BEFORE THE ILLINOIS POLLUTION CONTROL BOARD 

MIDWEST GENERATION, LLC, 

Petitioner, 

ILLINOIS ENVIROMMENTAL 

PROTECTION AGENCY, 

Respondent. 

1 

) 

1 

) PCB 13- 

) (Variance - Air) 

1 

1 

1 

NOTICE OF FILING 

To: 

John T. Therriault, Assistant Clerk 

Illinois Pollution Control Board 

James R. Thompson Center 

Suite 1 1-500 

100 West Randolph 

Chicago, Illinois 6060 1 

Julie Armitage 

Acting General Counsel 

Illinois Environmental Protection Agency 

Division of Legal Counsel 

1 02 1 North Gmd Avenue, East 

P.O. Box 19276 

Springfield, Illinois 62794-9276 

PLEASE TAKE NOTICE that we have today filed with the QEce of the CIerk of the 

Pollution Control Board a PETITION FOR VARIANCE on behalf of MIDWEST 

GENERATION, LLC, with a REQUEST FOR HEARTNG and the APPEARANCES OF 

KATHLEEN C. BASSI, STEPHEN J. BONEBRAKE, and ANDlREW N. SAWULA, copies 

of which are herewith served upon you. 

RECEIVED 

omion of Legal Counsel 

Environmental Protection 

Mew 

Attachment 1
SCHIFF HARDIN LLP 

Attorneys for Midwest Generation, LLC 

Kathleen C. Bassi 

Stephen J. Bonebrake 

Andrew N. 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.com 
BEFORE 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 behalf of Midwest Generation, LLC. 

athleen C. Bassi 

Dated: // ~~ t,j/ ,1. 

Kathleen C. Bassi 

SCHIFF HARDIN, LLP 

23 3 South Wacker Drive, Suite 6600 

Chicago, Illinois 60606 

312-258-5567 

Fax: 312-258-5600 

kbassi@schiftbardin.com 
BEFORE THE ILLINOIS POLLUTION CONTROL BOARD 

MIDWEST GENERATION, LLC, 

Petitioner, 

v. 

ILLINOIS ENVIRONMENTAL 

PROTECTION AGENCY, 

Respondent. 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

APPEARANCE 

PCB13-__________ _ 

(Variance- Air) 

I hereby file my appearance in this proceeding, on behalf of Midwest 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 .com 
BEFORE THE ILLINOIS POLLUTION CONTROL BOARD 

MIDWEST GENERATION, LLC, 

Petitioner, 

v. 

ILLINOIS ENVIRONMENTAL 

PROTECTION AGENCY, 

Respondent. 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

APPEARANCE 

PCB 13-____ _ 

(Variance- Air) 

I hereby file my appearance in this proceeding, on behalf of Midwest Generation, LLC. 

~~ Andrew N. 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 

PROTECTION AGENCY, 

Respondent. 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

PCB13-__ 

(Variance- Air) 

PETITION FOR VARIANCE 

NOW COMES Petitioner, MIDWEST GENERATION, LLC, ("Midwest Generation" or 

"Petitioner") by and through its attorneys, SCHIFF HARDIN LLP, and, pursuant to Sections 35 

and 37 of the Environmental Protection Act, 415 ILCS 5/35, 37 (2010) ("Act"), and 35 Dl. Adm. 

Code Part 104, Subpart B, requests that the Board grant Petitioner a variance from provisions of 

the Combined Pollutant Standard ("CPS") 1 set forth at 35 TIL Adm. Code§ 225.295(b)2 for the 

two-year period beginning January 1, 2015, and ending December 31,2016, and from Section 

225.296(a)(2) for a period of five months, delaying that requirement until May 31, 2015, and 

that the Board schedule a hearing in this matter. 

Additionally, to align with the variance requested in this Petition, Midwest Generation 

seeks a variance from the Board's Order in Midwest Generation, LLC- Waukegan Generating 

Station v. Illinois Environmental Protection Agency, PCB 12-121 (August 23, 20 12) 

("Waukegan Order") at page 20, where the Board ordered Midwest Generation to comply with 

the system-wide emission rates for sulfur dioxide ("S02"), or, in the alternative, Midwest 

1 Codified 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. 

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Generation requests that the Board adjust that portion of the Waukegan Order to be consistent 

with the relief requested herein or specifically find that the variance requested here supersedes 

only that provision of the Waukegan Order that requires compliance with the system-wide S02 

emissions rate but not the provisions regarding the retrofit of the hot-side precipitator and the 

installation of the flue gas desulfurization equipment or the shutdown deadline as applicable to 

Waukegan Unit 7. 

This request for a variance is an option of last resort that is intended to enable the 

company to manage through exceptionally difficult economic circumstances and financial 

hardship that could not have been foreseen when the CPS was adopted in 2007. Midwest 

Generation does not seek changes to the CPS program for reducing S02 emissions in 2013 or 

2014 or in 2017 or thereafter but, rather' proposes a "pause" in the pace of the decline of so2 

emission rates in the middle of the program (2015-2016), accompanied by enforceable 

commitments to ensure that total S02 tons of emissions are less than projected under the CPS 

during the period from 2013 through 2016. This request follows Midwest Generation's 

significant efforts to date to comply with the CPS, including major investments for pollution 

controls that now enable full compliance with CPS mercury and nitrogen oxide ("NOx") 

emission reduction requirements. Installation of such controls at Midwest Generation's 

Crawford Station in late 2011, only to cease operation of that station by the end of August 2012, 

provides clear evidence of the unforeseen economic circumstances now facing the company. 

Midwest Generation's record is one of continuous improvement and national leadership among 

existing coal-fired generating stations in achieving significant emission reductions. The 

requested short "pause" in the decline of CPS S02 system-wide emission rates will cause no 

environmental harm and is needed to avoid arbitrary and unreasonable hardship. 

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I. INTRODUCTION 

Midwest Generation has already expended considerable resources to comply with the 

state's CPS rule, resources that competitors in other states generally have not been required to 

expend. For instance, Midwest Generation has installed activated carbon injection ("ACI") 

systems for mercury control at all of its operating coal-fired units. The company has installed 

selective non-catalytic reduction ("SNCR") systems to control NOx emissions in order to comply 

with new NOx limits that took effect January 1, 2012. To control S02 emissions, Midwest 

Generation uses ultra-low sulfur coal and has begun installation of dry sorbent injection systems 

utilizing Trona. Midwest Generation has also begun related necessary upgrades of its 

electrostatic precipitators ("ESPs") to control emissions of particulate matter ("PM") associated 

with the Trona 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 of millions of dollars per 

year on operating costs related to CPS compliance, including for the purchase of urea 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 of these 

commodities. 

Even with approval of this requested variance, Midwest Generation currently plans to 

spend approximately $230 million on S02 emission controls and related PM controls in 2013 and 

2014, including for Trona system installations 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 8 by the 

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end of2014, Midwest Generation would be required to spend an estimated additional $210 

million in 2013 and 2014. Midwest Generation's ability to fund $210 million in additional 

controls costs in that timeframe has been impacted by a tsunami of adverse developments, the 

impact of which could not have been reasonably foreseen at the time that the CPS was adopted in 

2007 or even when Midwest Generation filed the Waukegan variance petition in April2012. In 

light of significantly changed regulatory, market, and financial circumstances since the CPS was 

adopted, Midwest Generation seeks more time to complete the additional pollution work in 2013 

and 2014 that would be required to satisfy the CPS 2015 and 2016 system-wide S02 emission 

rates and the Waukegan Unit 8 FGD equipment installation requirements while also maintaining 

adequate cash flow while it works through a financial restructuring. 

Recently, revenues have declined while costs have precipitously increased. Electricity 

prices have significantly declined due to weak demand and unprecedented natural gas production 

from shale gas reserves. On the other hand, the cost of coal as delivered to Midwest 

Generation's coal-fired units, the most significant element of its production costs, rose earlier 

this year under a new rail contract for the transportation of low sulfur coal to those units. 

Reflecting these adverse developments, Midwest Generation has suffered a significant net loss of 

$63 million for the first three quarters of 2012. 

These recent adverse revenue and cost developments are exacerbated by the need to 

compete against power 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 of various rules adopted by U.S. Environmental Protection Agency ("USEPA") 

since the CPS was adopted in 2007. For instance, all of Midwest Generation's units have been 

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controlled for mercury emissions since 2009. By comparison, the control requirements for the 

current federal regulations for mercury emissions found in the Mercury and Air Toxics Standards 

("MATS") do not take effect until2015. USEPA's Cross State Air Pollution Rule ("CSAPR"), 

addressing S02 and NOx emissions, was remanded by the court in EME Homer City Generation, 

L.P. v. E.P.A., 11-1302, 2012 WL 3570721 (D.C. Cir. August 21, 2012). Illinois' CPS rule 

required reductions in emissions of NOx 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 of federal 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 of S02 coincide with the need for Midwest Generation to 

make additional investments to comply with the S02 system emission rates of the CPS. 

