deadline for Waukegan Unit 8. 15. Demandfor emission control services is increasing. Midwest Generation's equipment suppliers are beginningto see that the market for large storage silos, ESP plates, and high frequency transformer rectifier ("TR") sets, 

### see footnote 17 below, is tightening up. There
are a limited number ofsuppliers in this space, and Midwest Generation is not the only coal-fired generator seeking to expedite retrofits to meet regulatory deadlines. Although it was known that the MATS would drive much demand for these products and services, there is evidence that the remand ofthe CSAPRis prompting some level ofdemand for projects inthe nearterm for units that otherwise might havebeen retired by 2014. 16. Midwest Generation intends to comply with theWaukegan Order and will satisfy CPS control requirements for Waukegan Unit 7 bythe end of2014. Movingback that work is not an option due to the CPS, but accelerating it onlyexacerbates the financial hardship that Midwest Generation is trying to mitigate. Midwest Generation can begin work on Waukegan Unit 8 in 2014 and still derive most ofthe benefits that it identified in the Waukegan variance petition, approved bythe Board in August 2012, with respect to procurementoflabor and materials, workforce planning, and projectmanagement. Midwest Generation commits not to

-19-operate Waukegan Unit 8 afterDecember 31,2014,until the work is completed in order to
ensure there is no environmental impact from extending the Waukegan Unit 8 equipment deadline. Consistent with these issues and commitments, Midwest Generation requests that the Board grant it a variance until May 31, 2015, from the December 31, 2014, deadline set forth in Section 225.296(a)(2) to install and have operational FGD equipment at Waukegan Unit 8.


### III. REGULATORY BACKGROUND (§ 104.204(a)) 17. OnMarch 14,2006, the Agency submitted aproposedrulema.king to the Board, 

### "In the Matter Of: Proposed New 35 lll. Adm. Code 225 Control ofEmissions from Large Combustion Sources," docketed at R06-25 (the "Mercury Rule"). The Board adopted this rule
on December 21, 2006, and it was effective as ofthat same date. TheMercury Rule includes
some provisions in Subpart A ofPart 225 and all ofSubpartB ofPart 225. 18. On May 22, 2006, the Agency submitted a proposedrulemaking to the Board, "In the Matter of: Proposed New CAIR S02, CAIR NOx Annual and CAIR NOx Ozone Season Trading Programs, 35 lll. Adm. Code 225, Control ofEmissions from Large Combustion Sources, Subparts A, C, D, and E," docketed at R06-26 ("CAIR" 13). On January 5, 2007, the Agency and Midwest Generation filed ajointcomment in this rulemaking describing an approach for control ofmercury and certain otheremissions in a new Subpart F to Part 225 ("Subpart F"). R06-26, PC#9. 14 Subsequently, on January 10, 2007, the Agency and Midwest Generation filed ajointcomment providing the regulatory language for Subpart F, including amendments to that language. R06-26, PC# 11. On Apri119, 2007, the Boardproceededto 13 Clean AirInterstate Rule. 14 Note that the Board's website docket does not include substantive, regulatory language for Subpart Fat PC#9.

-20-FirstNotice on the CAIR, includingSubpart F. OnJune 25, 2007, Midwest Generation submittedcomments onthe First Notice CAIR, including requested revisions to SubpartF. R06- 26, PC# 14. On July 26, 2007, the Board ordered the ruleto SecondNotice, including Subpart F with minor amendments. R06-26, Board Order (July 26, 2007). These rules becameeffective August 31,2007. Subsequently, in DocketR09-10, effective June 26,2009, the Board moved the CPS from SubpartF ofPart 225 to SubpartB ofPart 225, Sections 225.291 through 225.299. 19. Pursuantto Section 225.292, MidwestGeneration opted-in to the CPS on December27, 2007, identifyingJoliet Units 6, 7 and 8, Powerton Units 5 and 6, Waukegan Units 7 and 8, and Will CountyUnits 3 and 4, among others,15 as EGUs to be included as part ofthe Midwest Generation CPS Group. These units currentlycomprise theMidwest Generation systemthat is subject to the CPS provisions from which Midwest Generation seeks relief. 20. The CPS provisions from which Midwest Generation seeks reliefare as follows: 

### Section 225.295 

### Combined PollutantStandard: Emissions Standards for NOx and S02 b) Emissions Standards for S02. Beginning in calendar year 2013 and continuing in each calendar year thereafter, the CPS group must comply with the applicable CPS group average annual S02 emissions rate listed as follows:

Year lbs/mmBtu 

## * * *

15 Midwest Generation also includedFisk Unit 19 and Crawford Units 7 and 8 in its initial identification ofunits subject to the CPS to be included in the Midwest Generation CPS Group. However, as discussed elsewhere in this Petition, the Board ordered Midwest Generation to shut down Fisk Unit 19 by the end of2012 and Crawford Units 7 and 8 by the end of2014 in the Waukegan Order. As ofthose dates, those units will no longerbe considered part ofthe Midwest Generation CPS Group. Moreover, since Midwest Generation ceased operation ofthose units by theend ofAugust2012, the zero emissions from those units cannot be included in the calculation ofMidwest Generation's system-wide S02 emission rate. Until Midwest Generation withdraws the current permits for Crawford Station, however, Midwest Generation is authorized to operate Crawford Station as part ofthe Midwest Generation CPS Group. As discussed in this Petition, Midwest Generation commits to not operate Crawford Units 7 and 8 in 2013 and 2014 as a condition ofthe requested variance.

·21-2015 2016 

## * * *
Section 225.296 0.28 0.195

Combined Pollutant Standard: Control Technology Requirements for 

### NOx, S02, and PMEmissions a) Control Technology Requirements for NOx and S02 . 2) On orbefore December 31, 2014, the owner or operator must eitherpermanently shut down orinstall and have operational FGD equipment on Waukegan 8; 35 TIL Adm. Code §§ 225.295(b) (in part) and 225.296(a)(2).
IV. RELIEF REQUESTED (§§ 104.204(c), (e), (f), (k)) 21. Midwest Generation seeks targeted, narrow relieffrom the CPS in order to avoid arbitrary and unreasonable hardship. Specifically, Midwest Generation seeks relieffrom the CPS requirements that it comply with the system-wide S02 annual emissions standards of0.28 lb/mmBtu and 0.195 lb/mmBtu in 2015 and 2016, respectively. Duringeach ofthose years, Midwest Generation proposes to comply with a system-wide S02 annual emission rate of0.38 lb/mmBtu. Additionally, Midwest Generation commits to achieving mass S02emission levels
no greaterthan 39,000 and 37,000tons per year in 2015 and 2016, respectively. Midwest Generation commits to not operating the Crawford coal-fired units in 2013 and 2014, the two years prior to the date orderedbythe Board in the Waukegan Order, 

### i.e., December 31,2014. Midwest Generation also commits to emitting no more than 57,000 tons ofS02in 2013 and to no
more than 54,000 tons ofS02in 2014. As discussed in Fred McCluskey's Affidavit, attached hereto as Exhibit 5, these commitments would yield early S02emission reductions and cumulative net reductions in mass S02emissions of3,181 tons through the end ofthe four-year

-22-(2013-2016) period. 

### See, McCluskey Aff., Exh. 5, Table 5.1. Emissions ofotherpollutants would be significantly reduced as well during this period. Midwest Generation will comply with the CPS system-wide S02 annual emission rate of0.15lb/mmBtu in 2017, as set forth in Section 225.295(b). 16 MidwestGeneration also requests that the Board grant it a variance from or an adjustment to Condition 1(a) in the Waukegan Orderconsistent with this petition for variance relative to the system-wide

## so2 emission rate. 22. Midwest Generation also seeks relieffrom the requirement at Section 225.296(a)(2) that it install and have operational FGD equipment on Waukegan Unit 8by December 31, 2014, orthat itpermanently shut down that unitby that date. Because ofits current financial situation, Midwest Generation needs additional time to complete installation of the FGDequipment on Waukegan Unit 8 and to coordinate the necessary outage with the outage necessary for Waukegan Unit 7. Therefore, Midwest Generation will begin the Waukegan Unit 8 project in 2014 but seeks five months' delay in the requirement to complete equipment installation, to May 31, 2015. Midwest Generation commits to not operateWaukegan Unit 8 afterDecember 31, 2014, until installation ofthe FGD equipment is complete. 23. Midwest Generation essentially seeks abrief "pause" in the pace ofthe decline in system-wide S02 emission rates for 2015 and 2016 and the requirement to install FGD equipment on Waukegan Unit 8by December 31, 2014. This "pause" would be accompanied by

16In the alternative, Midwest Generation requests that the variance period be two years and one month, January 1, 2015,through January 31, 2017. Ifthe Board believes it isnecessary for Midwest Generation to explicitly meetthe rates setforth in the CPS, rather than recognizing that they are subsumedby the more stringent rate, Midwest Generation offers this alternative compliance strategy, set forth in more detail in footnote 36, below, extendingthe requested variance period for a month. However, the Board recently grantedreliefsimilarto the requested reliefin this Petition in Order, Ameren Order, p. 64 (Board conflated the requirement to comply with the 2015-2016 rate of0.25 lblmmBtu with thefinal MPS 2017 rate of0.23 lb/mmBtu as ofJanuary 1, 2020, the end ofthe varianceperiod).

