Danskammer HoldCo Files Chapter 11 to Halt NYISO Revenue Seizure

Danskammer HoldCo LLC and three affiliates, the owners of a 532-megawatt natural gas peaking plant on the Hudson River in Newburgh, New York, filed for chapter 11 protection on June 10, 2026 in the U.S. Bankruptcy Court for the District of Delaware. Unlike most large power-sector filings, this case is not about funded debt. The company entered bankruptcy with essentially no secured loans on its books. What pushed it into court was a single regulatory dispute: the New York Independent System Operator had begun seizing the plant's revenue to collect a disputed $13.45 million penalty, and gave the company until 5:00 p.m. on June 10 to pay the balance. The debtors filed that day to stop the garnishment and pursue a court-supervised sale of substantially all of their assets under section 363 of the Bankruptcy Code.

The lead case, Danskammer HoldCo LLC, is No. 26-10950 (KBO); the operating entity, Danskammer Energy, LLC, filed under No. 26-10954 (KBO). The four debtors requested joint administration, which the court granted on June 18. President and Chief Financial Officer Thomas M. Gray submitted the first day declaration that frames the case (chapter 11 petition, Docket 1).

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A bankruptcy driven by a regulator, not a balance sheet

The most unusual feature of this filing is what is absent. The Danskammer Generating Station was acquired in December 2017 with a $57.5 million secured credit facility from Mercuria affiliates, but that debt is gone. Under an omnibus amendment dated April 21, 2025, the lenders forgave the remaining balances on the purchaser loans, leaving the Tranche A and Tranche B advances at zero. As of the petition date there is no outstanding funded debt under the credit agreement, and the debtors filed no debtor-in-possession financing motion and no cash-collateral motion. Operations are funded from the plant's ongoing capacity and energy revenue.

What remained was a fight with the grid operator. The New York Independent System Operator, or NYISO, runs the wholesale electricity markets in the state. Beginning in August 2024, its market-monitoring group raised concerns about whether the station had met its reserve obligations during reserve activations in July 2024. The debtors say the limiting constraint was a clogged gas strainer in equipment owned and operated by Central Hudson Gas & Electric, not a failure of the plant. Most of the allegations were dropped by May 2025, but one remaining claim, covering an alleged capacity shortfall from October 2021 through April 2025, was referred to NYISO's Penalty Review Committee.

On January 13, 2026, that committee calculated a penalty of $13,450,921.50. The company disputes it and on January 23 invoked the tariff dispute-resolution process. The two sides held their first in-person meeting on June 1, 2026, and according to the debtors, NYISO identified the additional evidence it wanted before the matter could be resolved. The company committed to gathering it. The dispute process, in the debtors' telling, remained open (first day declaration).

NYISO did not wait. On June 2, 2026, it garnished $744,863.23 of the company's May capacity revenue, out of a May total of about $3.3 million. It took the same amount again on June 9. That same day, NYISO declared a payment default and demanded that the company cure it by paying $11,820,879.82, the penalty net of amounts already garnished, by 5:00 p.m. on June 10. The company filed for chapter 11 instead. It has reserved all rights and defenses, including a challenge to whether NYISO and the Federal Energy Regulatory Commission have constitutional authority to adjudicate civil-penalty liability.

How a working power plant ended up here

The Danskammer station has a long operating history. Central Hudson Gas & Electric built it in stages between 1954 and 1967 as a coal-fired plant, later converted to dual fuel. A Dynegy affiliate bought it in 2001; after Dynegy's own 2011 chapter 11 and the damage Superstorm Sandy inflicted in 2012, the plant was sold to Helios Power Capital in 2013 and brought back online in stages through 2014 with help from Mercuria. Mercuria bought out Helios in June 2017, and the current debtors acquired the equity in Danskammer Energy in December 2017 (first day declaration).

The plant today runs four natural-gas-fired steam turbines with a combined nameplate capacity of 532 MW. Because of its relatively high heat rate, it operates as a peaker, dispatching electricity during high-demand periods when the grid is constrained. Roughly 95% of the company's revenue comes from selling capacity rather than energy, which makes it acutely sensitive to how the capacity market is structured. The station sits in NYISO Zone G, within the G-J pricing locality that covers the Lower Hudson Valley and New York City. Thirty-seven people support operations, but only one is a direct employee; most of the workforce is supplied by Consolidated Asset Management Services under an operations-and-maintenance agreement, and Castleton Commodities Energy Services handles market bidding and gas procurement.

