## ~y-p 

# STATE OF CONNECTICUT Exhibit3 

## DEPARTMENT OF ENVIRONMENTAL PROTECTION

In the matter of The State of Connecticut and 

### the Connecticut Resources Recovery Authority )) J J ) ) ) 

# I Trading Agreement and Order No. 1494A

Whereas, the Commissioner of Environmental Protection ("Commissioner") and 

### the Connecticut Resources Recovery Authorit¥ ("CRRA"l agree that it 

### is 

### in the public interest that they work**cooperat~vely** 

### to 1mprove 

### the air quality with1n the State of Connecticut and that the use of discrete emission reduction credit (MDERC") trading to reduce nitrogen oxide ("NOx") emissions 

### will achieve this result in a t1mely and cost-effective manner:

A. At the request and with the agreement of**CRR~,** 

### the Commissioner finds 

### the following: 1.**CEL~** 

### is a public instrumentality**~~d** 

### political subdivision of the State of Connecticut establ1shed to provide solid waste management services to Connecticut's municioalities. On April 30, 2001 CRRA. will acquire from**The~Connecticut** 

### Light and Power C9mpany, and then own and operate the nine (9) oieces of fuel-burn1ng equioment identified in Table 1 of this**~rading** 

### Agreement and Order. Eight (8) pieces of the fuel burning equipment are combustion turbines**(~peaking** 

### units·) and one (1) plece of the fuel burning equipment 1S an auxiliary boiler**(~boiler·).** 

### The oeaking un1ts and the boiler are located at Reserve-Maxim Roaas. Hartford, Connecticut**(~facility~).** 

### 2. Pursuant to Subsection (b) of Section 22a-174-22 of the Regulations of Connecticut State Agencies ("Regulations"), each of the peaking units and the boiler identified in Table 1 of this Trading Agreement and Order are subject to Subsections (d) through (k) of Section 22a-174-22 of the Regulations, pertaining to the control of NOx emissions. 3. Results of the official u.S. Environmental Protection Agency (-EPA") Reference Method 7S stack testing oerformed for the eight peaking units and one boiler are provided in Table 1 of th1S Trading Agreement and Order:

Initials 

## AlA.) (Prinlcll un 

### IfJy '1:IcJ Paper) 7') El'n Street· Hartfllrll, CT**06106·SI~7** hltp:IIJep,slalc**,Cl,u~** till E"""I Oppnr"","r,I' t:t11I"III'C'r f'JC'bran'nt CflllnC'rticul CfllJS11J1Ruaurct MIJIIQgtmtlll: 1980-lIJOO 

# l A ../\....../'\...**~'-~~'-~'-** Date

### Connec ic ecovery eso rces uthority radi g gree e and Order o. 1 9

Table I MeT LIMITS CRRA

- NOx EMISSION RATES (lbs/MMBtu) F".Jel FUEL FLER NOx**p_~c_** Stack Stack Test Date of B ming (lbs/MMBtu) Rate Test Rate Stack EquipmentI (lbs/ tu) Rate (IDs/MMBtu) Test Registr

- (ppmvd) tion No. South 185.3 0.7 10/04/96 Meadow 1lA Other R260 oil 0.81 0.289 South 187.2 0.71 10/04/96 Meadow 118 Other R261 Oil 0.81 0.289 So h 75.7 0.67 0/02196 Meadow 12 OtJ:ler R262 0 0.8_ 0.289 Sou h 59._ 0.61 0/02/96

eadow 128 Other R263 Oil 0.81 0.289 South 201. 9 0.79 05/15/96 Meadow 

### 13A Other R264 Oil 0.81 0.289 So th 193.5 0.76 05/15/96 Meadow 38 

### a 

# hrr R265 Oi 0.81 0.289 So h 180._ 0.69 0/1 /96

eadow 4.A at er R266 Oil 0.81 0.289 South 179.5 0.69 10/11/96 Meadow 14B Other R267 Oil 0.81 0.289**AW<ll~ary** Boiler A 0.285 12/7/99

o. 9 Res

.