-23-commitments that would avoid any adverse environmental impact and, indeed, would result in a net environmental benefit. 24. Midwest Generation seeks this variance two years in advance ofthe 2015 compliance date because ofthe long lead time necessary forplanning and then implementing its current strategy that includes installation ofTronainjection systems and related upgrades to ESPs at two units in 2013 and 2014 while bringing its systeminto compliance with the 2017 S02 emission rate and ensuring that it can meet the mass emission levels it commits to in 2013 through 2016. 25. As discussed in the McCluskey Affidavit, Exh. 5, the planned injection ofTrona will increase the PM loading to the ESPs. Thecollection area and efficiency ofthe ESPs on Joliet Units 7 and 8, Powerton Unit 5, 17 Waukegan Unit 8, 18 and Will County Units 3 and 4 must beenhancedto accommodate the increasedPM loading and to maintain current operational levels. To improve the PMremoval efficiency ofthe existingESPs, Midwest Generation plans to increase the PM collection area, increasethe height ofthe collection plates in the ESPs, increasethe distance between each plate, add fields ofcollectionplates, and make other improvements. Such extensive work in the ESPs requires extended outages for each unit.

17 Powerton Unit 6 already has a largerESPandrequires only certain improvements, namely the addition ofhigh frequency TR sets. TR sets are components oftheESPrelated to providing the electrical powerthat charges PM particles, allowing them to becollected on the ESPplates. TR sets receive input power and transform the powerfrom low voltage and high currentto high voltage and low current, rectify the alternating current (AC) output ofthe transformer to form direct current (DC), and provide feedback signals to the automatic voltage controls. High frequency TR sets provide a higher powerfactor increasingthe electrical efficiency ofthe power supply, improving PM control. The Agency has issued a construction permit for these improvements, see Exh. 2, and Midwest Generation is proceeding with them. 18 TheESP on Waukegan Unit 7 is subject to a CPS requirement to covert from hot-side to coldside.

-24-MidwestGeneration must coordinate each outage with PJM19 to ensurethat grid reliability will bemaintained. 26. Required advance planningrelates not only to designing and installing the needed pollution controls, including for Waukegan Unit 8, but also to the means to fund additional controls in light ofcurrent financial constraints and the current challenging electricity and credit markets andregulatory uncertainty. 

### Inorderto comply with the CPS emission rates for 2015 and 2016 and the FGD equipment requirement for Waukegan Unit 8 (that is, without the requested variance), Midwest Generation would have to move forward-ifit can given its current financial constraints-with about $210 million 

### in additional capital expenditures for S02 controls and related PMcontrols bythe second quarter of2013. 

### See McCluskey Aff., Exh. 5, lj[«J[ 15-16. Midwest Generation mustknowbythebeginning ofApril2013 whether the variance will be granted. 27. Midwest Generation has taken a numberofmeasures, including using ultra-low sulfur coal and opting to install Tronainjection systems, the least expensive method for controlling S02emissions while still accomplishing the necessary levels ofreduction, in order to control S02emissions and avoid having to seek this variance. Through its emission reduction efforts, Midwest Generation's fleet in 2011 achieved an S02 emissionrate below the 2013 CPS rate. McCluskey Aff., Exh. 5, lj[ 14. Midwest Generation anticipates that the use ofthe Trona system at Powerton Unit 6 together with ultra-low sulfur coal throughout its coal-firedunits will be sufficientfor it to meet the CPS S02system-wide rates in 2013 and 2014. Further emission control would thereafter be providedby the planned FGD at Waukegan Unit 7. However, Trona

19 PJM Interconnection, LLC is theregional transmission system operatorthat must protect reliability ofthe grid and review the removal for any extended period oftime ofany generating units within the scope ofPJM's authority and responsibility.

-25-injection and related ESP upgrades are necessary at additional units to achieve the 2015 and 2016 CPS S02 rates. External factors arising after the Tronainjection and fuel plans were developed, including the impacts ofreduced demand and lower electricity prices combined with current debt obligations, as discussed here and in the attached affidavits, materially threaten if not prevent Midwest Generation from being able to fund such controls in 2013 and 2014, and there is no other feasible control option to achieve the 2015 and 2016 CPS rates. Thus, Midwest Generation is forced to seekthis variance now. Still, Midwest Generation seeks the least obtrusive path it possibly can through the provisions ofthis requested variance and is proposing to maintain the original schedule for completingthe significant step-down in its fleet-wide S02 emission rates in 2017 and thereafter.


### V. COMPLIANCE ALTERNATIVES (§ 104.204(d)) 28. As discussed in more detail in the McCluskey Affidavit, Exh. 5, Midwest Generation has plannedto comply with the CPS S02 emission system rates through a combination offiring ultra-low sulfur coal throughout its operating coal-fired fleet and Trona. The installation work for the Trona injection system at Powerton Unit 6 is already underway, and thatTronacontrol systemplus use ofultra-low sulfur coal should provide for compliance with the 2013 and 2014 CPS S02emission rates. In addition, Midwest Generation currentlyplans to install aTrona system at Waukegan Unit 7 by December 31, 2014. The Trona and related ESP control work at Powerton Unit 6 and Waukegan Unit7, together with some continued engineering and procurement oflong lead material associated with controls in 2013 and 2014 with respectto other units, is expected to cost around $230 million or more.

-26-29. Tronainstallation at several additional units before 2015, likelyincluding Powerton Unit 

### 5, Waukegan Unit 8, and Joliet Unit 7 or 8, however, is needed for Midwest Generation's fleet to comply with the CPS S02 emission rates in 2015 and 2016 without curtailing generation at any ofits units. That work, together with the related necessaryESP upgrades, is expected to cost approximately $210 million, and these costs would also need to be incurred in 2013 and 2014 to meet with CPS rates in 2015 and 2016. See McCluskey Aff., Exh. 

### 5, C)[<J[ 15-16. Midwest Generation needs additional time to perform this further control work for the reasons articulated in this Petition. 30. Midwest Generation has considered a number ofpotential alternative compliance strategies to avoid the need to seekthis variance. None, however, is viable. 31. As stated in the McCluskey Affidavit, Exh. 5, <J[ 19, installation ofother forms of dry scrubbing, which also requirethe installation ofbaghouses, would costfar more thanTrona injection systems and would take longer to implement, at least two and a halfyears to design and install. Wet scrubbers would costeven more, take longer to install, and would notbe an appropriate control technology for the type ofcoal that Midwest Generation has contracted to procure. Therefore, neither wet scrubbers nor an alternative form ofdry scrubbing would solve Midwest Generation's financial challenge, nor could they be completed within thetimeframe requiredby the CPS. 32. Midwest Generation also considered the possibility ofconverting one ormore units to natural gas, but such conversions are not feasible oreffective for compliance with the CPS system-wide rates. First, such conversions would not be economically viable at any ofthe units. None ofthe coal-fired stations, except Crawford and Fisk, has a supply ofnatural gas sufficientfor full load generation andproviding such a supply would require significant

-27-investment. More fundamentally, Midwest Generation expects that none ofthese units, if converted, would be economicallycompetitive with either natural gas turbines orcomparable coal-firedboilers. As such, the units could not survive in the marketplace ifthey were converted to natural gas. Generally see McCluskey Aff., Exh. 5, 120. Second, in light ofthe CPS system definition in the CPS rules, it does not appear that any coal-fired unit converted to gas couldbe included after conversion in the CPS system-wide rate average. See Section 225.292(b) ("A specified EGUis a coal-firedEGU listed in Appendix A.
..." (Emphasis added.)). Thus, a conversion to natural gas likely would not assist with CPS system-widerate compliance. 33. Finally, MidwestGeneration considered whetherit would be feasible to comply with the CPS rates in 2015 and 2016 through generation curtailments at the coal-fired units that would not then have Tronainjection systems. It would be possible to comply with the CPS S02 systemrates ifMidwest Generation operated only those units with Trona systems installed, but that is because the "system" would include onlythose two units. To avoid exceeding the 2015 and 2016 CPS S02 system-wide rates, generation from the other system units would have to be significantly curtailed in those years, with generation curtailment reaching about 75% in 2016. See McCluskey Aff., Exh. 5, ')[ 22. 