In addition, Midwest Generation and its indirect parent 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's parent 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 EME have 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 of the business enterprise through and after the 

bankruptcy process. 

Notwithstanding its current cash flow and credit challenges, Midwest Generation is not 

asking for relief from CPS provisions that will require it to spend approximately $230 million in 

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2013 and 2014, including for planned controls at Powerton Unit 6 and Waukegan Unit 7 to 

comply with the CPS 2013 and 2014 S02 emission rates and the Waukegan Unit 7 control 

equipment requirements. However, Midwest Generation has not been able to identify a viable 

current source of funding for the approximately $210 million in additional control installation 

costs that would be required for it to comply with the CPS 2015 and 2016 S02 system-wide rate 

requirements and Waukegan Unit 8 FGD installation requirements due by the end of 2014. To 

improve its ability to secure requisite financing, Midwest Generation needs time to work through 

the financial restructuring process, including any Chapter 11 proceedings. This places a 

premium on liquidity conservation in 2013 and 2014 to allow for a successful financial 

restructuring. The effect of granting the requested variance would be to shift around $210 

million of capital expenditures out of the critical period of 2013 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 competitive playing field within this same timeframe. This 

additional time would provide Midwest Generation the opportunity to conduct its financial 

restructuring and benefit from market recovery. 

Midwest Generation respectfully requests a variance from the 2015 and 2016 CPS rates. 

Consistent with this request for relief while Midwest Generation addresses a potential financial 

restructuring, it also seeks a delay of five months from the requirement to install FGD equipment 

at Waukegan Unit 8 by December 31, 2014. This relief would effectively provide a "pause" in 

some additional major pollution control expenditures while Midwest Generation continues with 

significant elements of its CPS compliance plan and works through its cash flow and financial 

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restructuring issues. Midwest Generation anticipates that following this "pause" in some 

expenditures, it can comply with 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 be better able to conserve cash and meet 

its obligations while it addresses its current challenging financial situation and works through 

financial restructuring and transitions to a new capital structure. Denial of the requested variance 

would have a significant, adverse impact on Midwest Generation, its employees, and others. 

Absent relief, Midwest Generation's cash flow preservation and restructuring efforts would be 

threatened by an additional expenditure of approximately $210 million in 2013 and 2014 to 

comply with the CPS in addition to the approximately $230 million that Midwest Generation 

currently plans to spend in that period even if this variance is granted. If Midwest Generation 

were unable to fund those $210 million in additional control work in 2013 and 2014, for which 

Midwest Generation has not yet identified a current viable source of funding, it would be 

required to significantly curtail generation from its fleet in at least 2015 and 2016. This would 

adversely impact Midwest Generation and its Stations as well as the jobs of its employees. 

Others would be adversely impacted as well, including lllinois businesses from which the 

company purchases goods and services and recipients of taxes resulting from operation of the 

Midwest Generation fleet. The requested temporary relief from the CPS rates in 2015 and 2016 

and from the requirement for the installation of FGD equipment on Waukegan Unit 8 by the end 

of 2014 would significantly reduce if not eliminate the depth and breadth of potential operational 

cutbacks and associated job reductions and other economic impacts that could otherwise arise. 

The requested variance from the system-wide S02 emission rates is for a period of two 

years, from January 1, 2015, through December 31, 2016, during which time Midwest 

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Generation proposes to comply with a system-wide average annual emission rate of 0.38 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 of 0.41 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 or to 

permanently shut down Waukegan Unit 8 by December 31, 2014. Midwest Generation commits 

to not operate Waukegan Unit 8 after December 31, 2014, until the FGD equipment is installed 

and operational. 

The overall CPS system-wide rate program remains unchanged except for years 2015 and 

2016 and concludes on schedule with the installation ofFGD equipment on designated units by 

the end of 2018 and a final step-down in 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 of both the new national ambient 

air quality standard ("NAAQS") for one-hour S02 and the Best Achievable Retrofit Technology 

("BART")/Regional Haze standards must be achieved by that year. 

As part of this request, Midwest Generation proposes additional compliance plan 

elements that would ensure a net environmental benefit if this variance is granted. Specifically, 

Midwest Generation will commit not to operate the Crawford coal-fired units in 2013 and 2014.4 

It will comply with regulatory CPS S02 emission rates in 2013 and 2014, and it will maintain 

3 If the Board believes it is necessary for Midwest Generation to explicitly meet the rates set forth 

in the CPS, rather than 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 of 2014; therefore, a commitment not to operate the Crawford Station in 2013 and 

2014 represents voluntary reductions not otherwise required. 

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mass emission levels at 57,000 tons in 2013 and 54,000 tons in 2014, which are mass emissions 

levels lower than anticipated based on average historic system-wide 2008-2011 heat input and 

CPS emission rates. Finally, Midwest Generation will manage operation of its fleet to ensure 

mass so2 emission levels of no greater than 39,000 tons in 2015, stepping down to 37,000 tons 

in 2016. Midwest Generation will thereafter comply with the CPS system-wide S02 emission 

rates, starting with the CPS rate of 0.15 lb/mmBtu in 2017. 

The net effect of these proposed commitments is early and cumulative decreases of S02 

emissions so that so2 emissions from 2013-2016 will be 3,181 tons less than expectations under 

the CPS if this variance is granted. Although not included in the 3,181 tons, any environmental 

impact from so2 emissions that might otherwise occur by granting this variance compared to 

reasonable expectations under the CPS is also mitigated by the emission reductions realized by 

Midwest Generation's early shutdown of the Fisk Station at the end of August 2012, four months 

prior to the date required in the Waukegan Order. Importantly for overall environmental benefit, 

Midwest Generation's facilities have also achieved significant reductions in S02 emissions 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 emission rate in 2011 was below the CPS 2013 emission rate. 

These commitments would also have the effect of decreasing emissions of other 

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 of ACI systems. Seven of its nine operating coal-fired units (all but 

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the two units with hot-side ESPs, i.e., Waukegan Unit 7 and Will County Unit 3) already comply 

with the 2015 mercury emission rate limits set forth in the CPS and with the mercury emission 

rate limits of the 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 compliance plan would result in a net environmental benefit for 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 end of 2014. Consequently, time is of the essence and Midwest Generation seeks this 

relief now. 

Midwest Generation did not foresee the extent of its current financial challenges, the 

invalidation of federal rules that would have helped to level the competitive playing field or the 

level of declining power market prices and is further hampered by increases in as-delivered coal 

prices. Moreover, it was unable to predict, and could not have been reasonably expected to 

foresee, that these changed conditions collectively would have such a significant impact on 

Midwest Generation's ability to comply with the 2015 and 2016 S02 system-wide emission rates 

and control equipment installation requirements. 

Under these circumstances and given that Midwest Generation's proposed compliance 

plan would ensure a net environmental benefit, denial of this variance request and enforcement 

of the CPS system-wide S02 emission rates of 0.28 and 0.195 lb/mmBtu in 2015 and 2016, 

respectively, and the requirement that Midwest Generation install FGD equipment on Waukegan 

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Unit 8 by December 31, 2014, would impose undue and arbitrary hardship on Midwest 

Generation. Midwest Generation, therefore, respectively requests a variance from those rates 

and the control equipment installation requirement. 

To align with the variance requested in this Petition, Midwest Generation also seeks a 

variance from or adjustment to the Waukegan Order where the Board orders Midwest Generation, 

at Condition l(a), to comply with the system-wide S02 emission rates set forth in Section 

225.295(b). Additional circumstances have arisen or clarified since Midwest Generation 

obtained the Waukegan variance, causing the need for Midwest Generation to seek this 

additional variance. 

In support of its Petition, Midwest Generation states as follows: 

II. BACKGROUND 

(§§ 104.204(b)(l), (2), (3), (4),(5), (6), (7), (8)) 

1. As of 2013, Midwest Generation will or legally could generate electricity from 

coal-frred units at five electric generating stations5 in illinois, all subject to the CPS, namely the 

Crawford Generating Station located in Cook County, the Joliet Generating Station located in 

Will County, the Powerton Generating Station located in Tazewell County, the Waukegan 

Generating Station located in Lake County, and the Will County Generating Station located in 

Will County. 

2. The Crawford Generating Station ("Crawford"), Agency I.D. No. 031600AIN, is 

an electric generating station owned by Midwest 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 ordered Midwest 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. 

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generating units ("EGUs") at Crawford went online between 1958 and 1961. Crawford is 

located at 3501 South Pulaski Road, Chicago, Cook County, lllinois 60623-4987. Cook County 

is designated nonattainment for 2008 ozone and 1997 annual PM2.56 and attainment or 

unclassifiable for all other NAAQS. It is a maintenance area for the 1997 8-hour ozone standard. 