# Fl ua R275 Oi 

## o. a 0.25

The emiss'on rates for eac of the peak'ng . s and the boiler identi 'ed in Table 1 0 t is Tradi g gree ent and Order are i excess of Section 22a-17_-22, Tab e 22-1, of the Regu_at'ons, 

### NOx Reasonably Available Control Technology**("~~CTn)** emission rate limits. 5. Pursuant to the"Department of Environmental Protection ( "Department") 's "Credi

### t Trading for Sources 

### with Irregular NOx Emissions" policy, revised on February 27, 2001, attached hereto and incorporated by reference into t 

### is rading Agree ent and Order as Ex

. it 1, eac peaking

. as oeak daily Ox emissio.s greater than three ti es the average daily emiss'o 5 d 

### ri the ozo 

### e season and 's t erefore considered a so 

### rce

"t**~rre** lar Ox emissio s.

Initials

## TZ..b~ -2- Date

### Connecticut Resources Recovery Authority Trading Agreement and Order No. 1494A

6.

8. 

### 7.



### B.



## c. Based on Department approved stack test data, it has been determined that each of the peaking units' and the boiler's emissions will not meet the applicable requirements of RACT contained in Section 22a-l74-22 of the Regulations.**C~~** proposes to use Full Load Emission Rates (·FLERs·) identified in Table 1 of this**Tradin~** Agreement and Order for the ourposes of calculating DERCs requ1red.

- On and after the date that CRRA acquires each peaking unit and the boiler identified in Table 1 of this Trading Agreement and Order. pursuant to Subsection (j) of Section 22a-174-22 of the Regulat10ns, CRRA will**~cquire** sufficient approved ozone and non-ozone season DERCs 1n order to meet appl1cable RACT requirements and the requirements of this Trading Agreement and Order for the following month's operation. CRRA intends to continue acquiring approved DERCs as needed. Approved DERCs are'defined for the purpose of this Trading Agreement and Order as those for**wh~ch** the Commissioner has provided written authorization for use in compliance with Section 22a-174-22 of the Regulations. The Commissioner, in accordance with the orovisions of this Trading Agreement and Order, pursuant to Subdivision (3) of Subsection (d) of Section 22a-l74-22 of the Regulations, hereby allows CRRA to comply with Section 22a-174-22 of.the Regulations through use of DERC trading referenced in Section A, herein. to achieve the nitrogen oxide emission reduction required by Subdivision (ll of Subsection (d) of Section 22a-174-22 or the Regulations. With the agreement of**C~~,** the Commissioner, acting under Connecticut General Statutes Sections 22a-6, 22a-171, 22a-174, 22a176. and 22a-177, orders CRRA as follows: 1. The terms and conditions established by this Trading Agreement and Order shall become effective on the date**C~~** purchases each of. the**pe~king** units and the boiler**identifie~** in**T~le** 1 of th1s Trad1ng Agreement and Order, and when th1s Trad1ng

. Agreement and Order has been issued.
2.

J.



### 4.

5. On and after the date which CRRA acquires each of the peaking units and the boiler identified in Table 1 of this Trading Agreement and Order, CRRA shall comply during operation of each peaking unit and boiler with the FLERs shown in Table 1 of this Trading Agreement and Order. On and after the date which CRRA acauires each of the oeaking units and the boiler identified in Table 1 of this Traaing Agreement and Order, CRRA shall have in its possession .sufficient approved DERCs**~o** meet.applicable RACT**requir~~ents** and the requ1rements of th1S Trad1ng Agreement and Order. On and after the date which CRRA acquires each of the peaking units and the boiler identified in Table 1 of this Trading Agreement and Order CRRA shall document and record the amounts or all fuel used by each peaking unit and boiler each day and the number of DERCs used for the ozone season (from May 1 through September 30 of each year) and non-ozone season (the remainder of the year)

. Approved DERCs shall be acquired on and after the date which CRRA**ac~ires** each of the peaking units and the boiler. until all of the peaking units and boiler emissions achieve permanent comoliance with the emission standards in Subsection (e) of Section 22a-174-22 of the Regulations or until May 1, 2003,


### -3- Date 

# vb

# do(

### Connecticut Resources Recovery Authority Trading Agreement and Order No. 1494A**whicheve~** occurs first.**C~~** shall acquire approved DERCs, and document and record the**amo~'ts** of NOx emissions and DERCs used b¥ each peaking unit and the boiler each month in accordance**w~th** the appropriate emission rates and limits in Table 1 of this Trading Agreement and Order, and shall maintain and submit such records to the Commissioner in accordance with the following and Secci?n 22a-174-4 of the Regulations:

a. DERCs required (1)**fo~** the peakin

# aunits Have in its possession**suff~c~ent** approve CERCs for the current day, based on the following calculations (described also in Exhibit 1) i At all times (mass calculation): DERCs (in tons) 