The company had tried to modernize. Starting in 2018 it pursued a repowering that would have replaced the old turbines with a roughly 536 MW combined-cycle plant. That effort collided with New York's Climate Leadership and Community Protection Act, signed in 2019. The state environmental regulator denied the air-permit modification in October 2021 on climate grounds, a New York court upheld the denial in June 2022, and the company withdrew the application and paused the project in June 2024.

Market changes that erased the economics

Two market developments converged in 2026 to make continued operation uneconomic, in the debtors' view. First, NYISO capacity-market rules effective May 1, 2026 split conventional generators into Firm and Non-Firm Fuel capacity classes, and a second change effective July 1, 2026 sharply lowered the capacity accreditation factor for the Non-Firm Fuel class. Because of its heat rate, the station was placed in the Non-Firm Fuel class, dropping its accreditation factor to roughly 55% from the 100% it had carried through April 30, 2026. That translates to about a 45% reduction in potential capacity revenue beginning July 1, 2026, on the revenue stream that supplies most of the company's income (first day declaration).

Second, the Champlain Hudson Power Express, a 1,250 MW high-voltage line carrying power from Quebec into New York City, entered commercial operation in May 2026 and becomes eligible for the capacity auction on July 1, 2026. The debtors expect that added supply to further depress capacity and energy prices in their zone.

Anticipating those headwinds, the company filed a deactivation notice with NYISO on December 17, 2025, identifying a January 14, 2027 retirement target with the right to retire as early as August 1, 2026 if no reliability need was found. NYISO's April 15, 2026 short-term reliability assessment found that the station is needed and may have to keep running until at least January 15, 2027. If the grid operator requires the plant to stay online past August 1, 2026, the company would be compensated as an Interim Service Provider, and a longer extension would require a Reliability Must-Run agreement that covers the plant's costs plus incentives. NYISO's next quarterly assessment is due July 14, 2026.

Capital structure

• Mercuria credit facility — The original $57.5 million secured facility from December 2017 (a $50 million Tranche A advance and a $7.5 million Tranche B advance) has been repaid or forgiven. As of the petition date, both tranches stand at zero and there is no outstanding funded debt.
• Tranche C / coal-ash obligations — A commitment of up to $7,934,000 supports the closure of the on-site coal-ash landfill, backed by a Liberty Mutual surety bond in the same amount. It is undrawn. A segregated cash-collateral account held $4,148,869 as of the petition date.
• Unsecured debt — Approximately $13.4 million, a figure that includes the disputed $13,450,921.50 NYISO penalty. (Source: first day declaration, Docket 12.)

Key dates

• December 27, 2017 — Debtors acquire Danskammer Energy with a $57.5 million Mercuria credit facility.
• April 21, 2025 — Omnibus amendment forgives the remaining purchaser loans, leaving zero funded debt.
• December 17, 2025 — Company files a deactivation notice with NYISO targeting retirement.
• January 13, 2026 — NYISO Penalty Review Committee calculates a $13,450,921.50 penalty.
• May 1, 2026 / July 1, 2026 — Capacity-market rule changes cut the station's capacity accreditation, reducing potential capacity revenue by roughly 45%.
• June 2 and June 9, 2026 — NYISO garnishes $744,863.23 of capacity revenue on each date.
• June 9, 2026 — NYISO declares a default and demands $11,820,879.82 by the next day.
• June 10, 2026 — Petition date.
• June 18, 2026 — First day hearing; interim orders entered and joint administration granted.
• July 22, 2026 — Second-day hearing scheduled.
• August 1, 2026 / January 15, 2027 — Earliest and latest potential retirement dates, depending on NYISO reliability findings.

Takeaways

Danskammer is a reminder that chapter 11 is sometimes a procedural shield rather than a deleveraging exercise. With its funded debt already forgiven, the company did not need to restructure a balance sheet; it needed the automatic stay to halt a regulator's seizure of operating revenue while it litigates a penalty it says is unfounded and runs a section 363 sale.

The asset's value is unusually dependent on regulatory mechanics. The same market design that made the plant uneconomic as a merchant generator could also create a near-term revenue floor, because NYISO has already found the station needed for reliability and may have to pay cost-based Interim Service Provider or Reliability Must-Run compensation to keep it online into 2027. A buyer in the sale process is effectively underwriting that reliability designation as much as the plant itself. For now, the case is a free-fall sale: no stalking horse, bid procedures, or plan has been filed, and the company is operating on existing cash and ongoing revenue while it markets the Newburgh station.