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IEPA ATTACHMENT NO.M..

Dec 10 06 04:34p

Linda

310-454-43P4

Memorandum of Understanding

By and Between Midwest Generation LLC and

Illinois Environmental Protection Agency

Revised 12/10/2006 3:21:06 PM

Midwest Generation LLC ("MWGen") and the Illinois Environmental

Protection Agency ("IEPA") have reached an Agreement that will achieve deep

and sustained reductions in emissions of mercury, sulfur dioxide ("S02"),

and

nitrogen oxide ("NOx") from MWGen's coal-fired Illinois electric generating

units ("EGUs"). The terms of the Agreement are as follows:

Mercury Emissions Requirements.

a. By July 1, 2008, MWGen will install and have operational halogenated

activated carbon injection ("ACI") equipment on the following EGUs:

i. Crawford Station - EGUs 7 a 8;

ii. Waukegan Station - EGUs 7 Et 8; and

iii. Fisk Station - EGU 19.

b. By July 1, 2009, MWGen

will install and have operational ACI

equipment on all of the remaining MWGen EGUs, both hot and cold

side electrostatic precipitators ("ESPs"), except those EGUs that

will be permanently shut down by December 31, 2010 and for which

IEPA has been provided proper notice as set forth in the proposed

Illinois mercury rule at 35 IAC Section 225.

c. MWGen will either shut down, convert to a cold-side ESP, or install.

fabric filter bag houses on the

two

EGUs that operate hot side ESPs

on the following dates:

By December 31, 2013, Waukegan Station EGU 7;

ii.

By December 31, 2015, Will County Station EGU 3.

d. Beginning on January 1, 2015 and measured on a rolling twelve

month basis (e.g., for the period Jan. 1, 2015 through Jan. 1, 2016,

and for every 12-month

period

after Jan. 1, 2015), each MWGen

Illinois EGU, except

Will

County Station EGU 3, shall achieve the

following mercury emissions standards:

An emission standard of 0.0080 lb mercury/GWh gross

electrical output; or

ii.

A minimum 90% reduction of input mercury.

e. MWGen's Will County Station EGU 3 shall achieve the mercury

emissions standards of Paragraph 1(d) above beginning on January

1, 2016, as

measured on a rolling twelve month basis (e.g., for the

period Jan. 1, 2016 through Jan. 1, 2017, and for every 12-month

period after Jan. 1, 2017).

f. For each EGU operating ACI equipment, MWGen shall inject

halogenated activated carbon at a rate of 5.0 lbs per million actual

cubic feet or at a rate or rates set tower by the Agency based upon

a showing by MWGen that (a) the EGU can achieve an emission

standard of 0.0080 lb Hg/GWh gross electrical output or a minimum

90-percent reduction of input mercury at a lower injection rate or

(b) such rates or rates are needed so that carbon injection will not

increase particulate matter emissions or opacity so as to threaten

noncompliance with the applicable requirements for particulate

matter or opacity, as provided in 35

Admin. Code Section

225.233(c).

•

- Compliance by MWGen with the mercury emissions standards set

forth in this Agreement shalt be deemed to be full and complete

compliance by MWGen with the mercury emissions standards

included within the proposed 35 Ill Admin. Code Section 225.

Emissions Requirements.

a, By December 31, 2011, MWGen shall .

permanently shut down Illinois

EGUs or install NOx emissions reduction equipment on its Illinois

EGUs so that for calendar year 2012 and beyond, MWGen will

achieve and maintain a fleet wide average annual NOx emission rate

of 0.11 lbs/mm btu and will achieve and maintain a fleet-wide

average ozone season NOx emission rate of 0.11 lbs/mm btu.

b. IEPA intends to monitor the NOx emissions reductions that MWGen

is able to obtain from selective non-catalytic NOx reduction

("SNCR") equipment. To facilitate that purpose, MWGen shall file,

no later than one year after startup of each SNCR, a report with the

IEPA describing the NOx emissions reductions that the SNCR has

been able to achieve.

