# STATE OF CONNECTICUT DEPARTMENT OF ENVIRONMENTAL PROTECTION

STATE OF CONNECTICUT AND PSEG POWER CONNECTICUT LLC TRADING AGREEMENT AND ORDER NO. 8241 MODIFICATION NO.2
TRADING AGREEMENT AND ORDER MODIFICATION Whereas, the CommissionerofEnvironmental Protection ("Commissioner") and PSEG Power Connecticut LLC (PSEG) having agreed to the terms and conditions set forth in Trading Agreement and Order 8241 issued on February 13,2003 and Trading Agreement and Order 8241 Modification 1 issued September 16, 2004, do now, by mutual agreement, modify said Trading Agreement and OrderNo. 8241 as follows: 1. Delete the date May 1,2005 and substitute therefore the date May 1, 2009 in paragraphs A.5., A.7., A.8., C1., C.1.b., C.2., C.6 footnote 3., and C.7
.. 2. Delete paragraph C.7.a. and substitute the following therefore: At all times: Before the first day ofeach month, PSEG calculate projected worst case DERCs required for that calendarmonth as follows: Estimated DERCs (tons)

## ={[estimated worst case NOx emission rate in IbsIMMBtu

- «0.95) x (NOx allowable emission limit orproportioned emission rate calculated pursuant to Section 22a-174- 22(f)(2)(A) ofthe Regulations in IbslMMBtu))] x (Estimated fuel use in MMBtu)} ": 2000 pounds/tons. No laterthan the twentieth day ofeach month, PSEG shall calculate and permanently retire DERCs used in the preceding calendarmonth, as follows: (i) Forthe boileron each day, determine whether the 24-hour average NOx emission rate* is less than the baseline emission rate or greaterthan the NOx allowable emission limit. (ii) When the boilerhas a daily NOx emission rate (24-hour average) exceeding the NOx allowable emission limit, calculate the amount ofDERCs used, as follows:

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# ..- PSEG Power ConnecticutLLC 2 Trading Agreement and OrderNo. S241 Modification 2.
Actual DERCs (tons) = {[(CEM-recordedNOx daily average emission rate in IbslMMBtu*)

- «0.95) x (NOx allowable emission limit or proportioned emission rate calculated pursuantto Section 22a174-22(f)(2)(A) ofthe Regulations in IbslMMBtu))) x (actual fuel use in MMBtu)} "'" 2000 pounds/tons. *This rate shall be calculatedpursuant to the methodology described in 40 CPR Part75. During the non-ozone season: During the period from October 1 through April 30, inclusive, each year until May 1,2009, the boiler shall, in addition to meeting the 24-houremission limitin Table 22-1 ofSection 22a-174-22 ofthe Regulations, meet anon-ozone season emission limit ofO.15IbslMMBtu. Priorto October 1, 2006, 2007, and 200S, PSEG shall estimate and acquire the amount ofDERCs or allowances required for such nonozone season needed to comply with Section 22a-174-22(e)(3) ofthe Regulations as follows: Estimated DERCs (tons) = [Estimated fuel use in MMBtu from October 1 through April 30 x (lower ofthe estimated seasonal average NOx emission rate orthe proportioned 24-hour allowable emission limitin IbslMMBtu during October 1 through April 30)

- (0.95 x 0.15 IbslMMBtu)) -;- 2000 pounds/ton. No laterthan May 31, 2007, 200S and 2009, in addition to the DERCs retired in paragraph C.7.a., calculate and permanently retire DERCs used in the preceding nonozone season as follows: Actual DERCs (tons) = [Actual fuel use in MMBtu from October 1 through April 30 x (lower ofthe actual seasonal average NOx emission rate orthe proportioned 24-hour allowable emission limitin IbslMMBtu during October 1 through April 30)

- (0.95 x 0.15 IbslMMBtu))-;- 2000 pounds/ton.
3. Delete paragraph e.S. and substitute the following therefore: DERC Shortfall. At a minimum, DERCs required shall be adjusted upwards by 100% if DERCs are not in PSEG's possession for use priorto the first day ofeach month or applicable season. However, nothing in this Trading Agreement and Order shall affectPSEG Power ConnecticutLLC 3 Trading Agreement and OrderNo. 8241 Modification 2.
the Commissioner's authority to institute any proceeding ortake any other action to require additional upward adjustment, based on the gravity ofany alleged noncompliance or violation oflaw. PSEG shall permanently retire the quantity ofDERCs equivalentto the excess emissions plus a 100% premium within sixty (60) days ofPSEG's discovery of the DERC shortfall. PSEG shall certify and report any such DERC retirement to the Commissionerin accordance with paragraph C.28. ofthis Trading Agreement and Order.
4. Delete paragraph C.12 and substitute the following therfor: Annual Emission Statement and Non-Ozone Season Emission Statement. No laterthan March 1 for the previous calendar year and July 30 (for the Octoberthrough April time period only starting in 2003) ofevery year after issuance ofthis Trading Agreement and Order, PSEG shall provide to the Commissioner, a record ofeach sale or othertransfer, and use ofany and all ofthe DERCs approved within and subsequentto issuance ofthis Trading Agreement and Orderuntil all such DERCs have been used or are no longerin PSEG's possession. PSEG shall also include actual NOx emissions from the boiler and the amount ofall DERCs used (including serial numbers (ifassigned) and approved DERCs generated and/or purchased from otherfacilities), generated and/or approved for the previous calendaryear and Octoberthrough April time period. These reports shall be on a form prescribedby the Commissioner and shall be in monthly increments, and by ozone and non-ozone seasons.
5. Delete the word "individual" and substitute therefore the word "section" in paragraph C.28
.. 6. Delete the name "Wendy Jacobs" in paragraph C.29
.. 7. Include anew paragraph C.30. as follows: Extension. No laterthan May 1,2009, with respect to the boiler, PSEG shall comply with the requirements ofSections 22a-174-22(d)(I) and 22a-174-22(d)(2)(A) ofthe Regulations and amendments thereto. There is no assurance that the Commissioner will grant a written extension ofthis Trading Agreement and Order.

# ., PSEG PowerConnecticutLLC 4 Trading Agreement and OrderNo. 8241 Modification 2.
8. Include anew paragraph C.31. as follows: Future Compliance Report. On orbefore September 1, 2008, PSEG shall submit areport in writing to the Commissioner, as directed in paragraph C.29. ofthis Trading Agreement and Order, indicating how the facility shall comply with section 22a-I74-22 ofthe Regulations with respect to the boileron and afterMay 1,2009. All otherterms and conditions ofTrading Agreement and OrderNo. 8241 issued by the Commissioner acting under Chapter446c, Sections 22a-6, 22a-I7I, 22a-I74, 22a-I76, and 22a-I77 ofthe Connecticut General Statutes shall remain in effect.
PSEG hereby consents to the entry ofthis modification to the Trading Agreement and Order without further notice.

## PSEGPOW~~ SIgnature:
. Name: Robert T" Parnell Title: Director of Asset Operations Date: August 2. 2006
Issued as a modification ofan Order ofthe CommissionerofEnvironmental Protection

# ~/~ Commissioner
CITY OF NEW HAVEN LAND RECORDS MAILED CERTIFIED MAIL, RETURN RECEIPT REQUESTED , 1 Date

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