NRG ENERGY, INC. 10-K

Item 1 — Business General NRG Energy, Inc., or NRG or the Company, is an integrated power company built on dynamic retail brands with diverse generation assets. NRG brings the power of energy to customers by producing and selling energy and related products and services, in major competitive power and gas markets in the U.S. and Canada in a manner that delivers value to all of NRG's stakeholders. NRG is a customer-centric business focused on perfecting the integrated model by balancing retail load with generation supply within its deregulated markets. As of December 31, 2020, the Company sold energy, services, and innovative, sustainable products and services directly to retail customers under the brand names NRG, Reliant, Green Mountain Energy, Stream, and XOOM Energy, as well as other brand names owned by NRG, supported by approximately 23,000 MW of generation. NRG also conducts business under the brand name of Direct Energy as a result of the Company's acquisition of Direct Energy, a North American subsidiary of Centrica plc, on January 5, 2021. Direct Energy is a leading retail provider of electricity, natural gas, and home and business energy related products and services in North America, with operations in all 50 U.S. states and 8 Canadian provinces. In addition, Direct Energy is a participant in the wholesale gas and power markets in the United States and Canada. See Item 15 — Note 4, Acquisitions, Discontinued Operations and Dispositions , to the Consolidated Financial Statements for further discussion of the acquisition of Direct Energy. On February 28, 2021, the Company entered into a definitive purchase agreement with Generation Bridge, an affiliate of ArcLight Capital Partners, to sell approximately 4,850 MWs of fossil generating assets from its East and West regions of operations for total proceeds of $760 million, subject to standard purchase price adjustments and certain other indemnifications. As part of the transaction, NRG is entering into a tolling agreement for its 866 MW Arthur Kill plant in New York City through April 2025. The transaction is expected to close in the fourth quarter of 2021, and is subject to various closing conditions, approvals and consents, including FERC, NYSPSC, and antitrust review under Hart-Scott-Rodino. The Company has achieved the targets related to operations and cost excellence, portfolio optimization, and capital structure and allocation enhancement, as set out by the Transformation Plan. See Item 7 - Management's Discussion and Analysis of Financial Conditions and Results of Operations for further discussion. Strategy NRG's strategy is to maximize stakeholder value through the safe production and sale of reliable power and gas to its customers in the markets it serves, while positioning the Company to provide innovative solutions to the end-use energy customer. This strategy is intended to enable the Company to optimize its integrated model to generate stable and predictable cash flow, significantly strengthen earnings and cost competitiveness, and lower risk and volatility. To effectuate the Company’s strategy, NRG is focused on: (i) serving the energy needs of end-use residential, commercial and industrial, and wholesale customers in competitive markets through multiple brands and channels; (ii) offering a variety of energy products and services, including renewable energy solutions, that are differentiated by innovative features, premium service, sustainability, and loyalty/affinity programs; (iii) excellence in operating performance of its existing assets; (iv) optimal hedging of NRG's portfolio; and (v) engaging in disciplined and transparent capital allocation. Sustainability is an integral piece of NRG's strategy and ties directly to business success, reduced risks and brand value. In 2019, NRG announced the acceleration of its science-based GHG emissions reduction goals to align with prevailing climate science, limiting global warming in the post-industrial era to 1.5 degree Celsius. Under its new GHG emissions reduction timeline, NRG is targeting a 50% reduction by 2025, from its current 2014 baseline, and net-zero emissions by 2050. The Company is on track to meet its 2025 goal. Business Overview The Company’s core business is the sale of electricity and natural gas to residential, commercial and industrial customers, supported by the Company's wholesale generation. As part of perfecting the integrated model, in which the majority of the Company’s generation serves its retail customers, the Company began managing its operations based on the combined results of the retail and wholesale generation businesses with a geographical focus in 2020. As a result, the Company changed its business segments from Retail and Generation to Texas, East and West/Other beginning in the first quarter of 2020. The Company's updated segment structure reflects how management makes financial decisions and allocates resources. The Company's business is segregated as follows: • Texas, which includes all activity related to customer, plant and market operations in Texas; 8 • East, which includes the remaining activity related to customer operations and all activity related to plant and market operations in the East; • West/Other, which includes the following assets and activities: (i) all activity related to plant and market operations in the West, (ii) activity related to the Cottonwood power plant that was sold to Cleco on February 4, 2019 and is being leased back until 2025, (iii) the remaining renewables activity, including the Company’s equity method investments in Ivanpah Master Holdings, LLC and Agua Caliente (which was sold on February 3, 2021) and the NFL stadium solar generating assets, and (iv) activity related to the Company’s equity method investment for the Gladstone power plant in Australia; and • Corporate activities. As of December 31, 2020, the vast majority of the Company’s business was in Texas, where the Company’s generation supply is fully integrated with its retail load. In the East, the Company’s retail load is more dispersed throughout the region and not fully integrated with the Company’s generation supply due to the locations of its power plants in that region. In the West, the Company’s business is primarily generation supply. The acquisition of Direct Energy broadens the Company's presence in the Northeast and into states and locales where it did not previously operate, supporting NRG's objective to diversify its business. The