The lllinois Environmental Protection Agency ("Agency" or "lllinois EPA") has proposed that 

Cook County be 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 of coal 

and natural gas as principal fuels and natural gas as auxiliary fuel during startup and for flame 

stabilization. There was 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. In the Waukegan Order, the Board ordered Midwest Generation to shut down 

the coal-fired units at the Crawford Station by December 31, 2014. Midwest Generation actually 

ceased operation of those coal-fired units by the end of August 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 of 2014. 

3. The Joliet Generating Station ("Joliet"), Agency l.D. No. 197809AAO, is an 

electric generating station operated by Midwest Generation. The Joliet coal-fired EGUs went 

online between 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 Letter to Cheryl Newton, Director, Office of Air and Radiation, USEPA Region 5, from Laurel 

Kroack, Chief, Bureau of Air, Illinois EPA (June 2, 2011). Midwest Generation can provide the Board 

with a copy of this letter if the Board so requires. 

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Will County is designated attainment or unclassifiable for all other NAAQS and is a maintenance 

area for the 1997 8-hour ozone standard. The lllinois EPA has proposed that Will County 

(except for Lockport and DuPage Townships; Joliet Station is not located in either of these 

townships) be designated unclassifiable for the 1-hour S02 NAAQS.7 Midwest Generation 

employs 253 people at Joliet. Midwest Generation operates five coal-fired boilers at Joliet that 

have the capability to fire at various modes that include the combination of coal or natural 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. The Powerton Generating Station ("Powerton"), Agency I.D. No. 179801AAA, is 

an electric generating station operated by Midwest Generation. The Powerton EGUs went online 

between 1973 and 1976. Powerton is located at 13082 East Manito Road, Pekin, Tazewell 

County, lllinois 61554. The area is currently designated attainment or unclassifiable for all 

NAAQS. However, Illinois EPA has proposed that Pekin Township, which includes Powerton, 

be designated nonattainment for the 1-hour S02 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 capability to fire at various modes that include the 

combination of coal 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 The Title V permit issued to Joliet Station identifies fuel oil as an optional fuel, but Midwest 

Generation does not use fuel oil at the Station. 

9 The Title V permit issued to Powerton Station identifies fuel oil as an optional fuel, but 

Midwest Generation does not use fuel oil at the Station. 

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operates associated coal handling, coal processing, and ash handling activities at Powerton. 

There is a 1,500-gallon gasoline tank located at Powerton to provide fuel for Station vehicles. 

5. The Waukegan Generating Station ("Waukegan"), Agency I.D. No. 097190AAC, 

is an electric generating station owned and operated by Midwest Generation. The Waukegan 

Generating Station is located at 401 East Greenwood A venue, Waukegan, Lake County, lllinois 

60087, within the Chicago 2008 ozone and 1997 annual PM2.5 nonattainment areas. Lake 

County is designated attainment or unclassifiable for all other NAAQS and is a maintenance area 

for the 1997 8-hour ozone standard. lllinois EPA has proposed that Lake County be designated 

unclassifiable for the 1-hour S02 NAAQS? The EGUs at the Waukegan Station went 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 of gas 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 retired Waukegan Unit 6 by December 31, 

2007. 

6. The Will County Generating Station ("Will County"), Agency I.D. No. 

197810AAK, is an electric generating station owned and operated by Midwest Generation. The 

Will County EGUs went online between 1957 and 1963. Will County is located at 529 East 

I351

h Road, Romeoville, Will County, Dlinois 60446, within the Chicago 2008 ozone and 1997 

10 The Title V permit issued to Waukegan Station identifies fuel oil as an optional fuel, but 

Midwest Generation does not use fuel oil at the Station. 

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annual PM2.5 nonattainment areas. Will County is designated attainment or unclassifiable for 

all other NAAQS 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 at Will County. Midwest Generation operates two coal-fired boilers at Will County that 

have the capability to fire at various modes that include the combination of coal, 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-gallon gasoline 

tank located at Will County to provide fuel for Station vehicles. Midwest Generation 

permanently retired Will County Units 1 and 2 pursuant to the CPS, Section 225.297(a)(2) in 

December 2010. 

7. Midwest Generation plans to comply with the CPS S02 rate standards, as well as 

the CPS requirement to install FGD equipment on designated units by certain dates, through the 

use of ultra-low sulfur coal and dry sorbent injection of Trona. Dry sorbent injection is an air 

pollution control system in which Trona, a mineral used in the production of sodium bicarbonate 

or baking soda, is injected into the flue gas upstream of a PM control device, such as an ESP. 

The injected material reacts with and neutralizes acid gases, such as S02, forming a dry powder 

that may be removed by the PM control 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 of dry sorbent injection requires various construction activities at the Stations, including 

storage silos, mills, and injection ports. PM emissions from each coal-fired boiler in the 

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Midwest Generation system are controlled by an ESP. Injection of Trona increases the 

particulate loading to the ESPs such that Midwest Generation must also upgrade its ESPs or 

undertake other PM control measures on a number of its EGUs. 

8. The locations and functions of ambient air quality monitoring stations operated by 

the Agency across the state are provided in Exhibit 1, an excerpt from the Agency's 40th Annual 

Air Quality Report (2010) ("2010 AQ Report"). Exhibit 1 also includes the Agency's map of the 

air quality monitoring stations with the locations of Midwest 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/20 1 0/index.html >. 

9. Each of Midwest 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 of operating and construction permits relative to air pollution control. The 

current permits are listed in Exhibit 2, including the type of permit (i.e., operating or 

construction), the date of issuance, whether the permit was appealed, and, if so, the status of the 

permit appeal. Because the CAAPP permits have been appealed and stayed, the sources 

currently operate pursuant to the authority granted in their last operating permits and, in some 

cases, construction permits issued since 2005. Some of the 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, if the Board grants the requested relief, Midwest Generation will seek 

extensions of construction permits from the Agency. The operating permits, including the 

CAAPP permits, and any appeals of those 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 if the Board is interested in them. Midwest Generation can provide copies 

of permits that have not been appealed if the Board finds them relevant and of interest. 

10. In addition to permits issued relative to air pollution control, the Agency has 

issued National Pollutant Discharge Elimination System (NPDES) permits for each Station and a 

landfill permit for bottom ash at the Joliet Station. The Army Corps of Engineers has issued 

maintenance dredging permits at the Crawford, Joliet, Powerton, and Waukegan Stations. 

11. As further discussed in the Affidavit of Douglas McFarlan, 11 which is attached 

hereto as Exhibit 3, notwithstanding the appeals and Board-issued stays of certain provisions of 

the construction permits authorizing the installation of the ACI systems to control mercury 

emissions, Midwest Generation has operated the ACI systems since their installation beginning 

in July 2008, significantly reducing mercury emission since that time. The company has 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 of 0.0080 lb mercury/GWh as of fall 2012, 

over two years before the regulations require. 

12. The Board granted Midwest Generation a variance from certain provisions of the 

CPS related solely to the Waukegan Station on August 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 of the Waukegan variance except for 

11 Citations to affidavits will be indicated as"-- Aff." and to exhibits as "Exh. __ ". 

12 Midwest Generation, LLC- Waukegan Generating Station v. Illinois Environmental Protection 

Agency, PCB 12-121. 

-17-
the condition of that variance that requires Midwest Generation to comply with the system-wide 

annual S02 emission rates at Section 225.295(b), which is the subject of this 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 of its request was the alignment of deadlines 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 of both Waukegan units for an extended period in the fall of 2014. 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 7 retrofit work as late as practicable in 2014, recognizing that it must complete the project 

by the end of 2014 to comply with the CPS rule. As Midwest Generation now begins detailed 

planning for execution of the pollution control work at Waukegan, Midwest Generation believes 

it would be both a financial hardship and physical challenge to complete the pollution control 

work on both Waukegan units simultaneously by the end of 2014. 

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 implemented by 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 of William M. Petmecky III, attached hereto as Exhibit 4. A 

$97 million interest payment on unsecured EME bonds due November 15, 2012, was not made 

-18-
by EME. The need for financial restructuring and the current market outlook for energy prices 

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 of FGD 

equipment on both Waukegan Units 7 and 8 in order to comply with the CPS. This Petition 

recognizes that Midwest Generation must meet its deadlines to comply with the CPS 

requirements by December 31, 2014, at Waukegan Unit 7, as established in the Waukegan Order, 

but requests an additional five months to complete the FGD equipment installation deadline for 

Waukegan Unit 8. 

15. Demand for emission control services is increasing. Midwest Generation's 

equipment suppliers are beginning to 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 of suppliers 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 of the CSAPR is prompting some level of demand for projects in the near term for units 

that otherwise might have been retired by 2014. 