# = (((FLER in lbs/MMBtu)

- (0.95 x NOx RACT in Ibs/MMBtu» x (actual fuel use in Ibs/MMBtul 

### 1 + 2000 pounds/ton During the ozone season only (peak day calculation): the maximum actual excess NOx emissions (in lbs) on any of the days pro}ected by the Commissioner to be -moderate to unhealchful. -unhealchful.· or "very unhealthful,· divided by 

### 3 and then divided by 

### 13 (wiCh the result in cons): CERCs -(in cons) 

# = [(Maximum excess NOx in lbs) + 

### 3] [13 lbs/day/tonJ i As described in Exhibit 1 of this Trading Agreement and Order, to the extent that DERCs used to offset on a peak day basis during the ozone season exceed the total mass excess emissions, remaining DERCs may be used in the nonozone season in the same or subsequent years**~~til** May I, 2003; 

### (2) For the boiler (i) Before the first day of each month, calculate the projected (estimated) worst case DERCs required for the same calendar month as follows: DERCs (tons) estimated 

# = {((FLER in Ibs/MMBtu for the boiler)

- (0.95) x (NOx RACT limit in lbs/MMBtu)] x (estimated fuel use in MMBtu)} + 2000 pounds. CRRA shall acquire sufficient approved DERCs no later than the first of each month to assure compliance for, at a minimum. that calendar month. Excess DERCs from orevious calendar months can be applied to subsequent months. (ii) No later than the twentieth day of each month, calculate the actual DERCs used in the preceding calendar month, as follows: DERCs (tons) actual 

# = {rFLER in lbs/MMBtu for the boiler

- ((0.95) x (NOx RACT**lim~t** in Ibs/MMBtu)] x (actual fuel use in MMBtu)} + 2000 pounds. b. Adjust upwards by 100% the DERCs required 

### if DERCs are not in CRRA's possession prior to use. However, nothing in this**Trad~ng** Agreement and Order shall affect the Commissioner'S authoritv to institute any oroceeding or take any other action to require additional upward adjustment, based on the gravity of any alleged noncompliance or violation of law;

Initials 

### -4- Date 

# if

# (-zZ((i(

### Connecticut Resources Recovery Authority Trading Agreement 

### and Order No. 1494A

c.

d.



### e.

f.



### g. Make and keep records of daily fuel use, excess NOx emissions and, for the Deaking units during the ozone season, the ozone**classlficat~on** 

### as forecasted by the Commissioner on the previous day; No later than March 1, 2002, 2003 and 2004( include with its annual emissions report to the**Commiss~oner,** 

### DERCs used (calculated as described in paragraphs C.S.a. and C.S.b. of this Trading Agreement and Order), by ozone and non-ozore seasons, for the previous calendar year; Keep records and supporting documentation as described in this section for a**m~nimum** 

### of five years, commencing on the date such records are created; Keep documentation to demonstrate that DERCs used during the ozone season were generated during the ozone season. The ozone season is £rom May 1 through September 30 in any calendar year. Generator**certificat~on** 

### of this fact shall be**suffic~ent;** 

### and Submit the records specified above to the Commissioner within thirty (30) days of receipt of a written request from the Commissioner. 6. Pursuant to Subdivision (3) of Subsection (d) of Section 22a174-22 of the Regulations I 

### CRRA may use NOx allowances, pursuant to Subsection (j) of**Sect~on** 

### 22a-174-22 of the Regulations to achieve all or a portion of the reductions for the peaking units required by Section**22a-174~22** 

### of the Regulations. Any allowance used for compliance with Subsection (e) of Section 22a-174-22 of the Regulations for the peaking units shall be subject to all**restr~ctions** 

### and/or requirements applicable to DERCs contained in this Trading Agreement and Order. 7. No later than May 1, 2003, CRRA shall comply with the requirements of Subdivision (1) of**Subsect~on** 

### (d) of Section 22a-174-22 of the Regulations. However, after full program review of this and other Trading Agreements and Orders and, if determined to be appropriate, the Commissioner may grant a written extension of this Trading Agreement and Order. 8. The FLERs may be adjusted.upon satisfactory demonstration to the Department and written approval by the Gommissioner. 9. Noncompliance with an established FLER shall subject CRRA to make restitution by matching the quantity of emissions ("true**up~)** 