Emissions Requirements.

a. MWGen will achieve the following fleet wide average annual SO2

emissions rates beginning in the calendar years set forth below:

Beginning with calendar year 2013, MWGen will achieve a fleet

Beginning with calendar year 2014, MWGen will achieve a fleet

wide average annual

SO2

emission rate of .41 lbs/mm btu;

iii, Beginning with calendar year 2015, MWGen will achieve a fleet

wide average annual

emission rate of .28 lbs/mm btu;

Beginning with calendar year 2016, MWGen will achieve a fleet

wide average annual SO

2 emission rate of .195 tbs/mm btu;

Beginning with calendar year 2017, MWGen will achieve a fleet

wide average annual SO2

emission rate of 0.15 lbs/mm btu;

vi.

Beginning with calendar year 2018, MWGen will achieve a fleet

wide average annual SO2

emission rate of 0.13 lbs/mm btu;

vii.

Beginning with calendar year 2019, MWGen will achieve a fleet

wide average annual SO2 emission rate of 0.11 lbs/mm btu;

b. By December 31, 2018, MWGen wilt either permanently shut down

or install FGD equipment on each EGU, except Joliet EGU 6, at

every MWGen Illinois Electric Generating Station (i.e., the Fisk,

Crawford, Waukegan, Joliet, Powerton, and Will County Stations)

such that on or before January 1, 2019, MWGen's Illinois coal-fired

generating fleet will achieve a fleet wide average annual 502

emission rate of 0.11 lbs/mm btu.

MWGen EGUs Scheduled

for Permanent Shutdown.

a. MWGen will permanently shut down the following EGUs on or before

the dates set forth below:

December 31, 2007 - Waukegan EGU 6.

ii.

December 31, 2010 - Will County EGUs

and 2.

5.?

MWGen EGUs

Scheduled for Permanent Shutdown or Installation of

Emissions Controls.

a. Waukegan Station EGUs 7 and 8.

Waukegan Station EGU 7.

1. By December 31, 2013, MWGen will either permanently

shut down EGU 7 at the Waukegan Station or install and

have operational FGD equipment on EGU 7 at the

Waukegan Station.

ii.

Waukegan EGU 8.

1 By December 31, 2014, MWGen will either permanently

shut down ECU 8 at the Waukegan Station or install and

have operational FGD equipment on EGU 8 at the

i. By December 31, 2015, MWGen will either permanently shut

down its Fisk Generating Station or install and have

operational flue gas desulphurization ("FGD") equipment on

EGU 19 located at the Fisk Station.

1. Beginning on December 31, 2008, and annually

thereafter up to and including December 31, 2015,

MWGen shall provide IEPA with a report on any

technology or equipment designed to affect air quality

that has been considered or explored for the Fisk

Station in the preceding 12 months, understanding that

such report shalt in no way obligate or be implied to

obligate MWGen to install any such equipment described

in the report.

c. Crawford Station.

MWGen shall either install emissions controls on or

permanently shut down the two EGUs at the Crawford Station

according to the following dates:

1. Crawford EGU 7.

a. If MWGen, in its sole discretion, decides to

operate Crawford EGU 7 after December 31,

2018, then

by December 31, 2015, MWGen shall install

and have operational on EGU 7 SNCR or

equipment capable of delivering

essentially equivalent NOx emissions

reductions, and

ii.

by December 31, 2018, MWGen shall install

and have operational FGD equipment on

Unit 7.

b MWGen may elect, in its sole discretion, not to

install SNCR or FGD equipment on Crawford EGU

7. In that case, MWGen shall permanently shut

down EGU 7 by no later than December 31, 2018.

2. Crawford EGU 8.

a. If MWGen, in its sole discretion, decides to

operate Crawford EGU 8 after December 31,

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by December 31, 2015, MWGen shall install

and have operational on EGU 8 SNCR or

equipment capable of delivering

essentially equivalent NOx emissions

reductions, and

ii.

by December 31, 2017, MWGen shall install

and have operational FGD equipment on

EGU 8.

b. MWGen may, in its sole discretion, elect not to

install SNCR or FGD equipment on Crawford EGU

8. In that case, MWGen shall permanently shut •

down EGU 8 by no later than December 31, 2017.