16. Midwest Generation intends to comply with the Waukegan Order and will satisfy 

CPS control requirements for Waukegan Unit 7 by the end of 2014. Moving back that work is 

not an option due to the CPS, but accelerating it only exacerbates 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 of the benefits that it identified in the Waukegan variance 

petition, approved by the Board in August 2012, with respect to procurement of labor and 

materials, workforce planning, and project management. Midwest Generation commits not to 

-19-
operate Waukegan Unit 8 after December 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. On March 14,2006, the Agency submitted a proposed rulema.king to the Board, 

"In the Matter Of: Proposed New 35 lll. Adm. Code 225 Control of Emissions 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 of that same date. The Mercury Rule includes 

some provisions in Subpart A of Part 225 and all of Subpart B of Part 225. 

18. On May 22, 2006, the Agency submitted a proposed rulemaking 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 of Emissions 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 a joint comment in this rule making describing an 

approach for control of mercury and certain other emissions 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 a joint comment providing the regulatory language for Subpart F, including 

amendments to that language. R06-26, PC# 11. On Apri119, 2007, the Board proceeded to 

13 Clean Air Interstate Rule. 

14 Note that the Board's website docket does not include substantive, regulatory language for 

Subpart Fat PC# 9. 

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First Notice on the CAIR, including Subpart F. On June 25, 2007, Midwest Generation 

submitted comments on the First Notice CAIR, including requested revisions to Subpart F. R06-

26, PC# 14. On July 26, 2007, the Board ordered the rule to Second Notice, including Subpart F 

with minor amendments. R06-26, Board Order (July 26, 2007). These rules became effective 

August 31,2007. Subsequently, in Docket R09-10, effective June 26,2009, the Board moved 

the CPS from Subpart F of Part 225 to Subpart B of Part 225, Sections 225.291 through 225.299. 

19. Pursuant to Section 225.292, Midwest Generation opted-in to the CPS on 

December 27, 2007, identifying Joliet Units 6, 7 and 8, Powerton Units 5 and 6, Waukegan Units 

7 and 8, and Will County Units 3 and 4, among others, 15 

as EGUs to be included as part of the 

Midwest Generation CPS Group. These units currently comprise the Midwest Generation 

system that is subject to the CPS provisions from which Midwest Generation seeks relief. 

20. The CPS provisions from which Midwest Generation seeks relief are as follows: 

Section 225.295 Combined Pollutant Standard: Emissions Standards 

for NOx and S02 

b) Emissions Standards for S02. Beginning in calendar year 20 13 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 included Fisk Unit 19 and Crawford Units 7 and 8 in its initial 

identification of units 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 of 2012 and Crawford Units 7 and 8 by the end of2014 in the Waukegan Order. As ofthose 

dates, those units will no longer be considered part of the Midwest Generation CPS Group. Moreover, 

since Midwest Generation ceased operation of those units by the end of August 2012, the zero emissions 

from those units cannot be included in the calculation of Midwest 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 of the 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 of the requested variance. 

·21-
2015 

2016 

* * * 

Section 225.296 

0.28 

0.195 

Combined Pollutant Standard: Control Technology 

Requirements for NOx, S02, and PM Emissions 

a) Control Technology Requirements for NOx and S02. 

2) On or before December 31, 2014, the owner or operator must 

either permanently shut down or install 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 relief from the CPS in order to avoid 

arbitrary and unreasonable hardship. Specifically, Midwest Generation seeks relief from the 

CPS requirements that it comply with the system-wide S02 annual emissions standards of 0.28 

lb/mmBtu and 0.195 lb/mmBtu in 2015 and 2016, respectively. During each of those years, 

Midwest Generation proposes to comply with a system-wide S02 annual emission rate of 0.38 

lb/mmBtu. Additionally, Midwest Generation commits to achieving mass S02 emission levels 

no greater than 39,000 and 37,000 tons 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 ordered by the Board in the Waukegan Order, i.e., December 31,2014. 

Midwest Generation also commits to emitting no more than 57,000 tons of S02 in 2013 and to no 

more than 54,000 tons of S02 in 2014. As discussed in Fred McCluskey's Affidavit, attached 

hereto as Exhibit 5, these commitments would yield early S02 emission reductions and 

cumulative net reductions in mass S02 emissions of 3,181 tons through the end of the four-year 

-22-
(2013-2016) period. See, McCluskey Aff., Exh. 5, Table 5.1. Emissions of other pollutants 

would be significantly reduced as well during this period. Midwest Generation will comply with 

the CPS system-wide S02 annual emission rate of 0.15lb/mmBtu in 2017, as set forth in Section 

225.295(b). 16 Midwest Generation also requests that the Board grant it a variance from or an 

adjustment to Condition 1(a) in the Waukegan Order consistent with this petition for variance 

relative to the system-wide so2 emission rate. 

22. Midwest Generation also seeks relief from the requirement at Section 

225.296(a)(2) that it install and have operational FGD equipment on Waukegan Unit 8 by 

December 31, 2014, or that it permanently shut down that unit by that date. Because of its 

current financial situation, Midwest Generation needs additional time to complete installation of 

the FGD equipment 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 operate Waukegan Unit 8 

after December 31, 2014, until installation of the FGD equipment is complete. 

23. Midwest Generation essentially seeks a brief "pause" in the pace of the decline in 

system-wide S02 emission rates for 2015 and 2016 and the requirement to install FGD 

equipment on Waukegan Unit 8 by December 31, 2014. This "pause" would be accompanied by 

16 In the alternative, Midwest Generation requests that the variance period be two years and one 

month, January 1, 2015, through January 31, 2017. If the Board believes it is necessary for Midwest 

Generation to explicitly meet the rates set forth in the CPS, rather than recognizing that they are 

subsumed by the more stringent rate, Midwest Generation offers this alternative compliance strategy, set 

forth in more detail in footnote 36, below, extending the requested variance period for a month. However, 

the Board recently granted relief similar to the requested relief in this Petition in Order, Ameren Order, p. 

64 (Board conflated the requirement to comply with the 2015-2016 rate of 0.25 lblmmBtu with the final 

MPS 2017 rate of 0.23 lb/mmBtu as of January 1, 2020, the end of the variance period). 

-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 of the 2015 

compliance date because of the long lead time necessary for planning and then implementing its 

current strategy that includes installation of Trona injection systems and related upgrades to 

ESPs at two units in 2013 and 2014 while bringing its system into 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 of Trona 

will increase the PM loading to the ESPs. The collection area and efficiency of the ESPs on 

Joliet Units 7 and 8, Powerton Unit 5, 17 Waukegan Unit 8, 18 and Will County Units 3 and 4 must 

be enhanced to accommodate the increased PM loading and to maintain current operational 

levels. To improve the PM removal efficiency of the existing ESPs, Midwest Generation plans 

to increase the PM collection area, increase the height of the collection plates in the ESPs, 

increase the distance between each plate, add fields of collection plates, and make other 

improvements. Such extensive work in the ESPs requires extended outages for each unit. 

17 Powerton Unit 6 already has a larger ESP and requires only certain improvements, namely the 

addition of high frequency TR sets. TR sets are components of the ESP related to providing the electrical 

power that charges PM particles, allowing them to be collected on the ESP plates. TR sets receive input 

power and transform the power from low voltage and high current to high voltage and low current, rectify 

the alternating current (AC) output of the transformer to form direct current (DC), and provide feedback 

signals to the automatic voltage controls. High frequency TR sets provide a higher power factor 

increasing the electrical efficiency of the 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 The ESP on Waukegan Unit 7 is subject to a CPS requirement to covert from hot-side to coldside. 

-24-
Midwest Generation must coordinate each outage with PJM19 to ensure that grid reliability will 

be maintained. 

26. Required advance planning relates 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 of current financial constraints and the current challenging electricity and credit 

markets and regulatory uncertainty. In order to 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-if it can given its 

current financial constraints-with about $210 million in additional capital expenditures for S02 

controls and related PM controls by the second quarter of 2013. See McCluskey Aff., Exh. 5, lj[«J[ 

15-16. Midwest Generation must know by the beginning of April2013 whether the variance will 

be granted. 