### Inturn, at these low levels ofgeneration, the entire fleet and, indeed, Midwest Generation itself, as well as its employees and those who rely on the Stations for taxes and other support, would be at serious risk given the extreme reduction in revenue this would cause. This is not a feasible option. No option is feasible except the reliefsoughtin this Petition.

-28-VI. ARBITRARY AND UNREASONABLEHARDSHIP (§ 104.204(e)) 34. The need for this variance arises from a combination ofcircumstances that were not foreseen, and could not have been expectedto be foreseen, when the CPS was adopted in 2007. These circumstances include significantrecent deterioration in Midwest Generation's cash flow, driven by an unexpected and significant decline in energy prices and capacity markets, exacerbated byhigher delivered coal costs. The impact on Midwest Generation ofthis decline is further exacerbatedby the deregulated status ofpower generators in lllinois and theuneven playing field created by the imposition ofstringent lllinois requirements coupled with the deferral ofcomparablefederal requirements that would have helped to level the competitive playingfield. Given its current financial condition, Midwest Generation needs to conserve cash in 2013 and 2014 as it works through financial restructuring, which mayinclude Chapter 11 reorganization. A successful restructuring shouldmake additional funds for controls available. Capacitymarkets are low for 2012 and 2013, butthey are somewhat betterin 2014, and there is
more improvement in 2015. 

### In 2015, some significant new federal regulatory requirements also will become effective, helping then to level the competitiveplaying field. Denying this Petition, which seeks additional time needed to secure financing for the controls, would create an arbitrary and unreasonablehardship. A. The Uneven PlayingField and Regulatory Uncertainty Contribute 

### to anArbitrary and Unreasonable Hardship. 35. It is well-recognized that lllinois has adopted emission reduction requirements significantly more stringent than other states, particularly within USEPA Region 5 and compared to other neighboring states. Examples ofrules that are more stringent include the Illinois CAIR

-29-program, with its clean air set-aside that reduces EGUs' NOx allowances by an additional25% 20 and the lllinois Mercury Rule which established mercury limits when the federal program, the Clean AirMercury Rule ("CAMR"), provided for an emissions trading program. As discussed above, the federal rules that underliethe Mercury Rule were delayed or vacated,21 butthe lllinois-specific programs remain intact. For example, the mercury reduction requirements ofthe CPS continued to apply after vacatur ofthe CAMR, and the NOx, S02, and PMreduction requirements ofthe CPS and Multi-Pollutant Standard ("MPS"), not necessary for compliance with current NAAQS or otherfederal requirements,22 continue to apply in lllinois. Moreover, the CPS and MPS curtail emissions trading that is allowed by the CAIR, thus limiting lllinois companies' access to a revenue stream that they would otherwise have. These lllinois requirements are generally more stringent thanrequirements applicable in surrounding states.Z3

20 See Sections 225.425(a) and 225.525(a). 21 Although the court found the CAIRto be fatally flawed in North Carolina v. EPA, 531 F3d 896, (D.C. Cir. 2008), 550F3d 1176 (D.C. Cir. 2008) (remanded without vacatur) the federal program, and thus the state implementation plans ("SIPs") effectuating the program, have remained in place. 22 Illinois relies on portions ofthe Mercury Rule in its SIP for regional haze, but there was no direction from USEPA or any otherfederal requirement that the regional haze SIP be approached in this way. In fact, many ifnot most states relied on the CAIR and then the CSAPR to satisfy theirregional haze SIP requirements. 77 Fed.Reg. 39943 (July 6, 2012) (approval ofIllinois' BART SIP); 77 Fed.Reg. 40150 (July 6, 2012) (partial approval ofthe NebraskaBART SIP, partial disapproval ofBART SIP relative to certain units, and finalization ofa federal implementation plan ("PIP") for BARTrelying on theTransport Rule [i.e., the CSAPR] relative to those same units); 77 Fed.Reg. 33642 (June 7, 2012) (USEPA found that the CSAPR "achieve[s) greater reasonable progress towards the national goal of achieving natural visibility conditions
...than source-specific
...BART
... in those states covered by the Transport Rule." USEPA issued limited disapprovals ofthe BART SIPs for several states, including Indiana, Iowa, Michigan, Missouri, Ohio, because they relied on the CAIR rather than the CSAPR in their BART SIPs and issued PIPs substituting the CSAPR for the CAIR). 23 Forexample, there are no mercury rules applicable in Indiana, Iowa, Kentucky, Missouri, and Ohio. The mercury rule applicable to coal-fired EGUs in Wisconsin requires a 90% reduction ofmercury emissions by January 1, 2015, orcompliance with a multi-pollutantoption that includes a 90% mercury reduction by January 1, 2021. Wis. Adm. Code, Department ofNatural Resources, NR 446 etseq. Coalfired EGUs in Michigan must reduce mercury by January 1, 2015, or achieve a 75% reduction under a multi-pollutant option. Mich. Adm. Code, Part 15, R336.2501 et seq. Thethree largest electric
-30-36. In addition, lllinois has a deregulated energy market. In contrast, surrounding states allow generators to recover the costs ofcapital projects, including those related to environmental mandates, from a consumerbasethrough rates. Although Midwest Generation knew that it was entering a deregulated market when it acquired the current Midwest Generation Stations in 1999, deregulation, nevertheless, places facilities at a competitive disadvantage with facilities located in regulated states and creates a "crippling double whammy," Order,Ameren v. IEPA, PCB 12-126 (September 20, 2012) ("Ameren Order"), p. 10, for coal-fired generators in lllinois. That is, lllinois' deregulated electricity generators must install controls generally not required in surrounding states and cannot recover the costs ofthose "additional" controls through
a regulated rate regime and consumerrates. This is exacerbated by the restrictions on emissions trading that do not apply to electricity generators in neighboring states. 24 Instead, lllinois electricity generators are entirely dependent on wholesale prices in the competitivepowerprice market for theirrevenue stream. 37. Since the Board adopted the Mercury Rule and the CAIR, USEPA proposed and promulgated two majorrules: the CSAPR25 and the MATS. 26 The Mercury Rule was lllinois' programto comply with the CAMR. Additionally, as discussed in this Petition, lllinois adopted
generatingplants in Minnesota must reduce mercury emissions by 90% by 2015 and otherfacilities must reduce mercury emissions 70-90% by 2025. Minn. Stat.§ 115A.932 etseq. 24Midwest Generation acknowledges thatit voluntarily opted-in to the CPS, knowing that it contained restrictions on emissions trading. Midwest Generation believed thatthe CPS offered a more reasonable timeframe for compliance with the very stringent Illinois Mercury Rule. This voluntary opt-in, however, does not obviate the fact that electricity generating companies in other states cantrade emissions allowances, while Illinois companies are required to surrender "excess" allowances. 25 Proposed at 75 Fed.Reg. 45210 (August 2, 2010); finalized at 76 Fed.Reg. 48208 (August 8, 2011), effective October7, 2011.
26 Proposed at 76 Fed.Reg. 24976 (May 3, 2011); finalized at 77 Fed.Reg. 9304 (February 16, 2012), effective Aprill6, 2012.

-31-a CAIR programmore stringent than federally required. Subsequently, the D.C. Circuit vacated the CAMR and found the CAIR to be fatally flawed.27 USEPA never implemented the CAMR butdid implement the CAIR, which remains the operativetransport rule controlling NOx and S02, despite its legal flaws. This creates substantial uncertainty regarding future regulatory requirements that apply to all coal-firedpower generators. 38. The CSAPRwas adopted to replace the CAIRcurrently applicable to fossil fuelfired EGUs in the eastern United States in response to the courtorder in North Carolina v. EPA. 28 The CSAPR included a number offeatures that are significantly more stringent than the CAIR, includingthe addition ofassurance provisions or variabilitylimits that establish hard
mass emission caps on each subject state's emissions ofS02 and NOx. Itpresented an entirely different allowance allocation methodology, with permanent allowances issued by USEPA and
no involvement ofthe states unless they develop SIPs in thefuture. The CSAPR also presents an entirely new S02 allowance trading program. 39. The CSAPR was timely appealed by a number ofentities at EMEHomer City LLCv. EPA, No. 11-132 (D.C. Cir. filed August 23, 2011). On December 30,2011, the court stayed the effectiveness ofthe CSAPR and continued the implementation ofthe CAIR during the appeal. On August 21, 2012, the court vacated the CSAPR in its entirety and ordered that the CAIR remain the active transport control program while USEPA tries again to develop a

27 The CAMR was vacated atNew Jersey v. EPA, 517 F.3d 547 (D.C. Cir. 2008). The court found that the CAIR was pervasively flawed and initially vacated the rule. North Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008). Subsequently, the courtremanded the CAIR in its entirety without vacatur, North Carolina v. EPA, 550 F.3d 1176 (D.C. Cir. 2008), ordering that the CAIR remain effective until USEPA replaced it with a new rule, which was the CSAPR. 28 Thecourt found that the CAIR was pervasively flawed and initially vacated therule. North Carolina v. EPA, 531 F.3d 896 (D.C. Cir. 2008). Subsequently, the court remanded the CAIR in its entirety without vacatur,North Carolina v. EPA, 550 F.3d 1176 (D.C. Cir. 2008), ordering that the CAIR remain effective until USEPAreplaced it with a new rule, which was the CSAPR.