Trading

of S02 and NOx Emissions

MWGen will be permitted to sell, trade, or transfer S02 and NOx

emissions allowances of any vintage owned, allocated to, or earned

by MWGen's Illinois EGUs (the "Illinois Allowances") to its Homer

City, Pennsylvania generating station ("Homer City Station") for as

long as the Homer City Station needs the Illinois Allowances to

comply with federal or state emissions regulations. When and if

the Homer City Station no longer requires all of the Illinois

Allowances, MWGen may sell any and all remaining Illinois

Allowances, without restriction, to any person or entity located

anywhere except that MWGen may not directly sell, trade, or

transfer Illinois Allowances to an NOx or S02 emission source

located in Ohio, Indiana, Illinois, Wisconsin, Michigan, Kentucky,

Missouri, Iowa, Minnesota, and Texas. In no event shall this

Agreement or any resulting rule, regulation, or adjusted standard

require or be interpreted to require any restriction whatsoever on

the sale, trade, or exchange of the Illinois Allowances by persons or

entities who have acquired the Illinois Allowances from MWGen.

MWGen shall be prohibited from purchasing or using S02 or NOx

allowances for the purpose of meeting the S02 and NOx emissions

standards set forth in paragraphs 2 and 3 of this Agreement.

Future Illinois Emissions Regulations.

a. The S02 emissions rates set forth in this Agreement shall be

deemed to be best available retrofit technology ("BART") under the

Visibility Protection provisions of the Clean Air Act, 42 U.S.C.

7491, reasonably available control technology ("RACT") and

reasonably available control measures ("RACM") for achieving fine

particulate matter ("PM 2.5"). requirements under NAAQs in effect

on the date of the date of this Agreement, as required by the Clean

Air Act, 42 U.S.C. § 7502. !EPA may use the SOZ and NOx emissions

reductions required under this Agreement in developing attainment

demonstrations and demonstrating reasonable further progress for

PM 2.5 and 8 hour ozone standards, as required under the Clean Air

Act. Furthermore, in developing rules, regulations, or state

implementation plans designed to comply with current NAAQs,

IEPA, taking into account all emission reduction efforts and other

appropriate factors, will use best efforts to seek SO2 and NOx

emissions rates from other EGUs that-are equal to or less than the

rates agreed to here by MWGen and will seek 502 and NOx

reductions from other sources before seeking additional emissions

reductions from MWGen.

8.?

Assistance with

Permit Approvals.

a. IEPA will use best efforts to process and approve quickly MWGen's

requests for the Illinois permits and regulatory approvals that are

required for the economically timely installation and operation of

the emissions control equipment that MWGen must install to meet

the emissions requirements of this Agreement.

9.?

Clean Coal and Wind Generation.

MWGen is exploring the possibility of developing one or more

integrated gasification combined-cycle ("IGCC") electric generating

stations to fire Illinois coat with gross electrical output of up to

1,200 MW in Illinois. MWGen is also exploring the possibility of

developing Illinois-based wind electric generating projects with

gross electrical output of up to 400 MW.

Should MWGen decide to pursue

1GCC

or wind generation projects,

or both, IEPA will use its best efforts to work with and assist

MWGen in obtaining commercially reasonable long term (i.e. 20-

year) contracts for all of the electrical output of the generating

units and will work with and assist MWGen, in obtaining Illinois

regulatory approvals for construction and operation of the

generating units.

10. Joint Undertaking with City of Chicago and IEPA Focused on Local

Environmental Issues Related to Fisk and Crawford Stations.

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Illinois Environmenta,3/4

a. MWGen currently manages a substantial community involvement

program which supports

numerous organizations and initiatives in

the Pilsen and Little Village neighborhoods around the Fisk and

Crawford Stations. The emphasis of the program is on projects

designed to improve educational opportunities and the local

environment. Building on this program and starting in 2007,

MWGen will establish a regular process with the City of Chicago and

the

IEPA to explore the technical and financial feasibility of

projects that would fit within the current MWGen community

involvement budget and would potentially benefit the environment

in the communities surrounding the Fisk and Crawford Stations.

11.

Rules and Regulations Relating to Water Temperature in Illinois Rivers

and Waterways.

a. IEPA will use its best efforts to work with MWGen to explore the

benefits of increasing the Des Plaines River temperature excursion

hours, especially those affecting MWGen's Joliet Station, to relieve

electric reliability and electric constraint problems during the

Summer and Winter peak periods.

12.

Adoption of.

Terms as Regulation.

a. MWGen's commitments and obligations under this Agreement are

subject to and conditioned upon the adoption and sustained validity

through an appropriate regulation incorporating Paragraphs

through 7 of this Agreement. IEPA and MWGen shall mutually

support and use best efforts to obtain the appropriate regulation

based on this Agreement.

Signed and executed this

day of December, 2006,