27. Midwest Generation has taken a number of measures, including using ultra-low 

sulfur coal and opting to install Trona injection systems, the least expensive method for 

controlling S02 emissions while still accomplishing the necessary levels of reduction, in order to 

control S02 emissions and avoid having to seek this variance. Through its emission reduction 

efforts, Midwest Generation's fleet in 2011 achieved an S02 emission rate below the 2013 CPS 

rate. McCluskey Aff., Exh. 5, lj[ 14. Midwest Generation anticipates that the use of the Trona 

system at Powerton Unit 6 together with ultra-low sulfur coal throughout its coal-fired units will 

be sufficient for it to meet the CPS S02 system-wide rates in 2013 and 2014. Further emission 

control would thereafter be provided by the planned FGD at Waukegan Unit 7. However, Trona 

19 PJM Interconnection, LLC is the regional transmission system operator that must protect 

reliability of the grid and review the removal for any extended period of time of any 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 Trona injection and fuel plans were 

developed, including the impacts of reduced 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 seek this variance now. Still, Midwest Generation seeks the least 

obtrusive path it possibly can through the provisions of this requested variance and is proposing 

to maintain the original schedule for completing the 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 planned to comply with the CPS S02 emission system rates through a 

combination of firing 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 

that Trona control system plus use of ultra-low sulfur coal should provide for compliance with 

the 2013 and 2014 CPS S02 emission rates. In addition, Midwest Generation currently plans to 

install a Trona system at Waukegan Unit 7 by December 31, 2014. The Trona and related ESP 

control work at Powerton Unit 6 and Waukegan Unit 7, together with some continued 

engineering and procurement of long lead material associated with controls in 2013 and 2014 

with respect to other units, is expected to cost around $230 million or more. 

-26-
29. Trona installation at several additional units before 2015, likely including 

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 of its units. That work, together with the related necessary ESP 

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 of potential alternative compliance 

strategies to avoid the need to seek this variance. None, however, is viable. 

31. As stated in the McCluskey Affidavit, Exh. 5, <J[ 19, installation of other forms of 

dry scrubbing, which also require the installation of baghouses, would cost far more than Trona 

injection systems and would take longer to implement, at least two and a half years to design and 

install. Wet scrubbers would cost even more, take longer to install, and would not be an 

appropriate control technology for the type of coal that Midwest Generation has contracted to 

procure. Therefore, neither wet scrubbers nor an alternative form of dry scrubbing would solve 

Midwest Generation's financial challenge, nor could they be completed within the timeframe 

required by the CPS. 

32. Midwest Generation also considered the possibility of converting one or more 

units to natural gas, but such conversions are not feasible or effective for compliance with the 

CPS system-wide rates. First, such conversions would not be economically viable at any of the 

units. None of the coal-fired stations, except Crawford and Fisk, has a supply of natural gas 

sufficient for full load generation and providing such a supply would require significant 

-27-
investment. More fundamentally, Midwest Generation expects that none of these units, if 

converted, would be economically competitive with either natural gas turbines or comparable 

coal-fired boilers. As such, the units could not survive in the marketplace if they were converted 

to natural gas. Generally see McCluskey Aff., Exh. 5, 120. Second, in light of the CPS system 

definition in the CPS rules, it does not appear that any coal-fired unit converted to gas could be 

included after conversion in the CPS system-wide rate average. See Section 225.292(b) ("A 

specified EGU is a coal-fired EGU listed in Appendix A. ... " (Emphasis added.)). Thus, a 

conversion to natural gas likely would not assist with CPS system-wide rate compliance. 

33. Finally, Midwest Generation considered whether it 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 Trona injection systems. It would be possible to comply with the CPS S02 

system rates if Midwest Generation operated only those units with Trona systems installed, but 

that is because the "system" would include only those 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. In turn, at these low levels of generation, 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 relief sought in this 

Petition. 

-28-
VI. ARBITRARY AND UNREASONABLE HARDSHIP 

(§ 104.204(e)) 

34. The need for this variance arises from a combination of circumstances that were 

not foreseen, and could not have been expected to be foreseen, when the CPS was adopted in 

2007. These circumstances include significant recent deterioration in Midwest Generation's cash 

flow, driven by an unexpected and significant decline in energy prices and capacity markets, 

exacerbated by higher delivered coal costs. The impact on Midwest Generation of this decline is 

further exacerbated by the deregulated status of power generators in lllinois and the uneven 

playing field created by the imposition of stringent lllinois requirements coupled with the 

deferral of comparable federal requirements that would have helped to level the competitive 

playing field. Given its current financial condition, Midwest Generation needs to conserve cash 

in 2013 and 2014 as it works through financial restructuring, which may include Chapter 11 

reorganization. A successful restructuring should make additional funds for controls available. 

Capacity markets are low for 2012 and 2013, but they are somewhat better in 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 competitive playing field. Denying this Petition, 

which seeks additional time needed to secure financing for the controls, would create an arbitrary 

and unreasonable hardship. 

A. The Uneven Playing Field and Regulatory Uncertainty Contribute to an Arbitrary 

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 of rules 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 Air Mercury Rule ("CAMR"), provided for an emissions trading program. As discussed 

above, the federal rules that underlie the Mercury Rule were delayed or vacated,21 but the 

lllinois-specific programs remain intact. For example, the mercury reduction requirements of the 

CPS continued to apply after vacatur of the CAMR, and the NOx, S02, and PM reduction 

requirements of the CPS and Multi-Pollutant Standard ("MPS"), not necessary for compliance 

with current NAAQS or other federal 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 than requirements applicable in surrounding states.Z3 

20 See Sections 225.425(a) and 225.525(a). 

21 Although the court found the CAIR to be fatally flawed in North Carolina v. EPA, 531 F3d 896, 

(D.C. Cir. 2008), 550 F3d 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 of the Mercury Rule in its SIP for regional haze, but there was no 

direction from USEPA or any other federal requirement that the regional haze SIP be approached in this 

way. In fact, many if not most states relied on the CAIR and then the CSAPR to satisfy their regional 

haze SIP requirements. 77 Fed.Reg. 39943 (July 6, 2012) (approval of Illinois' BART SIP); 77 Fed.Reg. 

40150 (July 6, 2012) (partial approval of the Nebraska BART SIP, partial disapproval of BART SIP 

relative to certain units, and finalization of a federal implementation plan ("PIP") for BART relying on 

the Transport 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 of the 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 For example, 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 of mercury 

emissions by January 1, 2015, or compliance with a multi-pollutant option that includes a 90% mercury 

reduction by January 1, 2021. Wis. Adm. Code, Department of Natural Resources, NR 446 et seq. 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. The three largest electric 

-30-
36. In addition, lllinois has a deregulated energy market. In contrast, surrounding 

states allow generators to recover the costs of capital projects, including those related to 

environmental mandates, from a consumer base through 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 of those "additional" controls through 

a regulated rate regime and consumer rates. 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 competitive power price 

market for their revenue stream. 

37. Since the Board adopted the Mercury Rule and the CAIR, US EPA proposed and 

promulgated two major rules: the CSAPR25 and the MATS.26 The Mercury Rule was lllinois' 

program to comply with the CAMR. Additionally, as discussed in this Petition, lllinois adopted 

generating plants in Minnesota must reduce mercury emissions by 90% by 2015 and other facilities must 

reduce mercury emissions 70-90% by 2025. Minn. Stat.§ 115A.932 et seq. 

24 Midwest Generation acknowledges that it voluntarily opted-in to the CPS, knowing that it 

contained restrictions on emissions trading. Midwest Generation believed that the 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 can trade 

emissions allowances, while Illinois companies are required to surrender "excess" allowances. 

25 Proposed at 75 Fed.Reg. 4521 0 (August 2, 201 0); finalized at 76 Fed.Reg. 48208 (August 8, 

2011), effective October 7, 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 program more stringent than federally required. Subsequently, the D.C. Circuit vacated 

the CAMR and found the CAIR to be fatally flawed. 27 US EPA never implemented the CAMR 

but did implement the CAIR, which remains the operative transport rule controlling NOx and 

S02, despite its legal flaws. This creates substantial uncertainty regarding future regulatory 

requirements that apply to all coal-fired power generators. 

38. The CSAPR was adopted to replace the CAIR currently applicable to fossil fuelfired EGUs in the eastern United States in response to the court order in North Carolina v. 

EPA. 28 The CSAPR included a number of features that are significantly more stringent than the 

CAIR, including the addition of assurance provisions or variability limits that establish hard 

mass emission caps on each subject state's emissions of S02 and NOx. It presented an entirely 

different allowance allocation methodology, with permanent allowances issued by USEPA and 

no involvement of the states unless they develop SIPs in the future. The CSAPR also presents an 

entirely new S02 allowance trading program. 

39. The CSAPR was timely appealed by a number of entities at EME Homer City 

LLC v. EPA, No. 11-132 (D.C. Cir. filed August 23, 2011). On December 30,2011, the court 

stayed the effectiveness of the CSAPR and continued the implementation of the 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 at New 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 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 

USEPA replaced it with a new rule, which was the CSAPR. 

28 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 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 USEPA replaced it with a new rule, which was the CSAPR. 

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program to replace it. EME Homer City Generation, L.P. v. E.P.A., 11-1302,2012 WL 3570721 

(D.C. Cir. August 21, 2012). On or before October 5, 2012, however, USEPA and some 

appellants sought a rehearing en bane of the appellate panel's decision. The outcome of that 

proceeding remains to be seen. 