-32-program to replace it. EMEHomer City Generation, L.P. v. E.P.A., 11-1302,2012WL3570721 (D.C. Cir. August 21, 2012). On orbefore October 5, 2012, however, USEPA and some appellants sought a rehearing en bane ofthe appellate panel's decision. The outcome ofthat proceeding remains to be seen. 

### 40. Assuming that the CAIR remains inplace for the foreseeable future, the stepdown in statewide budgets for S02 andNOx emissions, which are passed along to the affected EGUs, will occurin 2015. Although compliance with the CAIR is demonstrated through the relinquishment ofAcidRain Program 

### SOz allowances, Midwest Generation projects that it will be able to comply with the step-down with a system-widerate of0.38 lb/mmBtu in the CPS if this variance is granted. That is, the number ofAcid Rain Program S02 allowances allocated to Midwest Generation will be sufficient, with a system-widerate of0.38 lb/mmBtu, without Midwest Generation needingto go to the market for additional allowances. 41. The assumption that the CAIR will bethe operative transportcontrol programin 2015 may be ambitious. Itis possible that the D.C. Circuit Court ofAppeals will overturn the recent decision inHomer City and reinstate CSAPR. It is also possiblethat USEPA will develop, promulgate, and implementthe second successorto the CAIRby2015, possibly first in 2015. No one can predicttoday what that program might entail. Given this circumstance, many ofMidwest Generation's competitors that are not subjectto the lllinois-specific CPS can await certainty before making some ofthe capital decisions and expenditures that Midwest Generation has already begun to make. Further, the regulatory ambiguity inherent in knowing that the current program, i.e., the CAIR, is legally insufficient and notknowing what will replace it creates significantuncertainty for funding pollution control work, since sources offinancing prefer certaintyrather than the risk created byregulatory uncertainty. Therefore, Midwest

-33-Generation faces clearfinancial hardship as it continues to execute pollution control work based
on the CPS, a hardship that it seeks to mitigate, notby undoing the CPS, butby obtaining modest reliefto the S02 emission rate requirements for onlytwo years and a modestextension ofjust five months to the deadline for completingretrofit work atWaukegan Unit 8. 42. Moreover, regardless ofthe fate ofthe CAIR ortheCSAPR, the lllinois Mercury Rule containing the CPS is a staterule that will continue to require NOx and S02reductions when surrounding states are not subject to such limitations. This places Midwest Generation at a competitive disadvantage in the power marketplace. 43. TheMATS codifies the MaximumAchievable Control Technology (MACT) requirement applicable to coal- and oil-fired EGUs pursuantto Section 112 ofthe Clean Air Act. At the time that the Mercury Rule was adopted in lllinois, CAMR was the federal program, and
no one knew with any certainty that it would not survive legal challenge; no one could have foreseen the requirements and timing ofthe subsequently developed and promulgatedMATS. The CAMR included an emissions trading program; the MATS does not. The CAMR addressed emissions ofonly mercury; the MATS requires reductions ofemissions ofmercury, non-mercury hazardous ("HAP") metals, and hydrogen chloride ("HCl"). USEPA has established in the MATS the option ofmonitoring and controlling filterable PMemissions as a surrogate for the non-mercury HAP metals. Even 

### ifa source does not chooseto utilize the PM surrogate, the technology to control non-mercury HAP metals is the same as to control PM: ESPs or baghouses. Likewise, USEPA offers the option to comply with an S02 emission limit as a surrogate to complying with the HCllimit. As with PM and non-mercury HAP metals, USEPA has found that controlling S02 effectively controls HCL TheMATS requires compliance within

-34-three years, i.e., byApril16, 2015, with the strong possibilitythat upon a certain showing,
sources can be granted a fourth year by their states. 44. Midwest Generation complies with the mercuryemission limitations applicable under the illinois Mercury Rule29 and will comply, at the same time, with the less-stringent mercury emissions limitations in theMATS. Midwest Generation will comply with the MATS' filterable PM emissions limitation with its improved ESPs, improvements necessary for itto comply with the CPS S02 limit because the company is using injection ofTrona, which increases PM loading, to control S02 emissions. A system-wide annual S02 emission rate of0.38 lb/mmBtu in 2015 and 2016 will not interfere with Midwest Generation's abilityto comply with the MATS' HCllimitbecauseMidwest Generation is not relying on S02 as a surrogate; rather, Midwest Generation will monitor HCl emissions as set forth in the MATS. 

### In fact, Midwest Generation already complies with the HCllimit. 45. TheMATS was appealed by a number ofparties at White Stallion Energy Center


### v. U.S. EPA, D.C. Cir., No. 12-1272. The uncertainties inherent in an appeal, including what changes in the relevant requirements might arise as a result ofthe appeal, make planning more difficult for thecompany and suggest the need for control plan flexibility. 46. Midwest Generation's current operational plans aretocomply with the S02 emission rates contained inthe CPS through the use ofultra-low sulfurcoal and injection ofthe dry sorbent, Trona, and to ensure continuing compliance with PM emissions limits through improvements to the ESPs on each unit. This control plan will also enable Midwest Generation to becompliant with the MATS and the CAlR. Based on what is known to be required at this

29 Midwest Generation complies with the ACI injection requirements ofthe CPS. In addition, however, Midwest Generation has notified the Agency that Powerton Units 5 and 6, Joliet Units 6, 7, and 8, Will County Unit4, and Waukegan Unit 8 will comply early with the mercury emissions limitation set forth at Section 225.294(c), thatis, prior to the compliancedate ofJanuary 1, 2015.

-35-time, MidwestGeneration's strategy is reasonable, yet regulatory compliance goals seemto be a moving target. The status ofemissions transport control and the MATS continues to be uncertain. This regulatory uncertainty creates an uneven competitive playingfield for Illinois sources, which, combinedwith the unforeseen changes in the electricity marketplace and Midwest Generation's financial condition, discussed in detail below, creates arbitrary and unreasonablehardship for Midwest Generation ifit must comply with the CPS S02 rates in 2015 and 2016 and with the FGD installationrequirement for Waukegan Unit 8 by the end of2014. A two-year "pause" inthe CPS S02 rate, essentially a two-year slowdown in thepace at which emission rate limits are ratcheted down, should allow Midwest Generation to gain some level of certainty and provide a reasonable timeframe for creating a more level competitiveplayingfield. 

### B. Unrecoverable Costs ofCompliance Coupled with Midwest Generation's Current Financial Condition Contributeto an Arbitrary and Unreasonable Hardship. 47. As noted above, Midwest Generation has already expendedconsiderable
resources for CPS compliance. Its fleet ofcoal-fired units is equipped with controls adequate to comply with the CPS requirements for mercury and NOx, ithas switched its fleet to ultra-low sulfur coal, and it has commenced Tronainjection system installation work at Powerton 6. To date, Midwest Generation has spent more than $170 million in capital costs for CPS compliance, and it incurs additional significant operating costs on an ongoingbasis. McFarlan Aff., Exh. 3, 'l[ 12. Midwest Generation also currentlyplans to install a Trona injection system and to convert theESPfrom a hot-sideto a cold-sideprecipitator at WaukeganUnit 7. Midwest Generation expects to incur around $230 million in costs in 2013 and 2014 for the Trona and ESP work planned for Powerton Unit 6 andWaukegan Unit 7, together with some continued engineering and procurement oflong lead material associated with controls for some other units. McCluskey Aff., Exh. 5, 'l[ 17.

-36-48. Additional capital expenditures in 2013 and 2014, however, inthe range of$210 million are necessary to comply with the 2015 and 2016 CPS S02 system-wide emission rates and the installation ofFGD equipment atWaukegan Unit 8. McCluskey Aff., Exh. 