### caused by the exceedance plus a 100% premium. The true up in tons of DERCs shall be equal to the FLER exceedance in Lbs/MMBtu, multiplied by the total heat input during the period of noncompliance divided by 2000 lbs/ton. If the period of noncompliance is not known, the time period from the completion of the last/previous Department witnessed stack test through the**date.th~** 

### FLER comDliance is achieved as**a~proyed** 

### by the

.**Comm1ss~oner** 

### shall be used. However,**noth~ng·~n th~s** **Trad~ng** 

### Agreement and Order shall affect the Commissioner'S authority to institute any proceeding or take any other action to require additional upward adjustment, based on the gravity of any alleged noncompliance or violation of law. 10. Pursuant to Subsection (k) of Section 22a-174-22 of the Regulations, CRRA shall conduct NOx emission tests of the peaking units and boiler at least once every five years commencing from the date identified in Table 1 of this Trading Agreement and Order.



### Initials 

# TlG"W -5- Date 

# '1

# Infer

### Connecticut Resources Recovery Authority Trading Agreement 

### and Order No. l494A
11.

12.



### 13.

14.

15. 

### Each allowance used for comoliance with Section 22a-l74-22 of the Regulations for the peaKing units shall be equivalent to one DERC and shall be deducted from CRRA's NOx Budget Program comoliance account upon such use. Allowances shall be considered used for comoliance with Section 22a-l74-22 of the Regulations for the peaking units when they are transferred from the facility's**c9mpl~ance** 

### account or overdraft account to a State of**Connect~cut** 

### NOx allowance**ret~rement** 

### account. AporQya+s. CRRA shall use best efforts to submit to the**Comm~ss~oner** 

### all documents required by this Trading Agreement and Order in a complete and approvable form. If the Commissioner**notif~es** 

### CRRA that any document or other action is deficient I 

### and does not approve it with conditions or**modificat~ons,** 

### it is deemed disapproved, and CRRA shall correct the**deficienc~es** 

### and resubmit it within the time specified by the Commissioner or, if no time is specified by the Commissioner, within 30 days of the Commissioner'S notice of deficiencies. In approving any document or other action under this Trading Agreement and Order, the Commissioner may approve the document or other action as submitted or performed or with such conditions or modifications as the Commissioner deems necessary to carry out the purposes or this Trading Agreement and Order. Nothing in this paragraph shall excuse noncompliance or delay.**Defin~ti9ns.** 

### As used in this Trading Agreement and Order,**-Comm1ss~oner·** 

### means the Commissioner or a representative of the Commissioner;. ·Other oil- means a fuel that is liquid at sta..."dard condi.tions and is not residual oil; ·Residual oil- means any fuel oil of No.4, No.5, or No.6 grades, as defined by Commercial Standard C.S. 12-48; -Ozone season- means the period from May 1 through September 30 in**a-~y** 

### given calendar year. The date of -issuance- of this Trading Agreement and Order 

### is the date the Trading**Agreemen~** 

### and Order is deposited in the U.S. mail or personally delivered, whichever is earlier.**~ates.** 

### The date of submission to the Commissioner of any

ocument required by this Trading Agreement and Order shall be the date such document is received by the Commissioner. The date of any notice by the Commissioner under this Trading Agreement and Order, including but not limited to notice of approval or disapproval of any document or other action, shall be the date such notice is deoosited in the U.S. mail or is personally delivered, whichever is earlier. Except as otherwise specified in this Trading Agreement and Order, the word "day· as used in this Trading Agreement and Order means calendar day. Any document or**act~on** 

### which is required by this Trading Agreement and Order to be submitted or performed by a date which falls on a Saturday, Sunday or a Connecticut or federal holiday shall be submitted or performed by the next day which 

### is not a Saturday, Sunday or Connecticut or federal ho12day.**~r~if~cation** 

### of**d9cumen~~.** 

### Any document, including but not**~m~te** 

### to any not2ce t w**~ch** 

### is required to be submitted to the Commissioner under**th~s** 

### Trading Agreement and Order shall be signed by CRRA or, if CRRA is not an individual. by CRRA's chief executive officer or a duly authorized**reoresentat~ve** 

### of such officer, as those terms are defined in**§2~a-430-3** 

### (bl (2) of the**Re~lat~ons** 

### of Connecticut State Agencies, and by the individual(sl resoonsible for actuallx preparing such document, and CRRA or CRRA'S chief executive ofricer and each such individual shall certify in writing as follows: -I have personally**exa~ined** 

### and am**fa~iliar** 

### with the information submitted in this document and all**attacr~ents** 

### thereto, and I certify, based on reasonable investigation, including my inquiry of those individuals responsible for obtaining the**informat~on,** 

### that the submitted information is true, accurate and complete to the best of my knowledge and belief. I understand that any false statement made in the submitted information is punishable as a criminal offense under §53a-l57b of the Connecticut General


### Initials

# RC;-(j -6- Date

# ~(]r

### Connecticut Resources Recovery Authority Trading Agreement and Order No. 1494A

16.