40. Assuming that the CAIR remains in place for the foreseeable future, the stepdown in statewide budgets for S02 and NOx emissions, which are passed along to the affected 

EGUs, will occur in 2015. Although compliance with the CAIR is demonstrated through the 

relinquishment of Acid Rain Program SOz allowances, Midwest Generation projects that it will 

be able to comply with the step-down with a system-wide rate of 0.38 lb/mmBtu in the CPS if 

this variance is granted. That is, the number of Acid Rain Program S02 allowances allocated to 

Midwest Generation will be sufficient, with a system-wide rate of 0.38 lb/mmBtu, without 

Midwest Generation needing to go to the market for additional allowances. 

41. The assumption that the CAIR will be the operative transport control program in 

2015 may be ambitious. It is possible that the D.C. Circuit Court of Appeals will overturn the 

recent decision in Homer City and reinstate CSAPR. It is also possible that USEPA will 

develop, promulgate, and implement the second successor to the CAIR by 2015, possibly first in 

2015. No one can predict today what that program might entail. Given this circumstance, many 

of Midwest Generation's competitors that are not subject to the lllinois-specific CPS can await 

certainty before making some of the 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 not knowing what will replace it 

creates significant uncertainty for funding pollution control work, since sources of financing 

prefer certainty rather than the risk created by regulatory uncertainty. Therefore, Midwest 

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Generation faces clear financial hardship as it continues to execute pollution control work based 

on the CPS, a hardship that it seeks to mitigate, not by undoing the CPS, but by obtaining modest 

relief to the S02 emission rate requirements for only two years and a modest extension of just 

five months to the deadline for completing retrofit work at Waukegan Unit 8. 

42. Moreover, regardless of the fate of the CAIR or the CSAPR, the lllinois Mercury 

Rule containing the CPS is a state rule that will continue to require NOx and S02 reductions 

when surrounding states are not subject to such limitations. This places Midwest Generation at a 

competitive disadvantage in the power marketplace. 

43. The MATS codifies the Maximum Achievable Control Technology (MACT) 

requirement applicable to coal- and oil-fired EGUs pursuant to Section 112 of the 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 of the subsequently developed and promulgated MATS. 

The CAMR included an emissions trading program; the MATS does not. The CAMR addressed 

emissions of only mercury; the MATS requires reductions of emissions of mercury, non-mercury 

hazardous ("HAP") metals, and hydrogen chloride ("HCl"). USEPA has established in the 

MATS the option of monitoring and controlling filterable PM emissions as a surrogate for the 

non-mercury HAP metals. Even if a source does not choose to 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 The MATS requires compliance within 

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three years, i.e., by April16, 2015, with the strong possibility that upon a certain showing, 

sources can be granted a fourth year by their states. 

44. Midwest Generation complies with the mercury emission limitations applicable 

under the illinois Mercury Rule29 and will comply, at the same time, with the less-stringent 

mercury emissions limitations in the MATS. Midwest Generation will comply with the MATS' 

filterable PM emissions limitation with its improved ESPs, improvements necessary for it to 

comply with the CPS S02 limit because the company is using injection of Trona, which increases 

PM loading, to control S02 emissions. A system-wide annual S02 emission rate of 0.38 

lb/mmBtu in 2015 and 2016 will not interfere with Midwest Generation's ability to comply with 

the MATS' HCllimit because Midwest 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. The MATS was appealed by a number of parties 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 of the appeal, make planning more 

difficult for the company and suggest the need for control plan flexibility. 

46. Midwest Generation's current operational plans are to comply with the S02 

emission rates contained in the CPS through the use of ultra-low sulfur coal and injection of the 

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 be compliant 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 of the CPS. In addition, 

however, Midwest Generation has notified the Agency that Powerton Units 5 and 6, Joliet Units 6, 7, and 

8, Will County Unit 4, and Waukegan Unit 8 will comply early with the mercury emissions limitation set 

forth at Section 225.294(c), that is, prior to the compliance date of January 1, 2015. 

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time, Midwest Generation's strategy is reasonable, yet regulatory compliance goals seem to be a 

moving target. The status of emissions transport control and the MATS continues to be 

uncertain. This regulatory uncertainty creates an uneven competitive playing field for Illinois 

sources, which, combined with the unforeseen changes in the electricity marketplace and 

Midwest Generation's financial condition, discussed in detail below, creates arbitrary and 

unreasonable hardship for Midwest Generation if it must comply with the CPS S02 rates in 2015 

and 2016 and with the FGD installation requirement for Waukegan Unit 8 by the end of 2014. A 

two-year "pause" in the CPS S02 rate, essentially a two-year slowdown in the pace 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 competitive playing field. 

B. Unrecoverable Costs of Compliance Coupled with Midwest Generation's Current 

Financial Condition Contribute to an Arbitrary and Unreasonable Hardship. 

47. As noted above, Midwest Generation has already expended considerable 

resources for CPS compliance. Its fleet of coal-fired units is equipped with controls adequate to 

comply with the CPS requirements for mercury and NOx, it has switched its fleet to ultra-low 

sulfur coal, and it has commenced Trona injection 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 ongoing basis. McFarlan Aff., Exh. 3, 'l[ 

12. Midwest Generation also currently plans to install a Trona injection system and to convert 

the ESP from a hot-side to a cold-side precipitator at Waukegan Unit 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 and Waukegan Unit 7, together with some continued engineering 

and procurement of long lead material associated with controls for some other units. McCluskey 

Aff., Exh. 5, 'l[ 17. 

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48. Additional capital expenditures in 2013 and 2014, however, in the range of $210 

million are necessary to comply with the 2015 and 2016 CPS S02 system-wide emission rates 

and the installation of FGD equipment at Waukegan Unit 8. McCluskey Aff., Exh. 5, 11 15-16. 

Without relief from the CPS 2015 and 2016 rates and the FGD installation requirement 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 in more detail in the Petmecky Affidavit, Exh. 4. These challenges relate to 

constriction of revenues, increased costs, and debt at its indirect parent, EME. 

50. On the revenue side, Midwest Generation's average realized energy prices 

(dollars per megawatt hour) have fallen every year since 2008 due to weak demand and 

unprecedented exploration and production of shale gas that have caused steep reductions in the 

price of natural gas, which energy prices track. A comparison of energy 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. Petmecky Aff, Exh. 4, 110. Because of the 

impact of lower average energy prices, 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 capacity prices 

and revenues. The so-called capacity markets essentially provide payments for contractual 

commitments by power generators to provide power when called upon to do so. Midwest 

Generation's capacity prices are set three years in advance and, as with its business in general, 

are impacted by market cycles. But even accounting for typical market cycling, the capacity 

prices and corresponding anticipated revenues will fall to strikingly low levels in 2013. Midwest 

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Generation experienced much better capacity revenues in prior years. Generally see Petmecky 

Aff., Exh. 4, 19. In 2008, 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 million in 2011. In 2012, the capacity prices 

dropped substantially and the capacity revenues are projected to reach only $97 million this year. 

Capacity prices will drop even more in 2013, when Midwest Generation expects capacity 

revenues will total only $35 million, representing a decline of more than 85%- over $230 

million- from the 2010 and 2011 revenues. Petmecky Aff., Exh. 4, 19. Fortunately, based on 

increasing capacity prices in 2014 and 2015, Midwest Generation expects capacity revenues to 

increase in 2014 to $141 million and to recover further in 2015 to $193 million. Petmecky Aff., 

Exh. 4, '][9. 

52. On the cost side, Midwest Generation has experienced a recent substantial 

increase in fuel costs. Earlier this year, a favorable long-term coal rail contract expired, and 

Midwest Generation entered into a new, higher-priced contract for the transport of low 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 have been approximately 

60% higher than during the same period in 2008. Petmecky Aff., Exh. 4, '][ 12. 

53. As a result of the constriction of revenues and increased costs, Midwest 

Generation has entered a period of negative earnings, which has dealt a significant blow to its 

ability to secure financing. Whereas Midwest Generation had a net income of $87 million during 

the first three quarters of 2011, it suffered a net loss of $63 million for that same period in 2012. 

Petmecky Aff., Exh. 4, '][ 8. Midwest Generation expects that operating losses and deficits likely 

will continue through 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-wide rates in 2015 and 2016. As of 

September 30, 2012, EME had $3.7 billion of unsecured notes outstanding, $500 million of 

which mature in June 2013. EME continues to experience operating losses, including from the 

financial results of Midwest Generation, and EME expects that it will incur further losses and 

reductions in cash flow in the current year and for some subsequent years. EME currently 

expects a continuation of these adverse trends coupled with pending debt maturities and the need 

to retrofit Midwest Generation's plants to comply with governmental regulations to exhaust its 

liquidity. Consequently, EME has been considering all options available to it, including 

potential sale of assets, restructuring, reorganization of its capital structure, and conservation of 

cash that would be applied otherwise to the payment of obligations. 