acquired operations of Direct Energy will be integrated into the existing NRG segment structure. Domestic customer and market operations will be combined into the corresponding geographical segments of Texas, East and West/Other. The East segment will also include the deregulated customer and market operations of Canada. The West/Other segment will also include activity related to the regulated operations in Alberta, Canada and the services businesses. The Company’s integrated model consists of three core functions: Customer Operations, Market Operations and Plant Operations, which directly support each other in each geographic region. The Company’s integrated model provides the advantage of being able to supply the Company’s retail customers with electricity from the Company’s assets, which reduces the need to sell electricity to and buy electricity from other institutions and intermediaries, resulting in stable earnings and cash flows, lower transaction costs and less credit exposure. The integrated model also results in a reduction in actual and contingent collateral through offsetting transactions, thereby minimizing transactions with third parties. NRG provides energy and related services to residential, industrial and commercial, and wholesale customers at either fixed, indexed or month-to-month prices through various brands and sales channels across the U.S. and Canada. Residential and small commercial ("Mass market") customers typically contract for terms ranging from one month to five years, while industrial and large commercial ("C&I") contracts are often between one year and five years in length. NRG sold approximately 68.2 TWhs of electricity and 23.5 MMDth of natural gas in 2020 and served approximately 3.6 million customers as of December 31, 2020, making it one of the largest competitive energy retailers in the U.S. In any given year, the quantity of TWhs and MMDth sold can be affected by weather, economic conditions and competition. As of the end of 2020, NRG had recurring electricity and/or natural gas sales in 19 U.S. states, the District of Columbia, and 2 provinces in Canada. Following the acquisition of Direct Energy, NRG has recurring electricity and/or natural gas sales in 24 U.S. states, the District of Columbia, and 8 provinces in Canada. NRG's retail brands, collectively, have the largest share of competitively served residential electric customers in Texas and nationwide. 9 The charts below illustrate NRG's U.S. retail capabilities, power generation and net capacity as of and for the year ended December 31, 2020: Extreme Weather Event in Texas During February 2021 During February 2021, Texas experienced unprecedented cold temperatures for a prolonged duration, resulting in a power emergency, blackouts, and an estimated all-time peak demand of 77 GWs (without load shed). Ahead of the event, NRG launched residential customer communications calling for conservation across all of its brands, and initiated residential and commercial and industrial demand response programs to curtail customer load. The Company maximized available generating capacity and brought in additional resources to supplement in-state staff with technical and operating experts from the rest of its U.S. fleet. NRG is committed to working with all necessary stakeholders on a comprehensive, objective, and exhaustive root cause analysis of the entirety of the energy system. The estimated financial impact is still preliminary, due to customer meter and settlement data not being finalized, as well as potential customer and counterparty risk and expected ERCOT default allocations. Based on a preliminary analysis, Winter Storm Uri's financial impact is not expected to be adverse to NRG's financial results. The Company separately stress-tested assumptions and although at a lower probability, this stress-test analysis indicated a potential plus or minus $100 million to income from continuing operations in 2021. NRG's integrated platform continues to deliver stable results through unprecedented events. COVID-19 In March 2020, the World Health Organization categorized COVID-19 as a pandemic and the President of the United States declared the COVID-19 outbreak a national emergency. Electricity was deemed a ‘critical and essential business operation’ under various state and federal governmental COVID-19 mandates. NRG has been and continues to remain focused on protecting the health and well-being of its employees, while supporting its customers and the communities in which it operates and assuring the continuity of its operations. During 2020, NRG contributed $2 million to COVID-19 relief efforts, including funding for urgently needed safety equipment supporting first responders, as well as funds that aided local communities and teachers. The Company also allocated funding to the NRG Employee Relief Fund to assist employees adversely impacted by natural disasters and other extraordinary events. NRG activated its Crisis Management Team ("CMT") in January 2020, which proactively began managing the Company's response to the impacts of COVID-19. The CMT implemented the business continuity plans for the Company and had taken a variety of measures to ensure the ongoing availability of the Company's services, while maintaining the Company's commitment to its core values of health and safety. Pursuant to the Company's Infectious Disease & Pandemic Policy, in March 2020, NRG implemented restrictions on business travel and face-to-face sales channels, instituted remote work practices and enhanced cleaning and hygiene protocols in all of its offices and facilities. In order to effectively serve the Company’s customers, select essential employees and contractors continued to report to plant and certain office locations. In June 2020, summer-critical office employees also returned to the offices. 