17.

18.



### 19.

20.

21.

22.

23.

24.

25. Statutes and any ocher applicable law."**N~nc~mp~ian~e.** This Trading Agreement and Order is a final order o**t~omm~ssioner** with resoect to the matters addressed herein, and is nonappealable-and immediately enforceable. Failure to comply**w~th** this Trading Agreement and Order may subject CRRA to an injunction and penalties. FesSe stAtements. Any false statement in any information s**m~tted** pursuant to this Trading Agreement a.."1d Order 

### is punishable as a criminal offense under §53a-157b of the Connecticut General Statutes and any other applicable law.**Noti~~ ~f** **tr~nsser; li~ility**  of CRRA. Until CRRA has fully comp**~e w~t**  t**~s** Tra**~ng** Agreement and Order,**C~~** shall**not~fy** the Commissioner in**writin~** no later than 15 days after transferring all or any portion or the facility, the**o~erations.** the site or the business which is the subject of this lrading Agreement and Order or after obtaining a new mailing or location address. CRRA's obligations under this Trading Agreement and Order shall not be. affected by the**pa~sag~** of title to any property to any otner person or**mun~clpal~ty_ 80~issto~Ir'~** **power~t** Nothing in this Trading Agreement and**r~r** s a a fect t e Commissioner's authority to institute any proceeding or take any other action to prevent or abate violations of law, prevent or abate pollution, recover costs and natural resource damages. and to impose penalties for past. present I or future violations of law. If at any time the**Commiss~oner** determines that the actions taken by CRRA Dursuant to this Trading Agreement and Order have not successfully corrected all violations, fully characterized the extent or degree of any pollution, or successfully abated or prevented pollution. the Commissioner may institute any proceeding to reQ¥ire CRRA to undertake further investigat10n or further action to prevent or abate violations or pollution.**CR~'S** Obligations ¥nder law, Nothing in this Trading Agreement an Order sal**rel~eve** CRRA of other obligations under applicable federal, state and local law. No assurance b

# 6**aQmmis~ioner,** No provision of this Trading Agreement ana: r er an no action or inaction by the Commissioner shall be construed to constitute an assurance by the Commissioner that the actions taken by CRRA pursuant to this Trading Agreement and Order will result in**compl~ance** or prevent or abate pollution.**Acc~ss** to farility- Any representative of the Department of EnVlronmenta Protection may enter the facility**w~thout** prior notice for the purposes of monitoring and enforcing the actions required or allowed by this Trading Agreement and Order. No effact Qn,r*ghts Qf other**Qet~Ons.** This.Trading Agreement and Or er nelt er creates nor aLtects any**r~ghts** OL persons or municipalities that are not parties to this Trading Agreement and Order. 

# go Creation Qf Prooertv Riahts. This Trading Agreement and

rder does not create any prQperty rights with respect to these DERCs.**~~cg** to CQrnmission,r of,chanqes,**Wi~hin** 15 9ays of**~he** date ecomes aware 0_ a cnange ln any**~nformatlon subm~tted**  to the Commissioner under this Trading Agreement and Order. or that any such information was inaccurate or misleading or that any relevant information was omitted, CRRA shall submit the correct or omitted information to the Commissioner. 26.**Notific~tioo** 

# Q!**~QncQmpliance,** In the event**~hat** CRRA aware t at lt 1 not or may not comply, or dld not or becomes may not


### Initials 

# J1f:lo,) -7- Date 

# Cf(-z7(0'1Connecticut Resources Recovery Authority Trading Agreement 

### and Order No. l494A

27. comply on time, with any requirement of this Trading Agreement and Order or of any document required hereunder( CRRA shall immediately notify by telephone the individual**~dentified** in the next paragraoh and shall take all reasonable steps to ensure that any noncompliance or delay is avoided or, if unavoidable, is minimized to the greatest extent possible. Within five 