55. Based on current projections, EME does not expect to have sufficient liquidity to 

repay a $500 million debt obligation due in June 2013. EME disclosed on November 15, 2012, 

that it had elected not to make $97 million in interest payments due on certain bonds on that date. 

EME's unsecured bonds generally provide for a 30-day grace period for interest payments before 

an event of default shall be deemed to have occurred. EME's failure to pay indebtedness under 

its unsecured bonds will likely result in EME's filing for protection under Chapter 11 of the U.S. 

Bankruptcy Code, which contemplates that the party filing for bankruptcy will continue to 

operate through and after the bankruptcy process. EME and its parent, Edison International, 

continue to engage in discussions with the bondholders' financial and legal advisors regarding 

potential restructuring transactions of EME. Generally see Petmecky Aff., Exh. 4, '1I 19. 

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56. Midwest Generation had $1.323 billion of notes receivable from EME as of 

September 2012, with payments used to meet Midwest Generation's rent obligations under saleleaseback agreements with third parties for the Powerton and Joliet Stations. EME has indicated 

that it may not be able to make these payments. If Midwest Generation is unable to obtain 

financial support from EME or other sources, Midwest Generation may need to file for 

protection under Chapter 11 of the U.S. Bankruptcy Code. Petmecky Aff., Exh. 4, <J[ 14. 

57. EME and Midwest Generation have been engaged in negotiations with creditors 

concerning a potential financial restructuring. It is possible that such negotiations may lead to a 

successful restructuring prior to or in 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 effect in 2015, helping to level the playing field for lllinois generators like 

Midwest Generation. Midwest Generation does not seek relief from the 2017 CPS S02 systemwide rate. What Midwest Generation needs is time, a two-year pause to work through its 

financial constraints and operating revenue issues so that it can either borrow or otherwise 

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 of funding 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. Neither EME nor Midwest Generation has a reasonable likelihood of securing 

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financing for these additional control costs from an unrelated third party in time to comply with 

the current CPS schedule. Petmecky Aff., Exh. 4,1115, 20, 22-24. 

59. Financial conditions this challenging were not anticipated at the time the CPS was 

adopted. In order to comply with the CPS, Midwest Generation has already expended 

considerable resources to reduce emissions. Midwest Generation also plans to incur in 2013 and 

2014 additional costs related to installation of Trona injection systems at Powerton Unit 6 and 

Waukegan Unit 7, further significant CPS compliance costs. As a result of changed financial 

circumstances, however, Midwest Generation needs to defer still more control costs that would 

be required in 2013 and 2014 to achieve the CPS S02 rates 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 came before this Board for similar relief earlier 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 Bloomberg transcript, 

Exelon stated in its November 1, 2012 Q3 2012 Earnings Call that it "removed roughly $2.3 

billion of growth capital from 2012 to 2015 capital plans of Exelon Generation ... which 

meaningfully improves [its] free cash flow over the period .... [and] is a matter of better 

aligning [the company's] growth capital spend with the expected timing of the 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 of 2014, Midwest 

Generation would suffer unreasonable and arbitrary hardship. 

C. The Adverse Consequences of Denial Are Untenable and Must Be A voided. 

60. Denial of this Petition would likely have severe, adverse consequences on 

Midwest Generation, its employees, and others benefitted by Midwest Generation and its 

-41-
employees. In the event of a 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 of other CPS control projects, is suffering 

operating losses, needs to conserve what cash it has, has limited if any access to funds from other 

parties, and is attempting with EME to 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 of its 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 S02 emission rates, Midwest Generation would be forced to 

substantially curtail its generation. Generation curtailment, however, does not provide a viable 

compliance option. Absent a variance, Midwest Generation would be forced to significantly 

curtail generation from several other coal-fired units in the fleet that do not have Trona injection 

systems installed, up to 75% in 2016. Such extensive curtailments would result in substantial 

reduction in Midwest Generation's revenues at a critical time and are not sustainable. In 

addition, such curtailments may result in penalties under Midwest Generation's capacity 

contracts and may even require regulatory approval in light of grid reliability concerns. The 

level of generation curtailment required to comply with the CPS, absent this requested variance, 

would threaten the continued existence of Midwest Generation and the future viability of its 

Stations. 

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62. In summary, absent the requested variance, the future of Midwest 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-fired fleet is a vibrant part of the communities in 

which the fleet operates and an important contributor to the economics of the 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% of whom are represented by Local 15 

of the International Brotherhood of Electrical Workers. Large numbers of families 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 of the goods and services they 

purchase. In calendar year 2011, Midwest Generation provided annual payroll and benefits 

totaling $145 million; paid over $100 million for 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 in Will, Tazewell, Lake, and Cook counties. McFarlan Aff., Exh. 3, <J[ 20. 

64. Additionally, if Midwest Generation is forced to significantly curtail or even 

cease generation at some of its units, this would adversely impact state tax revenues. For 

example, Midwest Generation's purchases of sorbent will fall, depriving the state of various tax 

revenues and the Agency of revenue 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 

sorbent for its ACI systems in 2012. At a rate of 6.25%, so far in 2012, Midwest Generation has 

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

·43-
paid over $2.3 million in use tax on sorbent purchases, a portion of which is earmarked to help 

support the CAAPP at lllinois EPA. !d. 

65. The consequences of not 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 S02 emission rates beginning with an average annual rate of 0.44lb/rnrnBtu in 

calendar year 2013 and a rate of 0.41lb/rnrnBtu in calendar year 2014. See McCluskey Aff., 

Exh. 5, Table 5.1. Under the terms of the proposed variance, current CPS emission rates limits 

for 2013 and 2014 would be met, and emission rate 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 period from units legally permitted 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 of 3,181 tons of S02. 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 of the coal-fired boiler at Fisk 

Station four months earlier than required by the Waukegan Order. The last day the Fisk coalfired boiler operated was August 30, 2012. This early shutdown resulted in approximately 734 

tons less S02 emissions in 2012. McCluskey Aff., Exh. 5, !J[ 26. The Waukegan Order required 

-44-
Midwest Generation to shut down the Crawford Station by December 31,2014. However, 

Midwest Generation ceased operation of Crawford Station on August 28, 2012, which created an 

early reduction of S02 emissions of approximately 1,249 tons in 2012. McCluskey Aff., Exh. 5, 

<J[ 26. Midwest Generation is proposing to commit to no further operation of the coal-fired units 

at Crawford. 31 

68. Emissions of other pollutants would be reduced as well under this requested 

variance. As a result of the 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 C02 by approximately 16 

million tons. McCluskey Aff., Exh. 5, <J[ 26. In addition, the early cessation of operation of the 

coal-fired units at Fisk and Crawford result in an additional reduction of 461 tons of NOx, 299 

tons of PM, 3 pounds of mercury, and 904,477 tons of C02. McCluskey Aff., Exh. 5, <J[ 26. 

These reductions provide additional emission benefits from the proposed variance compliance 

plan. These additional reductions are on top of significant CPS controls that have already been 

implemented for these pollutants. 

69. The requested five-month deferral of the deadline for installing FGD equipment 

or shutting down Waukegan Unit 8 will have no adverse impact on emissions because Midwest 

Generation commits, if this variance is granted, not to operate that unit during the deferral 

period. Thus, that unit will have no emissions beginning January 1, 2015, until completion of the 

FGD installation. 

70. Pursuant to the CPS, Midwest Generation's fleet of coal-fired EGUs was among 

the first in the nation to install mercury control equipment in July 2008. Since 2007, when the 

31 The tons of S02 reduced from not operating Crawford Station in 2013 and 2014 are included in 

the proposed mass emissions levels to which Midwest Generation commits for those years. 

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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 of the CPS. Moreover, Midwest 

Generation can now meet the 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 output limitation of the 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 of criteria pollutants and C02 significantly fleet-wide since 2000: 

a. Midwest Generation has installed SNCRs to control NOx emissions on 

most of its CPS Group units listed in Appendix A of Part 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 of 20% from 2000 level of 6,552 tons. 

32 Midwest Generation has annualized emissions from January through September, 2012 

to obtain the emission levels in 2012 set forth in this portion of the Petition. 

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c. Emissions of COz have been reduced to approximately 26.9 million tons 

system-wide in 2012, a 16% reduction from 2000 levels of 31.9 million tons not required 

by any applicable law or regulation. 

d. Emissions of S02 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 interim rate 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 some reduction in the system-wide annual S02 emission rate in 2015 and 2016, though 

not to the extent currently required by the CPS. Midwest Generation can achieve this proposed 

stepped-down interim emission rate through the use of ultra-low sulfur coal and the planned 

control upgrades at Powerton Unit 6 and Waukegan Unit 7. Further, any suggestion of net 

environmental harm that might result if the Board grants the requested variance would be 

groundless in light of Midwest Generation's commitment to ensure that mass S02 emission 

levels would not exceed the levels proposed herein. 