10 The Company requires pre-entry screening, including temperature checks, separation of work crews, additional personal protective equipment for employees and contractors when social distancing cannot be maintained, and a ban on all non-essential visitors. As a result of these business continuity measures, the Company has not experienced any material disruptions in its ability to continue its business operations to date. The first COVID-19 vaccine became available in the United States in December 2020. NRG continues to advocate alongside state and federal trade groups for the high prioritization of essential electric industry personnel for inoculation against COVID-19. States are receiving weekly doses of vaccines and allocating those doses to frontline healthcare workers, elderly populations and high risk individuals. NRG continues to monitor state information as well as dosage and allocation numbers to anticipate the latest timing of vaccine distribution to our essential employees. The Company will continue to evaluate additional return to normal work operations on a location-by-location basis as COVID-19 conditions evolve. The Company continues to utilize the communication protocol established in January 2020, including a central information hub on its intranet. The Company has provided additional wellness programs to support employees through the pandemic, including no-cost access to telehealth services, a mindfulness and meditation program, center or home-based backup child and elder care, and access to the Company's Emergency Relief Fund for financially impacted employees. Following the President's declaration of COVID-19 outbreak as a national emergency in March 2020, the Governors of the majority of states in which the Company operates issued executive orders that every person should, except where necessary to provide or obtain essential services, minimize social gatherings and minimize in-person contact with people who are not in the same household. The impact of these orders affected energy loads due to closed schools, restaurants and bars, except in certain cases for takeout, and other non-essential businesses. As state restrictions have been eased or lifted, loads have begun to recover in those markets in which the Company operates. The rebound in demand has varied across the Company's market footprint, as restrictions vary regionally. During 2020, the Company experienced increased demand from its residential portfolio as many people remained at home, while the load for small businesses and C&I customers decreased due to reduced economic activity. The Company expects similar demand trends to continue in the near future. These restrictions have also created limitations to the Company's face-to-face sales channels and are expected to negatively impact the Company's customer count primarily in the East region. As the COVID-19 vaccine is distributed and the spread of transmission decreases, the Company would anticipate changes to the previously disclosed restrictions. In Texas, the PUCT adopted the COVID-19 Electricity Relief Program (“ERP”) to mitigate the impact of COVID-19 on Texas retail electric customers experiencing economic hardship as a result of the pandemic. The COVID-19 ERP provided temporary disconnection protection for eligible customers and established funds to offset some of the costs incurred by retail electric providers that continued service to those customers. The COVID-19 ERP disconnection protection and benefits ended on September 30, 2020. Consistent with the PUCT's orders, NRG is continuing to offer deferred payment plans to all residential and small commercial customers while the declaration of emergency in Texas is in place. While the pandemic presented risks, as further described in Part II, Item 1A — Risk Factors of this Form 10-K, to the Company’s business, there was not a material adverse impact on the Company’s results of operations for the year ended December 31, 2020. NRG believes it has sufficient liquidity on hand to continue business operations in light of current circumstances posed by the pandemic. As disclosed in the Liquidity and Capital Resources section, the Company has total available liquidity of $7.0 billion as of December 31, 2020, consisting of cash on hand, its Revolving Credit Facility and additional facilities. The situation surrounding COVID-19 remains fluid and the potential for a material adverse impact on the Company exists as long as the virus impacts the level of economic activity in the United States and abroad. The Company expects the risk to decrease in the future as vaccinations are administered. NRG cannot reasonably estimate with any degree of certainty the full impact COVID-19, and any resurgence of COVID-19, may have on the Company’s future results of operations, financial position, and liquidity. The extent to which the COVID-19 pandemic may impact the Company’s business, operating results, financial condition, risk exposure or liquidity will depend on future developments, including the duration of the pandemic, travel restrictions, business and workforce disruptions, any resurgence of the pandemic and the effectiveness of actions taken to contain, mitigate and treat the disease. See Part I, Item 1A — Risk Factors of this Form 10-K. Customer Operations Customer Operations is responsible for growing and retaining the customer base and delivering an outstanding customer experience. This includes acquisition and retention of all of NRG’s residential, small commercial, government and commercial & industrial customers. NRG employs a multi-brand strategy that leverages a wide array of sales and partnership channels, direct face-to-face sales channels, call centers, websites, and brokers. Go-to-market activities include market strategy planning and development, product innovation, offer design, campaign execution, marketing and creative services, and selling. Customer portfolio maintenance and retention activities include fulfillment, billing, payment processing, collections, customer service, issue resolution, and contract renewals. Throughout all Customer Operations activities, the customer experience is kept at the forefront to inform decision-making and optimize retention, while creating supporters and advocates for NRG’s brands in the 11 market. Following the expansion of the customer base with the acquisition of Direct Energy, Customer Operations now comprises three end-use customer facing teams: NRG Home, which serves Mass Market customers, NRG Business, which serves medium and large business customers, and NRG Services, which primarily includes the services businesses acquired. Product Offerings NRG sells a variety of products to residential and small commercial customers, including retail electricity and energy management, natural gas, home security, line and surge protection products, HVAC installation, repair and maintenance, home warranty and protection products, carbon offsets, back-up power stations, portable power, portable solar and portable lighting. Mass market customers make purchase decisions based on a variety of factors, including price, incentive, customer service, brand, innovative