### 5, 

### 11 15-16. Withoutrelieffrom the CPS 2015 and 2016 rates and the FGD installationrequirement at Waukegan Unit 8, Midwest Generation, its Stations, its employees, and others that rely on the Stations, as well as compliance investments to date, are at risk. 49. Midwest Generation is currently facing significant financial challenges, which are discussed inmore detail inthe Petmecky Affidavit, Exh. 4. These challenges relate to constriction ofrevenues, increased costs, and debt atits indirect parent, EME. 50. On the revenue side, Midwest Generation's average realized energy prices (dollars permegawatt hour) have fallen every year since 2008 due to weak demand and unprecedented exploration and production ofshale gas that have caused steep reductions in the price ofnatural gas, which energyprices track. A comparison ofenergy prices between 2008 and 2012 shows a dramatic, roughly 45% reduction in market energy prices, which in tum have driven down Midwest Generation's revenues. PetmeckyAff, Exh. 4, 110. Because ofthe impact oflower average energyprices, Midwest Generation also has suffered a decrease in generation, further reducing revenues. Petmecky Aff, Exh. 4, lj[ 11. 51. 

### In addition, Midwest Generation has recently experienced lower capacityprices and revenues. The so-called capacity markets essentiallyprovide payments for contractual commitments by powergenerators to providepower when called upon to do so. Midwest Generation's capacityprices are set three years in advance and, as with its business in general,
are impactedbymarket cycles. But even accounting for typical market cycling, the capacity prices and corresponding anticipated revenues will fall to strikingly low levels in 2013. Midwest

-37-Generation experienced much bettercapacity revenues inprior years. Generallysee Petmecky Aff., Exh. 4, 19. In2008, when Midwest Generation was relatively new to the PJM market, it achieved capacity revenues of$111 million. Its capacity revenues rose to $178 million in 2009 and $263 million in 2010, then declined to $244 millionin 2011. In 2012, the capacityprices dropped substantially and the capacity revenues are projected to reach only $97 million this year. Capacity prices will dropevenmorein 2013, whenMidwest Generation expects capacity
revenues will total only$35 million, representing a decline ofmore than 85%- over$230 million- from the 2010 and 2011 revenues. PetmeckyAff., Exh. 4, 19. Fortunately, based on increasing capacity prices in 2014 and 2015, Midwest Generation expects capacity revenues to increasein 2014 to $141 million and to recover further in 2015 to $193 million. PetmeckyAff., Exh. 4, '][9. 52. Onthe cost side, Midwest Generationhas experienced a recent substantial increase in fuel costs. Earlierthis year, a favorable long-termcoal rail contractexpired, and Midwest Generation enteredinto a new, higher-priced contract for the transport oflow sulfur coal to its fleet. The resultant increase in as-delivered fuel costs is substantial. During the first nine months of2012, Midwest Generation's as-delivered fuel costs havebeen approximately 60% higherthan during the sameperiod in 2008. Petmecky Aff., Exh. 4, '][ 12. 53. As a result ofthe constriction ofrevenues andincreased costs, Midwest Generation has entered a period ofnegative earnings, which has dealt a significantblow to its ability to securefinancing. Whereas Midwest Generation had a net income of$87 million during the first three quarters of2011, it suffered a netloss of$63 million for that sameperiod in 2012. Petmecky Aff., Exh. 4, '][ 8. MidwestGeneration expects that operating losses and deficits likely will continuethrough 2014. Petmecky Aff., Exh. 4, '][ 7. It needs financing.

-38-54. Midwest Generation has been largely dependent on EME to fund its cash flow deficits and environmental retrofits. EME, however, is facing its own financial challenges that throw into question its ability to provide funding to Midwest Generation to install additional controls required to comply with the CPS system-widerates in 2015 and 2016. As of September 30, 2012, EMEhad $3.7 billion ofunsecured notes outstanding, $500 million of which mature inJune 2013. EMEcontinues to experience operating losses, including from the financial results ofMidwest Generation, and EME expects that it will incurfurther losses and reductions in cash flow inthe current year and for some subsequent years. EME currently expects a continuation ofthese adverse trends coupled with pending debtmaturities and the need to retrofit Midwest Generation'splants to complywith governmental regulations to exhaustits liquidity. Consequently, EMEhas been considering all options available to it, including potential sale ofassets, restructuring, reorganization ofits capital structure, and conservation of cash thatwouldbe applied otherwise to the payment ofobligations. 55. Based on currentprojections, EME does not expectto have sufficient liquidity to repay a $500 million debt obligation due in June 2013. EME disclosed on November 15, 2012, that ithad elected not to make $97 million in interestpayments due on certain bonds on that date. EME's unsecured bonds generallyprovide for a 30-day grace period for interest payments before
an event ofdefault shall be deemed to have occurred. EME'sfailure to pay indebtedness under its unsecured bonds will likely result in EME's filing for protection under Chapter 11 ofthe U.S. Bankruptcy Code, which contemplates that the party filing for bankruptcy will continue to operate through and after the bankruptcyprocess. EME and its parent, Edison International, continue to engage in discussions with the bondholders' financial and legal advisors regarding potential restructuring transactions ofEME. Generallysee PetmeckyAff., Exh. 4, '1I 19.

-39-56. Midwest Generation had $1.323 billion ofnotes receivable fromEME as of September2012, with payments usedto meet Midwest Generation's rent obligations under saleleaseback agreements with third parties for the Powerton and Joliet Stations. EMEhas indicated that it may not be able to make these payments. IfMidwest Generation is unable to obtain financial support from EME orother sources, MidwestGeneration may need to file for protection under Chapter 11 ofthe U.S. Bankruptcy Code. PetmeckyAff., Exh. 4, <J[ 14. 57. EME and Midwest Generationhave been engaged in negotiations with creditors concerning a potential financial restructuring. Itis possiblethat such negotiations may lead to a successful restructuring priorto orin connection with any Chapter 11 reorganization proceeding. Capacity markets are depressed for 2012 and 2013 but they show an increase in 2014 and 2015. Petmecky Aff., Exh. 4, <J[ 9. Other federal rules, such as the MATs and CAIR Phase IT, are scheduled to go into effectin 2015, helping to level the playing field for lllinois generators like Midwest Generation. Midwest Generation does not seekrelieffrom the 2017 CPS S02 systemwide rate. WhatMidwest Generation needs is time, a two-year pause to workthrough its financial constraints and operatingrevenue issues so that it can either borrow orotherwise generate the funds needed for CPS compliance while also satisfying its other obligations. 58. As described in more detail in the Petmecky Affidavit, Exh. 4, Midwest Generation has been unable, to date, to identify any other source offunding for the roughly $210 million needed in 2013 and 2014 to install additional controls required to achieve the 2015 and 2016 CPS system-wide emission rates. Edison International has publicly stated that, given the challenging market conditions, it will not invest new funds in Midwest Generation. Petmecky Aff., Exh. 4, <J[ 21. NeitherEME nor Midwest Generation has a reasonable likelihood ofsecuring

-40-financing for these additional control costs from an unrelated third partyin time to comply with the current CPS schedule. PetmeckyAff., Exh. 4,1115, 20, 22-24. 59. Financial conditions this challenging were not anticipated at the time the CPS was adopted. In orderto complywith the CPS, Midwest Generation has already expended considerable resources to reduce emissions. Midwest Generation also plans to incurin 2013 and 2014 additional costs related to installation ofTronainjection systems at Powerton Unit 6 and Waukegan Unit 7, further significant CPS compliance costs. As a result ofchanged financial circumstances, however, Midwest Generation needs to defer still more control costs that would berequired in 2013 and 2014 to achieve the CPS S02rates in 2015 and 2016 and to install the FGD equipment at Waukegan Unit 8. This is not unlike constraints faced by other power generators, such as Ameren, which camebefore this Board for similarreliefearlier this year, or Exelon, which has publicly disclosed that it is deferring significant capital expenditures from 2012 to 2015. Petmecky Aff., Exh. 4, 15. Specifically as reported in a Bloombergtranscript, Exelon stated in its November 1, 2012 Q3 2012 Earnings Call that it "removed roughly $2.3 billion ofgrowth capital from 2012 to 2015 capital plans ofExelon Generation
... which meaningfully improves [its] free cash flow overthe period
.... [and] is a matter ofbetter aligning [the company's] growth capital spend with the expectedtiming ofthe power market recovery." Petmecky Aff., Exh. 4, 15. Absent a variance from the CPS 2015 and 2016 rates and the requirement to install FGD equipment on Waukegan Unit 8 by the end of2014, Midwest Generation would suffer unreasonable and arbitrary hardship. 