### (5) days of the initial notice, CRRA shall submit in writing the date, time, and duration of the noncompliance and the reasons for the noncompliance or delay and propose, for the review and written aporoval of the Commissioner, dates by which compliance will be achieved, and CRRA shall comply with any dates which may be approved in writing by the Commissioner. Notification by CRRA shall not excuse noncompliance or delay, and the Commissioner's approval of any compliance dates proDosed shall not excuse noncompliance or delay unless specifically so stated by the Commissioner in writing.**SUbm~ssion** 9£**gocument~,** 

### Any document required to be submitted to t e**Comm~ss~oner** un er tnls Trading Agreement and Order shall, unless otherwise specified in this Trading Agreement and Order or in writing by the Commissioner, be directed to: Wendy Jacobs Department of Environmental Protection Bureau of Air Management Emissions and**Cred~t** Trading Section 79 Elm Street Hartford, Connecticut 06106-5127



### Initials

## ~~ -8- Date

# ~Ol

### connecticut Resources Recovery Authority Trading Agreement and Order No. 1494A CRRA consents to the issuance of this Trading Agreement and Order without further notice. The undersigned certifies that he/she is fully authorized to enter into this Trading Agreement and Order and to legally bind CRRA to the 'terms and conditions of the Trading Agreement and Order.
Connecticut Resources Recovery Authority

# ~/iA'Y Signature: 

# _R-G (1\)( k

# rt-------------
Type Name: Robert E. 

### Wright Type TitIe:**---lP-=r..:::e:..=s~i~d..::.e~nt~** 

### _ Date: Apri 

### 1 27; 2001

Issued as a final order of the Commissioner of
Environmental Protection on

# \_~_~_~ __

MAILED CERTIFIED MAIL, RETURN RECEIPT REQUESTED Certified Document

-9-

### EXHIBIT 1
TRADING AGREEMENT AND ORDER NO. 1494A

# STATE OF CONNECTICUT DEPARTMENT OF E VIRONME TAL PROTECTIO
UpdatedFebruary27 

### 2001 

## CreditTradingforSources with Irregular 0 Emissions

The following ouLlines th Department'sconcerns and methodology for dealing withpeaking units ( peakers") that have maximum peakdailyemissions thatare substantially higherthan theiraverage daily emissions and that C Qose to achieve Ox compliancevia credittrading pursuantto §_2a-17

__(j) ofthe Regulations ofConnecticutStateAgencies ('Regulations'). Forpurpos s ofthis protocol, peakers are defined as sources with maximum peakdaily Ox emissions grea erthan three times theiraverage daily emissions I durinc theozone season.
The basic cone ptofthe trading programis thatsources with excess Ox emissions (arale thatexceeds the rate limits in the Regulations) rna obtain Ox discreteemissioD reduction credits ( 'DERCs ) from
sources that ha e' over-conrroUed 'their Ox emissions. Although rypical sources can obtain credits on 

### a 

### mass basis (one ton ofDERCs to offsetone ton ofexcess emissions) with 

### an acceptableenvironmenml outcome sources ith large variations in emissions fromday today pose an additional problemforozone attainmentplanning.
The mostcommon peakers are electrici[}'generatingunits mat nduring times ofhighelectrici[}' consumption. Electricitydemand is often the highest during ho humid days of!.he summerwhen the potential forozoneformation is also high. Peakers frequently b ve high emission rates. To the extent that these units produceemissions atexac Iy the time when emissions need to be reduced to limitozone formation, allowingpeakers to continue to comply with new rate limits through the use ofDERCs aD a ton-far-ton basis will exacerbate this effect. On the otherhand ifitcan bedemonstrated thattheDERCs being used bypeakers were generatedon acomparable basis (i.e. during days ofhigh ozonepotencial). then ton-for-ton use bypeakers would be appropriate.
The full impactofthe Ox emissions from these types offacilities during summeroperation mustconsider temporal variability as well as mass ofexcess emissions. Any DERC trade must considerequivalency to the Ox reductions thatcontrol equipment would produce on an ozone day on both atemporal and a mass basis. The protocol below places appropriaterequirements on peaking units to reflect the greaterimpact of

### NOx emitted under this type ofusuge pattern. Attachment 

### Iprovides 

### adetailed xample ofhow this policy would be applied to apeaker. Attachment2provides an explanation ofthe calculations underlying this policy.