offers/features and referrals from friends and family. Through its broad range of service offerings and value propositions, NRG is able to attract, retain, and increase the value of its customer relationships. NRG's brands are recognized for exemplary customer service, innovative smart energy and technology product offerings, and environmentally-friendly solutions. The Company provides power and natural gas to the business-to-business markets in North America, as well as retail services, including demand response, commodity sales, energy efficiency and energy management solutions to C&I customers. The Company is an integrated provider of supply and distributed energy resources and focuses on distributed products and services as businesses seek greater reliability, cleaner power and/or other benefits that they cannot obtain from the grid. These solutions include system power, distributed generation, renewable products, carbon management and specialty services, backup generation, storage and distributed solar, demand response, and energy efficiency and advisory services. In providing on-site energy solutions, the Company often benefits from its ability to supply energy products from its wholesale generation portfolio to C&I customers. In 2020, the Company sold approximately 20 TWhs of electricity to C&I customers and managed approximately 1,750 MWs of demand response positions across its portfolio. Market Operations Market Operations has two primary objectives: (i) to supply energy to our customers in the most cost-efficient manner; and (ii) to maximize the value of the Company's assets after satisfying its customer load requirements. These objectives are intended to reduce supply costs and maximize earnings with predictable cash flows. To meet these objectives, NRG enters into supply, power and gas sales and hedging arrangements via a wide range of products and contracts, including (i) renewable PPAs, (ii) capacity auctions and other contracted revenue sources, (iii) fuel supply and transportation contracts, and (iv) physical and financial natural gas derivative instruments and other financial instruments. In addition, because changes in power prices in the markets where NRG operates are generally correlated to changes in natural gas prices, NRG uses hedging strategies that may include power and natural gas forward purchases and sales contracts to manage the commodity price risk. Renewable PPAs During 2019, NRG began procuring mid to long-term renewable generation through power purchase agreements. As of December 31, 2020, NRG has entered into PPAs in Texas totaling approximately 1,800 MWs with third-party project developers and other counterparties. The tenor of these agreements is an average between eleven and twelve years. The Company expects to continue evaluating and executing agreements, such as these, that support the needs of the business. Capacity and Other Contracted Revenue Sources NRG's revenues and cash flows, primarily in the East and West, benefit from capacity/demand payments and other contracted revenue sources, originating from market clearing capacity prices, resource adequacy contracts, tolling arrangements and other long-term contractual arrangements. The Company's largest sources of capacity revenues are capacity auctions in PJM, ISO-NE and NYISO. Both PJM and ISO-NE operate a pay-for-performance model where capacity payments are modified based on real-time performance and NRG's actual revenues will be the combination of revenues based on the cleared auction MWs plus the net of any over- and under-performance of NRG's respective generation assets. The Company primarily sells physical and financial capacity forward through bilateral contracts for our New York state assets. To the extent NRG is not able to enter into physical bilateral contracts, NRG will sell the remaining capacity into the NYISO six month strip, monthly or spot auctions. • 2024/2025 ISO-NE Auction Results - On February 11, 2020 ISO-NE announced the results of its 2024/2025 forward capacity auction. NRG cleared 1,518 MW of capacity. NRG's expected capacity revenues from the auction for the 2024/2025 delivery year are approximately $48 million. 12 • PJM Auction Results — PJM announced during 2019 it was suspending all auction deadlines relating to Base Residual Auctions for 2022/2023 and 2023/2024 delivery year, consistent with FERC’s July 25, 2019 Order. The auctions are now set to resume in 2021. Refer to the Capacity Market Reforms Filing discussion within the Regional Regulatory Developments section below for further discussion. In California, there is a resource adequacy requirement that is primarily satisfied through bilateral contracts. Such bilateral contracts are typically short-term resource adequacy contracts. When bilateral contracting does not satisfy the resource adequacy need, such shortfalls can be addressed through procurement tools administered by the CAISO, including the capacity procurement mechanism or reliability must-run contracts. Fuel Supply and Transportation NRG's fuel requirements consist of various forms of fossil fuel and nuclear fuel. The prices of fossil fuels can be volatile. The Company obtains its fossil fuels from multiple suppliers and through multiple transporters. Although availability is generally not an issue, localized shortages, transportation availability, delays arising from extreme weather conditions and supplier financial stability issues can and do occur. The preceding factors related to the sources and availability of raw materials are fairly uniform across the Company's business and fuel products used. NRG's primary fuel requirements consist of the following: Natural Gas — NRG operates a fleet of mid-merit and peaking natural gas plants across all its U.S. wholesale regions. Fuel needs are managed on a spot basis, especially for peaking assets, as the Company does not believe it is prudent to forward purchase natural gas for these types of units as the dispatch is highly unpredictable. The Company contracts for natural gas storage services, as well as natural gas transportation services to deliver natural gas when needed. Coal — The Company believes it is adequately hedged, using forward coal supply agreements, for its domestic coal consumption for 2021. NRG actively manages its coal requirements based on forecasted generation, market volatility and its inventory on site. As of December 31, 2020, NRG had purchased forward contracts to provide fuel for approximately 