### C. The Adverse Consequences ofDenial Are Untenable and

### MustBe A voided. 60. Denial ofthis Petition would likely have severe, adverse consequences on Midwest Generation, its employees, and others benefittedby Midwest Generation and its

-41-employees. Inthe event ofa denial, Midwest Generation would confront two possible compliance scenarios. McFarlan Aff., Exh. 3, 

### '119; Petmecky Aff., Exh. 4, 

### '128; McCluskey 

### Mf., Exh. 5, '1'115-23. First, Midwest Generation could be required to attempt to fund the additional $210 million in necessary control costs in 2013 and 2014 at the same time that it expects to be funding approximately $230 million ofother CPS control projects, is suffering operating losses, needs to conserve what cash ithas, has limited ifany access to funds from other parties, and is attempting with EMEto effectuate a significant financial restructuring. Under these circumstances, funding would be uncertain at best and such a large additional expenditure could threaten Midwest Generation's viability and that ofits Stations. 61. Second, as discussed in the McCluskey Affidavit, Exh. 5, absent a variance or the ability to fund in 2013 and 2014 the additional $210 million needed for pollution controls to achieve the CPS 2015 and 2016 S02emission rates, Midwest Generation would be forced to substantially curtail its generation. Generationcurtailment, however, does not provide a viable compliance option. Absent a variance, Midwest Generation would beforced to significantly curtail generation from several othercoal-fired units in the fleet that do not have Tronainjection systems installed, up to 75% in 2016. Such extensive curtailments wouldresult in substantial reduction in Midwest Generation's revenues at a critical time and are not sustainable. 

### In addition, such curtailments mayresult in penalties under Midwest Generation's capacity contracts and may even require regulatory approval in light ofgrid reliability concerns. The level ofgeneration curtailment required to comply with the CPS, absent this requested variance, would threaten the continued existence ofMidwest Generation and the future viability ofits Stations.

-42-62. In summary, absent the requested variance, the future ofMidwest Generation and its Stations is at risk. In turn, this threatens employees and others who rely on the operation of the Stations. 63. The Midwest Generation coal-firedfleet is a vibrant part ofthe communities in which the fleet operates and an importantcontributor to the economics ofthe state. As of October 31, 2012, Midwest Generation's plants and supporting operations based in lllinois collectively employed 84530 men and women, 539, or 64% ofwhom are represented byLocal 15 ofthe International Brotherhood ofElectrical Workers. Large numbers offamilies rely upon those employees' earnings for support. Reductions in earnings would also impact the income and other taxes those employees pay, as well as the providers ofthe goods and services they purchase. In calendar year 2011, Midwest Generation provided annual payroll and benefits totaling $145 million; paidover $100 millionfor contracted labor (nearly all skilled building and construction trades members) to perform special project work; spent $379 million to purchase goods and services from Illinois businesses, to pay for various licenses and regulatory fees, and to support lllinois-based organizations; and paid $4.7 million in property taxes to local units of government inWill, Tazewell, Lake, and Cookcounties. McFarlan Aff., Exh. 3, <J[ 20. 64. Additionally, ifMidwest Generation is forced to significantly curtail oreven
cease generation at some ofits units, this would adversely impact state tax revenues. For example, Midwest Generation'spurchases ofsorbent will fall, depriving the state ofvarious tax
revenues and the Agency ofrevenue to help support the Title V program specifically derived from the use tax on sorbent. See 35 ILCS 105/9. Midwest Generation has spent $36 million on sorbentfor its ACI systems in 2012. At a rate of6.25%, so far in 2012, Midwest Generation has

30 Please note that this total number ofemployees reflects only eight workers now at Crawford.

·43-paid over $2.3 million in use tax on sorbentpurchases, aportion ofwhich is earmarked to help supportthe CAAPP at lllinois EPA. !d. 65. The consequences ofnot being granted the variance are very dire not only to Midwest Generation, but also to its employees, their communities, the state generally, and the Agency in particular. 

### Vll. ENV1RONMENTALIMPACT (§ 104.204(g)) 66. Under the CPS, Midwest Generation is required to achieve annually declining system-wide S02emissionrates beginning with an average annual rate of0.44lb/rnrnBtu in calendar year 2013 and a rate of0.41lb/rnrnBtu in calendar year 2014. See McCluskey Aff., Exh. 5, Table 5.1. Under the terms ofthe proposed variance, current CPS emissionrates limits for 2013 and 2014 would bemet, and emissionrate limits for 2015 and 2016 would be modified. Under the proposed mass emission limits for the period 2013 through 2016, total actual tons of so2 emissions for that periodfrom units legallypermitted to operate during those respective years would be less than expected based upon historical average 2008-2011 heat input and the CPS rates. Meeting the proposed mass emission levels over the four-year period (2013-2016) would provide a cumulative net reduction of3,181 tons ofS02. See McCluskey Aff., Exh. 5, Table 5.1. 

### In addition, total emissions in 2013 and 2014 would be less than expected for those years, by about 15,000 tons, providing early emission reductions. 67. Additionally, Midwest Generation ceased operation ofthe coal-fired boiler atFisk Station four months earlierthan required by the Waukegan Order. The last day the Fiskcoalfired boiler operated was August 30, 2012. This early shutdown resulted in approximately 734 tons less S02emissions in 2012. McCluskey Aff., Exh. 5, !J[ 26. The Waukegan Order required

-44-Midwest Generation to shutdownthe Crawford StationbyDecember 31,2014. However, Midwest Generation ceased operation ofCrawford Station on August 28, 2012, which created an early reduction ofS02 emissions ofapproximately 1,249 tons in 2012. McCluskey Aff., Exh. 5, <J[ 26. Midwest Generation is proposing to commit to no further operation ofthe coal-fired units at Crawford.31 68. Emissions ofotherpollutants would be reduced as well under this requested variance. As a result ofthe S02 emission commitments proposed, for the period 2013-2016, Midwest Generation anticipates that NOx would be reduced by approximately 8,503 tons, PM by approximately 3,169 tons, mercury by approximately 135 pounds, and C02by approximately 16 million tons. McCluskey Aff., Exh. 5, <J[ 26. In addition, the early cessation ofoperation ofthe coal-firedunits at Fisk and Crawford result in an additional reduction of461 tons ofNOx, 299 tons ofPM, 3 pounds ofmercury, and 904,477 tons ofC02. McCluskey Aff., Exh. 5, <J[ 26. These reductions provide additional emission benefits from the proposed variance compliance plan. These additional reductions are ontop ofsignificant CPS controls that have already been implemented for these pollutants. 69. The requested five-month deferral ofthe deadline for installingFGD equipment
or shutting down Waukegan Unit 8 will have no adverse impact on emissions because Midwest Generation commits, ifthis variance is granted, notto operate that unit during the deferral period. Thus, that unit will have no emissions beginningJanuary 1, 2015, until completion ofthe FGD installation. 70. Pursuant to the CPS, Midwest Generation's fleet ofcoal-firedEGUs was among the first in the nation to install mercury control equipment in July 2008. Since 2007, when the
31 Thetons ofS02reducedfrom not operating Crawford Station in 2013 and 2014 are included in the proposed mass emissions levels to which Midwest Generation commits for those years.

-45-CPS was implemented, system-wide mercury emissions have been reduced from approximately 1,345 pounds per year to approximately 221 pounds per year in 2012. This represents an 84% reduction in system-wide mercury emissions since adoption ofthe CPS. Moreover, Midwest Generation can now meetthe mercury emissions rate set forth at Section 225.294(c) for each of its operating coal-fired units except the two with hot-side precipitators as provided by the regulations and the Waukegan Order. Since fall2012, Joliet Units 6, 7, and 8, Powerton Units 5 and 6, Waukegan Unit 8, and Will County Unit 4 have been complying on a continuous basis with the 0.0080 lb/GWh gross electrical outputlimitation ofthe CPS. McCluskey Aff., Exh. 5, '![ 

### 4. 71. As described in the McFarlan Affidavit, Exh. 3, '!['![ 13-15, through installation of various control measures and shutting down several units, Midwest Generation has reduced emissions ofcriteriapollutants and C02 significantly fleet-wide since 2000:
a. Midwest Generation has installed SNCRs to control NOx emissions on most ofits CPS Group units listed in Appendix A ofPart 225, thus significantly reducing such emissions. Since 2000, Midwest Generation has reduced annual system-wide NOx emissions by 83%, a reduction from approximately 72,283 tons in 2000 to approximately 12,526 tons emitted in 2012.32 b. Midwest Generation's improvements and other changes with respect to its coal-fired units have reduced PM emissions in 2012 to approximately 5,221 tons, a reduction of20% from 2000 level of6,552 tons.

32 Midwest Generation has annualized emissions from January through September, 2012 to obtain the emission levels in 2012 set forth in this portion ofthe Petition.