73. System-wide reductions in mercury will not be negatively 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 of mercury. 

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74. PM emissions are already controlled by the existing ESPs on the EGUs. 

Therefore, PM emissions will not increase as a result of the requested variance. The 

improvements to the ESPs that will be delayed if this variance request is granted are to 

accommodate increased PM loading due to the injection of Trona to control S02 emissions. The 

improvements to the ESPs would allow Midwest Generation to maintain current operational 

levels with the increased PM loading. Until Trona is injected at a unit, the ESP improvement 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 contribute to the formation of Acid Rain and fine particulate 

matter. Midwest Generation complies with the Acid Rain permits issued for each Station. 

Emissions of fine particulate matter are currently regulated by the CAIR. Acid Rain can 

contribute to eutrophication of water bodies located far downwind of a source of S02• 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 of the variance, if granted. 

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 impact element by committing to meet 

S02 emission levels of 57,000 tons 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 of about 3,181 tons over a four-year period 

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(2013-2016). See McCluskey Aff., Exh. 5, Table 5.1. During the pendency of the variance, if 

granted, Midwest Generation will continue to inject powdered activated carbon to control 

mercury emissions at each EGU in its system. It will 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 of mercury, NOx, C02, 

and PM during that period, as noted above. 

77. Given all of these factors, the hardship to Midwest Generation clearly outweighs 

any potential impact to human health or the environment. Indeed, the compliance program that 

Midwest Generation proposes during the pendency of the variance will result in a net benefit 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) of the 

Act and Board precedent in variance proceedings. Denial of the variance would force additional 

major expenditures that may be impossible to fund or substantial curtailments that would 

threaten the survival of Midwest 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 of workers and their families and would drain hundreds of 

millions of dollars from the economy. 

78. Cross-media impacts are not an issue in this matter. The level of S02 emissions 

in 2015 and 2016 should have no significant impact on water quality. 

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VIIT. CONSISTENCY WITH FEDERAL LAW 

(§§ 104.204(1) and 104.208(a)) 

79. The Board may grant this requested variance consistent with federal law. 

Granting the variance has no impact on Section llO(a) of the Clean Air Act and 40 CFR Part 51. 

Specifically, Section 110(a)(2)(D) of the Clean Air Act is addressed through the CAIR and 

perhaps a successor if USEP A is able to develop, promulgate, and successfully implement an 

emissions transport control rule by 2015 or 2016, the years of the requested variance. Midwest 

Generation complies with the CAIR and will continue to do so as long as it is applicable. 

Second, on June 24, 2011, the Agency submitted portions of the 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 of Technical Support Document for Best Available 

Retrofit Technology Under the Regional Haze 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 of illinois' SIP, including those portions of the 

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 of the Board regarding consistency with federal 

law, Midwest Generation points out several factors. First, compliance with the limit reflecting 

BART is due as expeditiously as possible but no later than five years after SIP approval, or, in 

Illinois' case, mid-2017, approximately six months after the end of the requested variance period. 

33 Exhibit 6 consists of the cover letter, the Technical Support Document (''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 of the entire TSD or the entire 

collection of documents included in the SIP submittal if the Board requires. 

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42 U.S.C. § 7491(g)(4)(e)(l)(iv). Midwest Generation will comply with the CPS 2017 systemwide annual S02limit of0.15lb/mmBtu. 

81. Second, the BART/Regional Haze SlP is concerned with the S02 emission rate. 

lllinois EPA demonstrated that the system-wide average S02 emission rates included in the CPS 

provide greater reductions than applying the presumptive BART rate to only BART-eligible 

units by applying the rates to average heat input, and USEPA accepted this analysis. See 77 

Fed.Reg. at 3973; 77 Fed.Reg. at 39946. The slight increase in emissions attributable to a rate of 

0.38 lb/mmBtu still leaves Dlinois compliant with presumptive BART levels. See Exh. 9.34 

Additionally, the shutdowns of Fisk and Crawford in 2012 would reduce mass emissions of S02 

and NOx to levels below those included in lllinois' BART submittal that demonstrated that the 

system-wide CPS rates produced greater reduction than applying the BART presumptive rates to 

only the BART-eligible units, as illustrated by Exhibit 9. Therefore, there would be no negative 

impact on the Agency's BART calculations regarding emissions levels. 

82. The only issue could be a discrepancy in the interim rates prior to the BART 

compliance date. As part of its 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 if the Board grants the variance, 

USEPA would approve an amendment to the BART SlP to reflect the change in emission rate. 

Midwest Generation notes that the mass emissions levels that it proposes here as part of its 

34 Exhibit 9 consists of Table 4.7 from the BART TSD, Exhibit 6, with the addition of Midwest 

Generation's analysis of an S02 emission rate of 0.38 in 2015. Midwest Generation used the same heat 

input data that the Agency used in creating the table, presented in column 3 ofTSD Table 4.7. The 

reductions in 2015 resulting from a rate of 0.38 are less than if Midwest Generation were to meet the 0.28 

rate, obviously, but they are still greater than the presumptive BART reductions. Additionally, the 

reductions that can be expected for 2017, the compliance year, and 2019, the final year of the CPS stepdowns in S02 emission rates, are significantly greater than the Agency anticipated when it developed the 

BART SIP because of Midwest Generation's actions to reduce emissions. 

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compliance plan should not be part of the amendment to the BART SIP, as BART is 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 of 0.28 

lb/mmBtu in 2014 and 0.195lb/mmBtu in 2015, as set forth in Section 

225.295(b ). 

Midwest Generation shall not be subject to 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 compliance plan as a condition of the 

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 of S02 

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 of S02 to 

35 The "system" for purposes of this compliance plan table is comprised of the 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. 

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Date Activity 

no more than 54,000 tons. 

January 1, 2015, and Midwest Generation will not operate Waukegan Unit 8 

thereafter until completion of 

installation of FGD 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 completed the installation of and 

have operational FGD equipment 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 of 0.38lb/mrnBtu. 

January !-December 31, 2015 Midwest Generation will limit its system-wide mass emissions 

of so2 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 

of so2 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 Beginning January 1, 2017, Midwest Generation will comply 

with the rate set forth in Section 225.295(b) for 2017 of 0.15 

lb/mmBtu.36 

Continuously during the a. Midwest Generation will comply with the CAIR. 

pendency of the variance 

b. Midwest Generation will comply with the Acid Rain 

Program at 40 CFR § 72. 

36 In the alternative, if the Board believes that the emission rates for 2015 and 2016 that are set 

forth in Section 225.295(b) must be in effect for some time period, Midwest Generation will comply with 

a system-wide annual S02 emission rate of0.38lb/mmBtu in 2015 and 2016, a rate of0.281b/mmBtu 

from January I through January 15, 2017, a rate of 0.195lblmmBtu from January 16 through January 31, 

2017, and will comply with a system-wide annual rate of 0.15 lb/mmBtu from February I through 

December 31, 2017. Midwest Generation may demonstrate compliance with these requirements, however, 

through a rate of 0.15 lb/mmBtu for the period of January I through December 31, 2017. 

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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 of the 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 of compliance were also determined to be both 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 of compliance 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 capacity markets due to weak demand and the impact of shale gas on energy prices has 

-54-
driven down Midwest Generation revenues while its costs have substantially increased. The 

impact of Midwest 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 by the significant debts, including 

to Midwest Generation, of its indirect parent corporation, EME, upon which Midwest 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 of impact to the environment 

from the requested relief from the CPS S02 emission rates and the deadline for installing FGD 

equipment at Waukegan Unit 8, a variance is warranted. This brief"pause" in the pace ofS02 

emission rate reductions and the installation requirement at Waukegan Unit 8 would 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 

commitments to meeting mass S02levels in 2013 through 2016 results in a net reduction in 

anticipated S02 emissions over that period (based on average 2008-2011 heat input) and a 

reduction in other pollutants, providing a net environmental benefit. 

-55-
WHEREFORE, for the reasons set forth above, MIDWEST GENERATION, LLC 

requests that the 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 or permanently 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," 40th Annual Air Quality Report (20 1 0), Plus a Map Depicting the 

Locations of Midwest 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 of Douglas McFarlan, President, Midwest Generation, LLC, and 

Vice-President, Public Affairs, Edison Mission Group 

4 Affidavit of William M. "Tres" Petmecky, Vice-President and Treasurer, 

Edison Mission Energy 

5 Affidavit of Fred 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 of the Illinois BART SIP (77 Fed.Reg. 3966 (Jan. 

26, 2012)) 

8 Final Federal Approval of the 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