50% of the Company's expected requirements for 2021 and 2022 . NRG purchased approximately 11 million tons of coal in 2020, almost all of which was Powder River Basin coal. For fuel transport, NRG has entered into various rail transportation and rail car lease agreements with varying tenures that will provide for most of the Company's transportation requirements of Powder River Basin coal for the next 2 years. Nuclear Fuel — STP's owners, including NRG, satisfy their fuel supply requirements by: (i) acquiring uranium concentrates and contracting for conversion of the uranium concentrates into uranium hexafluoride; (ii) contracting for enrichment of uranium hexafluoride; and (iii) contracting for fabrication of nuclear fuel assemblies. Through its proportionate participation in STPNOC, which is the NRC-licensed operator of STP that is responsible for all aspects of fuel procurement, NRG is party to a number of long-term forward purchase contracts with many of the world's largest suppliers covering STP's requirements for uranium concentrates with only approximately 25% of STP's requirements outstanding for the duration of the original operating license. Similarly, NRG is party to long-term contracts to procure STP's requirements for conversion and enrichment services and fuel fabrication for the life of the operating license. Since the operating license was renewed for another 20 years in 2017, STPNOC has begun to review a second phase of fuel purchasing. Derivative Instruments and Other Financial Instruments NRG also trades electric power, natural gas and related commodities, environmental products, weather products and financial products, including forwards, futures, options and swaps. NRG enters into these instruments for many reasons, including to manage price and delivery risk, optimize physical and contractual assets in the portfolio, manage working capital requirements, reduce the carbon exposure in its business and comply with regulations and laws. Plant Operations The Company owns a diversified power generation portfolio with approximately 23,000 MW of fossil fuel, nuclear and renewable generation capacity at 33 plants as of December 31, 2020. The Company's power generation assets are diversified by fuel-type, dispatch level and region, which helps mitigate the risks associated with fuel price volatility and market demand cycles. NRG continually evaluates its generation portfolio to focus on asset optimization opportunities and the locational value of its generation assets in each of the markets where the Company participates, as well as opportunities for the development of new generation. 13 The following table summarizes NRG's generation portfolio as of December 31, 2020: (In MW) (a) Type Texas East West/Other Total Natural gas 4,774 2,742 2,308 9,824 Coal 4,174 3,140 605 7,919 Oil — 3,600 — 3,600 Nuclear 1,132 — — 1,132 Utility Scale Solar — — 321 321 Battery Storage (b) 2 — — 2 Total generation capacity 10,082 9,482 3,234 22,798 (a) All Utility Scale Solar are described in MW on an alternating current basis. MW figures provided represent nominal summer net MW capacity of power generated as adjusted for the Company's owned or leased interest excluding capacity from inactive/mothballed units (b) The Distributed Solar figure includes the aggregate production capacity of installed and activated residential solar energy systems Plant Operations is responsible for operating the Company's generation facilities at the highest standards of safety and reliability, and includes (i) operations and maintenance, (ii) asset management, and (iii) development, engineering and construction. Operations & Maintenance NRG operates and maintains its generation portfolio, as well as approximately 7,243 MW of additional coal and natural gas generation capacity at 11 plants operated on behalf of third parties as of December 31, 2020 using prudent industry practices for the safe, reliable and economic generation of electricity in compliance with all local, state and federal requirements. The Company follows a consistent set of operating requirements, including a solid base of training, required adherence to specific safety and environmental limits, procedure and checklist usage, and the implementation of continuous process improvement through incident investigations. NRG uses best-in-class maintenance practices for preventive, predictive, and corrective maintenance planning. The Company’s strategic planning process evaluates equipment condition, performance, and obsolescence to support the development of a comprehensive work scope and schedule for long-term performance. Asset Management NRG manages all aspects of its generation portfolio to optimize the lifecycle value of the assets, consistent with the Company’s goals. The Company evaluates capital projects required for continued operation and strategic enhancement of the assets, provides quality assurance on capital outlays, and assesses the impact of rules, regulations, and laws on business profitability. In addition, the Company manages its long-term contracts, power purchase agreements, and real estate holdings and provides third party asset management services. Development, Engineering & Construction NRG develops, engineers and executes major plant modifications, “new build” generation and energy storage projects that enhance the value of its generation portfolio and provide options to meet generation growth needs in the retail markets we serve, in accordance with the Company’s strategic goals. Projects have included gas-fired generation development and construction, coal to gas conversions, grid scale energy storage development, grid scale renewable construction, and asset demolition, remediation and reclamation work. 14 Operational Statistics The following statistics represent the Company's retail customer count, load and contract mix: Years ended December 31, 2020 2019 2018 Sales volumes (in GWh) Mass Market electricity - Texas 38,473 38,958 37,846 Mass Market electricity - East 10,221 9,918 7,968 C&I electricity - Texas 17,928 18,976 20,192 C&I electricity - East 1,596 1,214 984 Total Load 68,218 69,066 66,990 Customer count - Electricity (in thousands) Mass Market - Texas (a) Average retail 2,449 2,358 2,209 Ending retail 2,451 2,450 2,318 Mass Market - East Average retail 1,019 990 790 Ending retail 970 1,070 903 (a) Includes customers of non-electric services Customer count - Natural gas - East (in thousands) Average retail Mass Market 156 122 64 Ending retail Mass