-46-c. Emissions ofCOz have been reduced to approximately 26.9 million tons system-wide in 2012, a 16% reduction from 2000 levels of31.9 million tons notrequired by any applicable law orregulation. d. Emissions ofS02 have been reduced in 2012 to approximately 56,395 tons from 94,195 tons in 2000, a 40% reduction. 72. Assuming the variance requested in this petition is granted, following the twoyear "pause" in the annual system-wide S02 emission rates, Midwest Generation will resume compliance with the SOz rates set forth in the CPS for 2017, i.e., 0.15lb/mmBtu. Additionally, Midwest Generation emphasizes that the interimrate it seeks for 2015 and 2016, 0.38 lb/mmBtu, is less than the rate for 2014, which is 0.41lb/mmBtu. Therefore, the "pause" that Midwest Generation seeks does include a step-down in the emission rate; Midwest Generation will be providing somereduction in the system-wide annual S02 emission rate in 2015 and 2016, though not to the extent currentlyrequired by the CPS. Midwest Generationcan achieve this proposed stepped-down interim emission rate through the use ofultra-low sulfur coal and the planned control upgrades at Powerton Unit 6 and Waukegan Unit 7. Further, any suggestion ofnet environmental harm that might result ifthe Board grants the requested variance would be groundless in light ofMidwest Generation's commitment to ensure that mass S02 emission levels would not exceed the levels proposedherein. 73. System-wide reductions in mercury will notbenegatively impacted by this requested variance. Midwest Generation will continue to operate its ACI systems to control mercury emissions and will comply with the mercury emission rates set forth in the CPS by January 1, 2015, or sooner. Therefore, there are no additional health effects that could result from emissions ofmercury.

-47-74. PM emissions are already controlled bythe existingESPs on the EGUs. Therefore, PM emissions will not increase as a result ofthe requested variance. The improvements to the ESPs that willbe delayed ifthis variance request is granted are to accommodate increased PM loadingdue to the injection ofTronato control S02 emissions. The improvements to the ESPs would allow Midwest Generation to maintain current operational levels with the increased PM loading. Until Tronais injected at a unit, the ESPimprovement is not necessary. Additionally, each Station is subject to the state's PM limitations at Section 212.203. These requirements will continue to apply. Each Station is in compliance with these requirements and will remain so. 75. S02 emissions contributeto the formation ofAcid Rain and fine particulate matter. Midwest Generation complies with the Acid Rain permits issued for each Station. Emissions offine particulate matter are currently regulated by the CAIR. Acid Rain can contribute to eutrophication ofwaterbodies located far downwind ofa source ofS02• USEPA has documented various possible health effects, largely respiratory, associated with inhalation of fine particulate matter. Midwest Generation's system is in compliance with these requirements and will remain so during the pendency ofthe variance, 

### ifgranted. 76. In a variance proceeding, a petitioner must demonstrate that the hardship resulting from denial would "outweigh any injury to the public or the environment" from granting the relief. Marathon Oil Co. v. EPA, 242 TIL App. 3d 200, 206, 610 N.E.2d 789,793 (5th Dist. 1993). Midwest Generation satisfies the environment impactelementbycommitting to meet S02 emission levels of57,000tons and 54,000 tons in 2013 and 2014, respectively, a total of about 15,000 tons less than reasonably anticipated under the CPS (based on average 2008-2011 heat input), with a total reduction in S02 emissions ofabout 3,181 tons over a four-year period

-48-(2013-2016). 

### See McCluskey Aff., Exh. 5, Table 5.1. During the pendency ofthe variance, if granted, Midwest Generation will continue to injectpowdered activated carbon to control mercury emissions at each EGUin its system. Itwill continue to operate its ESPs to control particulate emissions. Additionally, by complying with the S02 mass emissions levels proposed here for 2013 through 2016, Midwest Generation will reduce emissions ofmercury, NOx, C02, and PM during that period, as noted above. 77. Given all ofthese factors, the hardship to Midwest Generation clearly outweighs any potential impactto human health or the environment. Indeed, the compliance program that Midwest Generation proposes during the pendency ofthe variance will result in a netbenefit to the environment, indicating that the requested variance should be granted. Ameren Order, p. 62 (Board found that net benefit to air quality favors granting the variance). The hardship, therefore, rises to the level of"arbitrary or unreasonable," consistent with Section 35(a) ofthe Act and Board precedent in variance proceedings. Denial ofthe variance would force additional major expenditures that maybeimpossible to fund orsubstantial curtailments that would threaten the survival ofMidwest Generation, as detailed above. McFarlan Aff., Exh. 3, '][ 19; Petmecky Aff., Exh. 4,'][ 28; McCluskey Aff., Exh. 5, <Jl<]l 15-23. Shuttering the Stations would have devastating impacts on hundreds ofworkers and their families and would drain hundreds of millions ofdollars from the economy. 78. Cross-media impacts are not an issue in this matter. The level ofS02 emissions in 2015 and 2016 should have no significant impact on water quality.

-49-

### VIIT. CONSISTENCY WITH FEDERAL LAW (§§ 104.204(1) and 104.208(a)) 79. The Boardmay grant this requested variance consistent with federal law. Granting the variance has no impact on Section llO(a) ofthe Clean AirAct and 40 CFR Part 51. Specifically, Section 110(a)(2)(D) ofthe CleanAirAct is addressed through the CAIR and perhaps a successor ifUSEPA is able to develop, promulgate, and successfully implement an emissions transport control rule by 2015 or2016, the years ofthe requested variance. Midwest Generation complies with the CAIR and will continue to do so as long as itis applicable. Second, on June 24, 2011, the Agency submitted portions ofthe CPS, including Sections 225.295(b) and 225.296(a)(2), to USEPA for inclusion in lllinois' SIP addressing BART and Regional Haze. lllinois EPA, selected pages ofTechnical SupportDocument forBestAvailable Retrofit Technology Under the RegionalHaze Rule, AQPSTR 09-06 (April29, 2011), attached hereto as Exhibit 6;33 77 Fed.Reg. 3966 (Jan. 26, 2012), attached hereto as Exhibit 7. On July 6, 2012, USEPA approved Illinois' submittal as part ofillinois' SIP, including those portions ofthe CPS that establish the annual system-wide S02 emission rates. 77 Fed.Reg. 39943 (July 6, 2012), attached hereto as Exhibit 8. 80. Recognizing a potential concern ofthe Board regarding consistency with federal law, Midwest Generation points out several factors. First, compliance with the limitreflecting BART is due as expeditiously as possible but no laterthan five years after SIP approval, or, in Illinois' case, mid-2017, approximately six months afterthe end ofthe requested variance period.

33 Exhibit 6 consists ofthe coverletter, the Technical SupportDocument (''TSD") cover page, TSD pp. 24-25, 30-31,33, and Appendix C. These are the pages pertinent to this request for variance; however, Midwest Generation will provide the Board with a copy ofthe entireTSD orthe entire collection ofdocuments included in the SIP submittal ifthe Board requires.

-50-42U.S.C. § 7491(g)(4)(e)(l)(iv). Midwest Generation will complywith the CPS 2017 systemwide annual S02limitof0.15lb/mmBtu. 81. Second, the BART/Regional Haze SlPis concerned with the S02emission rate. lllinois EPA demonstrated that the system-wide average S02 emission rates included in the CPS provide greaterreductions than applying the presumptiveBART rate to only BART-eligible units byapplying the rates to average heat input, and USEPA accepted this analysis. See 77 Fed.Reg. at 3973; 77 Fed.Reg. at 39946. The slightincrease in emissions attributable to a rate of 0.38 lb/mmBtu still leaves Dlinois compliant with presumptive BARTlevels. See Exh. 9.34 Additionally, the shutdowns ofFisk and Crawfordin 2012 would reduce mass emissions ofS02 and NOx to levelsbelow those included in lllinois' BART submittal that demonstrated that the system-wide CPS rates produced greaterreduction than applying the BARTpresumptive rates to only the BART-eligible units, as illustratedbyExhibit 9. Therefore, there wouldbeno negative impact on the Agency's BARTcalculations regarding emissions levels. 82. The only issue couldbe a discrepancy in the interimrates prior to the BART compliance date. As part ofits statutory duties, the Agency must submit to USEPA the Board's order granting this requested variance, assuming it is granted, and request that USEPA reflect the variance in the SlP. Thus, Midwest Generation anticipates that ifthe Board grants the variance, USEPA would approve an amendment to theBARTSlPto reflect the change in emission rate. Midwest Generation notes that the mass emissions levels that itproposes here as part ofits

34 Exhibit 9 consists ofTable4.7 from the BARTTSD, Exhibit 6, with the addition ofMidwest Generation's analysis ofan S02 emission rate of0.38 in 2015. Midwest Generation used the same heat input datathat the Agency used in creatingthe table, presented incolumn 3 ofTSDTable4.7. The reductions in 2015 resulting from a rate of0.38 are less than ifMidwest Generation were to meet the 0.28 rate, obviously, butthey are still greater than the presumptive BARTreductions. Additionally, the reductions that can be expected for 2017, the compliance year, and 2019, the final yearofthe CPS stepdowns in S02 emission rates, are significantly greaterthan the Agency anticipated when itdeveloped the BART SIP because ofMidwest Generation's actions to reduce emissions.