Ox Emissions Reduction CrediJ Use Computation ForPeakers

• Peakers are only considered to be atemporal issue for the ozone season months.

• All xcess Ox emissions during the winter (non-ozone season) need only beoffsetby DERCs on amass basis.

• Priortoeach ozone season there will be aprospectj e estimation to determine how many tons of DERCs must be

.on hand" during theozone season. retrosp cti ecalcul:Hion will detennine how many DERCs were actually 'used" during the ozone season.

1

- Forpurposes 0 this ana.lysis,:1 er:l:ed.a.ilyemissior.s n

_ e ermine by ivi ing a our c's 01.31 ozone**s~n**

0:,< emissions (pounds) by 153 da s to aleulae an Jver3ge pound/day alue.
(**Prinli.~t1** on ReI:. deu P per 9 Elm Streel • H n onl. CT 0 10 ·51_ hllp·l/dep. IJle I U AJI Eq"al Oppurtuml. Emplu. a**r~**

## n~brating Connl'ccicuJCoastalRtsOllru,"!anagt'!'lrllt:

## f~ 0

## .10~O II.:JFor EReuse during the ozoneseason:
1. Prospective estimation (pre-ozone season) will determine the numberofDERCs that mustbe provided for the ozone season. (Beginning in 1996. the DERCs mustbe in place no laterthan May 1.)
DERCs required for lheozone season shall be calculated on the following bases: (a) Mass basis: DERCs required will be equal to the tOlal numberoftons ofestimatedexcess NOx emissions overtheentire ozone season, calculated in the same mannerused forolher
sources usingDERCs 

### (i.e.• including anydiscounts).
(b) Ma..'(-peak basis: DERCs required (in lons) will becalculatedbydividing one·third ofthe estimated maximumdaily excess emissions (in pounds) for any dayduring !.heozone season by 13 poundsl(ton-day) '. (see Attachment 2 for an explanation ofthis calculation):
DERCs required (tons) 

### = «Estimated Maximum Excess NOx in lbslday) + 3]
+ [13Ibsl(loooday)]
Sources 

### will be required to holdcredilS equal to lhe greaterofme amount calculated
on a mass ormax-peakbasis. The timing ofactual creditpossession will begovernedby the terms ofthe specific rrading orderissued forthat source.
2. Retrospecti"e calculalion (post-ozone season) will determine the actual credituse and the DERC surplus, ifany. Atthe end ofthe ozone season.lhe calculations required in step 1 above will be repeated using: for (a), the actual (ralherthan estimated) total excessemissjons forthe ozone season, and for (b), the (ratherthan estimated) maximumdailyexcess NOx emissionson any ofthedays projectedby the Commissionertobe ·moderateto unhealthful-. ·unheallhful-. or ·very unhealthful-

. The numberofDERCs required pursuantto this policy will be the greaterofthe numberof DERCs calculated on lhe mass basisorthe max-peilkdaybasis.
Ofthe torol DERCs needed for the ozone season: anumberofDERCs equal 

### to the unit's actual total excessemissions (on a mass basis) 

### will be used tocover such actual excessemissions. The numberofDERCs equal to the difference between the total numberneeded pursu:mtto this policy and total actual excess emissions shall be convertedfrom ozone se:1S0n DERCs to non-ozone season PERCs. Any surplus DERCs (those purchased pursuantto the pre·ozone season estimation and notused to coveractual emissions norconverted to non-ozone season emissions) may be c:uned forward foruse as ozone season DERCs through April 30,2003 excepl

### as may be limited by the trading agreement and order, orby regulation.

2 - For the pre-ozone se:J50nestim:ttion. the maximumdailyexcess NOx emissions (in Ibslday) is the difference between the ma..1.imumex:pected NOx emission rate and 95% ofthe allowable NOx emission r.lle under Seclion22:1- 174-11(e) of**th~ R~gulalions**  (lb/MMBtu) multiplied by the unil's maximum r:lIed C:lp:lCilY(MMBlulhr) Jnd by the estimJled m:lx;mum hours ofopcr:lIion perday (Ilrs/day).