Market 166 158 99 Customer contract mix Fixed 69 % 67 % 65 % Month-to-month 23 % 24 % 25 % Indexed 8 % 9 % 10 % 100 % 100 % 100 % The following are industry statistics for the Company's fossil and nuclear plants, as defined by the NERC, and are more fully described below: Annual Equivalent Availability Factor, or EAF — Measures the percentage of maximum generation available over time as the fraction of net maximum generation that could be provided over a defined period of time after all types of outages and deratings, including seasonal deratings, are taken into account. Net Heat Rate — The net heat rate represents the total amount of fuel in BTU required to generate one net kWh provided. Net Capacity Factor — The net amount of electricity that a generating unit produces over a period of time divided by the net amount of electricity it could have produced if it had run at full power over that time period. The net amount of electricity produced is the total amount of electricity generated minus the amount of electricity used during generation. 15 The tables below present these performance metrics for the Company's generation portfolio, including leased facilities and those accounted for as equity method investments, for the years ended December 31, 2020 and 2019: Year Ended December 31, 2020 Fossil and Nuclear Plants (a) Net Owned Capacity (MW) Net Generation (In thousands of MWh) (a) Annual Equivalent Availability Factor Average Net Heat Rate BTU/kWh Net Capacity Factor Texas 10,082 31,385 76.0 % 7,704 35.9 % East 9,482 4,102 81.7 % 12,329 4.8 % West/Other (b)(c) 3,234 9,171 88.0 % 7,338 52.3 % Year Ended December 31, 2019 Fossil and Nuclear Plants (a) Net Owned Capacity (MW) Net Generation (In thousands of MWh) (a) Annual Equivalent Availability Factor Average Net Heat Rate BTU/kWh Net Capacity Factor Texas 10,061 37,995 83.3 % 10,542 43.2 % East 9,426 6,913 81.7 % 11,917 8.3 % West/Other (b)(c) 3,294 9,462 79.9 % 6,751 51.4 % (a) Net generation excludes equity method investments (b) Includes the Sherbino and Guam facilities that were sold in 2019 (c) Includes the aggregate production capacity of installed and activated residential solar energy systems The generation performance by region for the three years ended December 31, 2020, 2019 and 2018 is shown below: Net Generation (In thousands of MWh) 2020 2019 2018 Texas Coal 15,701 21,985 24,781 Gas 6,006 6,315 4,415 Nuclear (a) 9,678 9,695 9,018 Total Texas 31,385 37,995 38,214 East Coal 1,888 4,435 7,965 Oil 322 209 544 Gas 1,892 2,269 1,610 Total East 4,102 6,913 10,119 West/Other Gas 9,165 9,450 10,187 Renewables 6 12 783 Total West/Other 9,171 9,462 10,970 (a) Reflects the Company's undivided interest in total MWh generated by STP Competition While there has been consolidation in the competitive retail space over the past few years, there is still considerable competition for customers. In Texas, there is healthy competition in deregulated areas and customers can choose providers based on the most appealing offers. Outside of Texas, electricity retailers compete with the incumbent utilities, in addition to other retail electric providers, which can inhibit competition, depending on the market rules of the state. There is a high degree of fragmentation, with both large and small competitors offering a range of value propositions, including value, rewards, and sustainability. Wholesale generation is highly fragmented and diverse in terms of industry structure by region. As such, there is a wide variation in terms of the capabilities, resources, nature and identities of the Company’s competitors depending on the market. Competitors include regulated utilities, municipalities, cooperatives, other independent power producers, and power marketers or trading companies, including those owned by financial institutions. 16 Seasonality and Price Volatility The sale of electric power to retail customers is a seasonal business with the demand for power generally peaking during the summer months. In connection with the acquisition of Direct Energy, the Company acquired a large natural gas customer portfolio, which generally experiences peak demand during the winter months. As a result, net working capital requirements for the Company's retail operations generally increase during summer and winter months along with the higher revenues, and then decline during off-peak months. Weather may impact operating results and extreme weather conditions could have a material impact. The rates charged to retail customers may be impacted by fluctuations in total power prices and market dynamics, such as the price of natural gas, transmission constraints, competitor actions, and changes in market heat rates. Annual and quarterly operating results of the Company's generation portfolio can be significantly affected by weather and energy commodity price volatility. Significant other events, such as the demand for natural gas, interruptions in fuel supply infrastructure and relative levels of hydroelectric capacity can increase seasonal fuel and power price volatility. The preceding factors related to seasonality and price volatility are fairly uniform across the regions in which the Company operates. Market Framework NRG sells electricity, natural gas and related products and services to customers throughout the U.S. and Canada. In most of the states and regions that have introduced retail consumer choice, NRG competitively offers electricity, natural gas, portable power and other value-enhancing services to customers. Each retail consumer choice state or province establishes its own retail competition laws and regulations, and the specific operational, licensing, and compliance requirements vary by state or province. Regulated terms and conditions of default service, as well as any movement to replace default service with competitive services, as is done in ERCOT, can affect customer participation in retail competition. In Canada, NRG sells energy and related services to residential and commercial customers in the province of Alberta pursuant both to a regulated rate service governed by provincial regulations as well as a competitive service with rates set by market forces. Sales of energy to commercial customers take place in other provinces as well. The attractiveness of NRG's retail offerings may be impacted by the rules, regulations, market structure and communication requirements from public utility commissions in each state and province. NRG's fleet operates in organized energy