-51-complianceplan should not bepart ofthe amendment to the BART SIP, as BARTis concerned only with emission rates, and that is the approach that lllinois has followed in its submittals.


### IX. VARIANCE CONDITIONS AND COMPLIANCE PLAN (§§ 104.204(f) and (j)) 83. Midwest Generation requests that the Board grant a variance from the S02 emission rates for 2015 and 2016 set forth in Section 225.295(b) and from the requirement to install FGD equipment at Waukegan Unit 8 by December 31, 2014, as set forth in Section 225.296(a)(2). Midwest Generation recommends that the variance be stated as follows: Midwest Generation shall not be subject to the system-wide emission rates of0.28 lb/mmBtu in 2014 and 0.195lb/mmBtu in 2015, as set forth in Section 225.295(b). Midwest Generation shall not be subjectto the requirement to install and have operational FGD equipment on Waukegan Unit 8 by December 31,2014, as set forth in Section 225.296(a)(2). 84. Midwest Generation recommends a complianceplan as a condition ofthe variance as follows:
Date Activity 2013 and 2014 Midwest Generation will not operate the coal-fired boilers at the Crawford Station. January 1-December 31, 2013 Midwest Generation will limit system-wideJ=> emissions ofS02 to no more than 57,000 tons. May 1, 2014 Midwest Generation will report to the Agency its system-wide mass S02 emissions for 2013 with its Annual Emissions Report. January 1-December 31, 2014 Midwest Generation will limit system-wide emissions ofS02to

35 The "system" for purposes ofthis compliance plan table is comprised ofthe following coalfired units: Joliet Units 6, 7, and 8, Powerton Units 5 and 6, Waukegan Units 7 and 8, and Will County Units 3 and 4.

-52-Date Activity
no more than 54,000 tons. January 1, 2015, and Midwest Generation will not operateWaukegan Unit 8 thereafter until completion of installation ofFGD equipment May 1, 2015 Midwest Generation will report to the Agency its system-wide mass S02 emissions for 2014 with its Annual Emissions Report. May 31,2015 Midwest Generation must have completedthe installation ofand have operational FGDequipment on Waukegan Unit 8 or permanently shut down the unit 2015 and 2016 Midwest Generation will comply with a system-wide annual S02 emission rate of0.38lb/mrnBtu. January !-December31, 2015 Midwest Generation will limit its system-wide mass emissions ofso2 to no more than 39,000 tons. May 1, 2016 Midwest Generation will report to the Agency its system-wide mass S02 emissions for 2015 with its Annual Emissions Report. January 1-December 31, 2016 Midwest Generation will limit its system-wide mass emissions ofso2 to no more than 37,000 tons. May 1, 2017 Midwest Generation will report to the Agency its system-wide mass S02 emissions for 2016 with its Annual Emissions Report. January 1, 2017 BeginningJanuary 1, 2017, Midwest Generation will comply with the rate set forth in Section 225.295(b) for 2017 of0.15 lb/mmBtu.36 Continuously during the a. Midwest Generation will comply with the CAIR. pendency ofthe variance b. Midwest Generation will comply with the Acid Rain Program at 40 CFR § 72.

36 In the alternative, ifthe Board believes that the emission rates for 2015 and 2016 that are set forth in Section 225.295(b) mustbe in effect for some time period, Midwest Generation will comply with a system-wide annual S02emission rate of0.38lb/mmBtu in 2015 and 2016, a rate of0.281b/mmBtu from January I through January 15, 2017, a rate of0.195lblmmBtu from January 16 through January 31, 2017, and will comply with a system-wide annual rate of0.15 lb/mmBtu from February I through December 31, 2017. Midwest Generation may demonstrate compliance with these requirements, however, through a rate of0.15 lb/mmBtu for the period ofJanuary I through December 31, 2017.

-53-Date Activity
c. Midwest Generation will comply with all other applicable requirements.

X. HEARING

(§ 104.204(n)) 85. Midwest Generation hereby requests that the Board schedule a hearing in this matter at its earliest convenience.


### XI. RCRA (§ 104.206) 86. Section 104.206 ofthe Board's procedural regulations is not applicable to this request for variance. Section 104.206 specifically addresses requests for variance from the Resource Conservation and Recovery Act (RCRA). Midwest Generation does not seek such relief.


### XII. CONCLUSION 87. The Board has recently granted variances to petitioners faced with unique regulatory uncertainty where the costs ofcompliance were also determined to beboth substantial and certain and where a variance was necessary due to a change in circumstances that required additional time to fund compliance costs. ExxonMobil Oil Corp. v. !EPA, PCB 11-86, PCB 12- 46 (December 1, 2011**)~** Ameren Order. Midwest Generation is similarly facing regulatory uncertainty, the costs ofcompliance are substantial and certain, and Midwest Generation needs to preserve its limited cash flow until it works through its financial restructuring and current challenging revenue and expense circumstances. The recent unforeseen collapse in the energy and capacitymarkets due to weak demand and the impact ofshale gas on energy prices has

-54-driven down Midwest Generation revenues while its costs have substantially increased. The impact ofMidwest Generation's increased costs, including complying with the CPS, is exacerbated by the uneven playing field compared to competitors in other states. These conditions have led Midwest Generation to experience substantial net losses during the first three quarters of2012. Its current financial condition is made worse bythe significant debts, including to Midwest Generation, ofits indirect parent corporation, EME, uponwhichMidwest Generation has relied for certain financial contributions. Midwest Generation needs time for the energy market to recover and for EME to effectuate a financial restructuring. 88. Considering those factors together with the lack ofimpact to the environment from the requested relieffrom the CPS S02emissionrates and the deadline for installing FGD equipment at Waukegan Unit 8, a variance is warranted. This brief"pause" inthe pace ofS02 emissionrate reductions and the installationrequirement at Waukegan Unit 8would help avoid financial harm to Midwest Generation, its employees, and others benefited by its operations while avoiding any negative impacts on electricity generation in Illinois. Midwest Generation's commitmentsto meeting mass S02levels in 2013 through 2016 results in a net reduction in anticipated S02emissions overthat period (based on average 2008-2011 heatinput) and a reduction in otherpollutants, providing a net environmental benefit.

-55-WHEREFORE, for the reasons set forth above, MIDWEST GENERATION, LLC requests thatthe Board grant it a variance from the system-wide annual S02 emission rate of 0.28 lb/mmBtu in 2015 and 0.195 lb/mmBtu in 2016 and from the requirement to install and have operational FGD equipment on orpermanently shut down Waukegan Unit 8 by December 31,2014.

Dated: November 30, 2012 Kathleen C. Bassi Stephen J. Bonebrake Andrew N. Sawula SCHIFF HARDIN LLP 233 South Wacker Drive, Suite 6600 Chicago, Illinois 60606 312-258-5500 Fax: 312-258-5600 kbassi@schiffhardin.com sbonebrake@schiffhardin.com asawula@schiflhardin.com Respectfully submitted, MIDWEST GENERATION, LLC by:

-56-

### Exhibit List Exhibit 1 Illinois Environmental Protection Agency, Appendix A "Air Sampling Network," 40thAnnualAir QualityReport 

### (20 1 0), Plus a Map Depicting the Locations ofMidwest Generation's Generating Stations vis-a-vis the Ambient Air Monitoring Stations Operated by the Agency 2 Table Listing the Air Permits Issued to Midwest Generation 3 Affidavit ofDouglas McFarlan, President, Midwest Generation, LLC, and Vice-President, Public Affairs, Edison Mission Group 4 Affidavit ofWilliam M. "Tres" Petmecky, Vice-President and Treasurer, Edison Mission Energy 5 Affidavit ofFred McCluskey, Vice President ofTechnical Services, Midwest Generation EME, LLC and Edison Mission Energy 6 Excerpts from the BART SIP TSD: the Cover Letter; the TSD Cover Page; TSD pp. 24-25, 30-31, 33; and Appendix C 7 Proposed Federal Approval ofthe Illinois BART SIP (77 Fed.Reg. 3966 (Jan. 26, 2012)) 8 Final Federal Approval ofthe Illinois BART SIP (77 Fed.Reg. 39943 (July 6, 2012)) 9 Table Comparing Midwest Generation Emissions at the Proposed 2015-2015 Rate to Presumptive BART Levels