### 2

### Attachment1 Example of thispolicy beingappliedto apeaking unit
Before the ozone season. apeakerhas estimated its toralexcess emissions tobe 15 tons for the ozone season. Itis also estimated thatthe maximumexcess emission on adayprojected tobe "moderate to unhealthful" orworse willbe5000pounds. Actual ozone season excess emissions arelistedin the table below. The analysis ofhowthis policywouldbe applied to this peakerfollows afterthetable.
Date NOx Excess NOx OERCs "Mod to Peak Day NOx Emissions needed (mass Unhealthful" (or DERCs needed (pounds) basis) (tons) worse) forecast? (tons)


### 5/1 

### 1,000 0.50 no 

### 25.64 5/15 

### 2,000 1.00 yes . 

### 51.28 6/1 3,000 1.50 no 

### 76.92 6/15 

### 4,000 2.00 ves 

### .. 1'02.56 7/1 

### 1,000 0.50 yes 

### 25.64 7/15 

### 5.000 2.50 no 

### 128.21 8/1 

### 1,000 0.50 yes 

### 25.64 8/15 

### 3,000 1.50 no 

### 76.92 9/1 

### 3,000 1.50 . yes 

### 76.92 9/15 

### 4,000 2.00 no 

### 102.56 

# I 13.00 

# I

SUM (mass basis)
ANALYSIS: PRE-OZONE SEASON ESTIMATION 128 21 Estimated Ozone Season Tons Needed (max-peak basis using

• 5000 pounds as estimated maximum daily excess emissions) 15.00 Estimated Ozone Season Excess Emissions (mass basis) 128.21 Number of ozone season DERCs thaI need to be held no laterthan May 1

POST-OZONE SEASON CALCULATION 10256 Ozone Season Tons Needed (max-peak basis using

• 4000 pounds as actual m8.?'imum daily excess emissions) -13.00 Actual Ozone Season Excess Emissions (mass basis) 89.56 Number of Ozone Season DERCs convened to Non-Ozone Season DERCs max-peak basis

SUMMARY Ofthe 128.21 tons of ozone season OEACs**th~t** were reserved by May 1, 13.00 tons were used to cover actual ozone season emissions on a mass basis 89.56 tons were converted to non-ozone season OERCs 25.64 tons were carried forward as surplus ozone season DERCs



### 3

### Attachment2 Explanation of Max-PeakBasis Calculation

Unless it can be demonstrated otherwise, DERCs are assumed to be created by relatively small daily reductions in NOx emissions overthe course ofan entire ozone season (153 days). The averagedailyNOx emissions reduction represented by each ton ofcreditis 13 pounds/daycalculated as follows:

2000 pounds/ton + 153 days

## =13 pounds/(ton-day)
Thus, oneDERC (ton) would be equivalent to areduction in NOx emissions of 13 pounds/day.

Forexample. ifapeakeremits one ton ofexcess NOx perday when operating. butonly operates for five days during the ozone season. t.be owner/operatorofthatsource would nominally need to obtain five tons ofDERCs on amass basis. However. those DERCs used tooffsetthis peaker'sexcess emissions are likely to have been createdby relatively small daily reductions in NOx emissions from anothersource overthe
courseofan entireozone season (153 days). In this example. assuming apurchase offive tons ofDERCs, thatcalculates outto a NOx reduction ofapproximately 65 pounds. (5 tons x 2000 pounds/ton) + 153 days

## =65 pounds/day Clearly. on anyday that the peakeroperates. there will be many more tons ofexcess Ox emitted than NOx credits created (on lhe same day) [0offsetthoseexcess emissions (on theorderof 1.935 pounds 

### in this example). (I ton x 2000 pounds/ton)

- (65 pounds credit) = 1.935 pounds excess NOx emissions
While the total amount ofNOx emittedby apeakerwould be offset on a seasonal averogebasis. on the -peaking" daythere would be apotentially significantincrease in NOx emitted, and thus an increase in potential ozonecre':l.Eion. [n orderto achieve acommensurate reduction in ozonecreation potential for peakers, an adjusunent in the calculation ofrequired DERCs is needed. One approach would be torequire DERCs in aquantity that would ensure that thedaily average reduction represented by those DERCs would equal the maximum dailyexcess NOx emissions from the peaking source on anyday that itron. On this basis. apeaking source with amaximum 24-hourexcess NOx emission ofone ton would be required to purchase 153 tons ofDERCs.

1 ton/dayx 153 dnys/season

## =153 tons/season
This 153 tons ofDERCs would be adequ.:ne tooffsetexcessemissions ofone ton perday foras many days
as the sourceoperated during aparticularozone season. This has been deemed to beunduly stringeD[. given the diversity in operation ofsome ofthe peakers. In light ofthe foregoing. this requirementhas been adjusted downward 

### by two-thirds.

4