markets, known as RTOs or ISOs. Each organized market administers day-ahead and real-time centralized bid-based energy and ancillary services markets pursuant to tariffs approved by FERC, or in the case of ERCOT, market rules approved by the PUCT. These tariffs and rules dictate how the energy markets operate, how market participants make bilateral sales with one another, and how entities with market-based rates are compensated. Established prices reflect the value of energy at the specific location and time it is delivered, which is known as the Locational Marginal Price. Each market is subject to market mitigation measures designed to limit the exercise of locational market power. These market structures facilitate NRG's sale of power and capacity products at market-based rates. Other than ERCOT, each of the ISO regions also operates a capacity or resource adequacy market that provides an opportunity for generating and demand response resources to earn revenues to offset their fixed costs that are not recovered in the energy and ancillary services markets. The ISOs are also responsible for transmission planning and operations. Texas NRG's business in Texas is subject to standards and regulations adopted by the PUCT and ERCOT (a) , including the requirement for retailers to be certified by the PUCT in order to contract with end-users to sell electricity. The ERCOT market is one of the nation's largest and, historically, fastest growing power markets. ERCOT is an energy-only market and has implemented market rule changes referred to as the Operating Reserve Demand Curve (ORDC) to provide pricing more reflective of higher energy value when operating reserves are scarce or constrained. The PUCT directed the implementation of the ORDC in 2014 to act as the primary scarcity pricing mechanism, with subsequent amendments made in 2019 and 2020. The majority of the retail load in the ERCOT market region is served by competitive retail suppliers, except certain areas that have not opted into competitive consumer choice and are served by municipal utilities and electric cooperatives. East While most of the states in the East region have introduced some level of retail consumer choice for electricity and/or natural gas, the incumbent utilities currently provide default service in most of the states and as a result typically serve the majority of residential customers. NRG’s retail activities in the East are subject to standards and regulations adopted by the ISOs and state public utility commissions, including the requirement for retailers to be certified in each state in order to contract with end-users to sell electricity. (a) The Cottonwood facility is located in Deweyville, Texas, but operates in the MISO market 17 NRG's power plants and demand response assets located in the East region of the U.S. are within the control areas of ISO-NE, MISO, NYISO and PJM. Each of the market regions in the East region provides for robust competition in the day-ahead and real-time energy and ancillary services markets. Additionally, the East region receives a significant portion of its revenues from capacity markets. PJM and ISO-NE use a three-year forward capacity auction, while NYISO uses a month-ahead capacity auction. MISO has an annual auction, known as the Planning Resource Auction. Capacity market prices are sensitive to design parameters, as well as additions of new capacity. Both ISO-NE and PJM operate a pay-for-performance model where capacity payments are modified based on real-time generator performance. In such markets, NRG’s actual capacity revenues will be the combination of cleared auction prices times the quantity of MWs cleared, plus the net of any over-performance "bonus payments" and any under-performance charges. Additionally, bidding rules allow for the incorporation of a risk premium into generator bids. West In the West region of the U.S., NRG operates a fleet of natural gas-fired power plants located entirely within the CAISO footprint. The CAISO operates day-ahead and real-time locational markets for energy and ancillary services, while managing congestion primarily through nodal prices. The CAISO system facilitates NRG's sale of power, ancillary services and capacity products at market-based rates, either within the CAISO's centralized energy and ancillary service markets or bilaterally pursuant to tolling arrangements or other capacity sales with California's LSEs. The CPUC also determines capacity requirements for LSEs and for specified local areas utilizing inputs from the CAISO. Both the CAISO and CPUC rules require LSEs to contract with sufficient generation resources in order to maintain minimum levels of generation within defined local areas. Additionally, the CAISO has independent authority to contract with needed resources under certain circumstances, typically either when LSEs have failed to procure sufficient resources, or system conditions change unexpectedly. Canada In Canada, NRG sells to residential and commercial retail customers in Alberta under both regulated rates approved by the AUC as well as through competitive service with rates set by the market. The Company's regulated rates are approved through periodic rate applications that establish rates for power and gas sales as well as for recovery of other costs associated with operating the regulated business. In addition, the Company conducts retail sales of energy to commercial customers in other provinces. All sales and operations are subject to applicable federal and provincial laws, regulations and licensing requirements. Regulatory Matters As participants in wholesale and retail energy markets and owners and operators of power plants, certain NRG entities are subject to regulation by various federal and state government agencies. These include the CFTC, FERC, NRC and the PUCT, as well as other public utility commissions in certain states where NRG's generation or distributed generation assets are located. In addition, NRG is subject to the market rules, procedures and protocols of the various ISO and RTO markets in which it participates. Likewise, certain NRG entities participating in the retail markets are subject to rules and regulations established by the states and provinces in which NRG entities are licensed to sell at retail. NRG must also comply with the mandatory reliability requirements imposed by NERC and the regional reliability entities in the regions where NRG operates. Since entering office in January 2021, the President has