Dynegy tells New York PSC that Danskammer is a total washout

In a move that was no surprise, Dynegy Danskammer LLC filed a Jan. 3 notice with the New York State Public Service Commission that it intends to discontinue operation of the Danskammer power plant in Newburgh, N.Y., and permanently retire all six generating units at the facility, including coal capacity.

The Danskammer facility has been unavailable to the power grid for more than 60 days, the company noted. Following the retirement of the facility, Dynegy will transfer it to a salvage company for dismantling. Dynegy requested that the commission waive the normal 180-day requirement for power plant retirement notices like this one.

On Oct. 29, 2012, Danskammer Units 1-4 were flooded due to high water from Super Storm Sandy and have been in a forced outage status since that time. Units 5 and 6 were not exposed to flood water, but the power transformer for these generators was damaged by the flood. Dynegy retained contractors to assess the full extent of the damage and their assessment indicates that the flooding damaged about 90% of the motors and 60% of the switchgear in the facility. Based on this assessment, the estimated costs to repair the Danskammer facility are significant.

Danskammer Units 1 and 2 are oil-fired “peakers” with a net capacity of 130 MW. The coal-fired Units 3 and 4 have a net capacity of 370 MW (summer rating). Units 5 and 6 are emergency diesel generators with a net capacity of 5 MW, which are currently not in operation and not connected to the power grid.

Bankruptcy sale of plant calls for plant demolition

In November 2011, Dynegy Holdings LLC and certain of its subsidiaries, including Dynegy Danskammer, filed for bankruptcy protection. “Dynegy’s bankruptcy was largely a consequence of the poor economics of operating the Danskammer Facility and the fact that further, substantial additional investment would be necessary to maintain the Danskammer Facility safely and reliably as well as to continue to conform to current and future environmental regulations,” the Jan. 3 filing noted. That means the plant was on poor economic ground to begin with, with the Sandy flooding the final blow.

Beginning in June 2012, as the result of a settlement agreement approved by the bankruptcy court, the bankrupt companies and Blackstone Advisory Partners L.P. worked with various parties to develop and execute a sale process to market and sell the Danskammer plant and the gas-fired Dynegy Roseton LLC facility, also located in New York. An auction for Danskammer commenced on Nov. 19, 2012. A bid from ICS NY Holdings LLC was deemed the highest and otherwise best bid for Danskammer.

The facility will be sold to ICS for $3.5m in cash and ICS’s assumption of certain liabilities, including tax and environmental liabilities. Following closing of the sale and this retirement notification process, ICS will demolish any remaining structures and own the site. On Dec. 26, 2012, the bankruptcy court approved the sale.

Danskammer is located in the service territory, and interconnected to the transmission and distribution system, of Central Hudson Gas and Electric. The bankrupt companies and Central Hudson worked out an October 2012 settlement which provides Central Hudson with the option to purchase certain equipment to resolve any reliability issues it would face due to the retirement of Danskammer.

Dynegy is also simultaneously providing a copy of the Jan. 3 retirement notice to the New York Independent System Operator.

Notable is that the New York commission in December approved a deal for Cayuga Operating to keep its coal-fired Cayuga plant operating for an extra year beyond the planned January 2013 mothball date so needed transmission system improvements can be made in the meantime. The damage from Sandy would seem to preclude that option of extended life for Danskammer.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.