signed a package of executive orders which, amongst other things, intends to boost the federal government's response to COVID-19, as well as elevate climate change across all levels and jurisdictions of the federal government. The administration has requested all agencies delay submitting rules to the Federal Register or posting their effective date for 60 days if not already effective, until they can be reviewed by appointees of the current administration. NRG is closely monitoring agency action as the orders will likely result in the promulgation of new regulations, where applicable. NRG's operations within the ERCOT footprint are not subject to rate regulation by FERC, as they are deemed to operate solely within the ERCOT market and not in interstate commerce. These operations are subject to regulation by the PUCT, as well as to regulation by the NRC with respect to NRG's ownership interest in STP. Federal Energy Regulation D.C. Circuit Ruling on FERC's Use of Tolling Orders — On June 30, 2020, the U.S. Court of Appeals for the D.C. Circuit issued a decision stating that FERC's ability to "toll" actions on rehearing beyond the statutory 30-day period is unlawful. On September 17, 2020, FERC staff explained that in Federal Power Act cases, it will no longer issue tolling orders but instead will issue either a Notice of Denial of Rehearing by Operation of Law or a Notice of Denial of Rehearing by Operation of Law and Providing for Further Consideration. The first indicates that FERC would not intend to issue a merits order and the second indicates that FERC intends to issue further action. This decision impacts an array of appeals related to the PJM MOPR order and will impact how rehearings are decided and appeals filed. 18 State and Provincial Energy Regulation State Proceedings Regarding States’ Participation in the Wholesale Market — Various states, including Connecticut, New Jersey, and New York as well as the District of Columbia have initiated proceedings to investigate resource adequacy alternatives and to consider its participation in the regional wholesale electricity market constructs, specifically withdrawal from the regional market or implementing a Fixed Resource Requirement Regime. Any actions taken by the states could affect market design and market prices in the respective regional markets. Regional Regulatory Developments NRG is affected by rule/tariff changes that occur in the ISO regions. For further discussion on regulatory developments see Item 15 — Note 25, Regulatory Matters, to the Consolidated Financial Statements. East/West PJM Capacity Market Reforms Filing — On December 19, 2019, FERC issued an order on the pending proposals to reform the PJM market to mitigate subsidized resources in the capacity market. FERC directed PJM to apply the Minimum Offer Price Rule, or MOPR, to new and existing resources receiving state subsidies and subject them to default offer floor prices in their capacity bids. The Order provided for various category specific exemptions to the MOPR, as well as a unit specific exemption, which permits any resource that can justify an offer lower than the default offer price floor to submit such capacity bids to PJM for review. After subsequent filings and orders, on November 13, 2020, PJM submitted its third compliance filing, including a timeline to hold the next Base Residual Auction for Delivery Year 2022-2023 on May 19-25, 2021, which was accepted by FERC. Multiple parties filed appeals in this matter, which have been consolidated at the Seventh Circuit Court of Appeals. Subjecting subsidized resources to default offer floors in the capacity market should protect the market from further price suppression. The impact of these changes on capacity market outcomes depends on, among other factors, bidding behavior, load forecast changes, new resource entry, and existing resource exit. Indiana Municipal Power Agency and City of Lawrenceburg, Indiana Complaint on Station Power — On September 17, 2020, FERC issued an order in response to a complaint and request for declaratory judgement challenging the station power wholesale netting provisions in PJM's tariff. FERC found that it does not have jurisdiction over the supply of station power and the provision of station power is a retail sale subject to state jurisdiction. The order established a Section 206 proceeding and required PJM to submit a filing within 60 days to show why the station service netting provisions of its tariff are just and reasonable. Lawrenceburg Power, LLC filed for rehearing, which was denied by operation of law on November 19, 2020 and they subsequently appealed to the United States Court of Appeals for the District of Columbia Circuit. The matter is pending. On November 23, 2020, PJM submitted its station power compliance filing to FERC. Multiple parties filed comments and protests to PJM's compliance filing. This decision could affect the rates that plants pay for station power. PJM's ORDC Filing and Compliance Directives — On March 29, 2019, PJM proposed energy and reserve market reforms to enhance price formation in reserve markets, which includes modifying its ORDC and aligning market-based reserve product in Day-Ahead and Real-Time markets. On May 21, 2020, FERC approved PJM's proposed energy and reserve market reforms. FERC also directed PJM to implement a forward-looking Energy and Ancillary Services Offset to be used in PJM's capacity markets. PJM submitted a compliance filing to revise its tariff on August 5, 2020. On November 12, 2020, FERC approved two PJM compliance filings regarding PJM's reserve markets and the forward-looking Energy and Ancillary Services Offset and subsequently issued a timeline to hold the Base Residual Auction as noted above. PJM will implement the forward-looking Energy and Ancillary Services Offset for the 2022/2023 Base Residual Auction. New England ISO-NE Inventoried Energy Compensation Proposal — FERC approved ISO-NE's proposed interim measure to address near-term fuel security concerns by operation of law. After an appeal to the Court of Appeals and a remand back to FERC, FERC issued an order accepting Inventoried Energy Compensation Proposal and by operation of law denied requests for rehearing on August 20, 2020. Multiple parties filed amended petitions for review to include FERC's order on remand. ISO-NE's proposal will affect future capacity market prices and the compensation that fuel secure units receive. Mystic's Complaint on Transmission Reliability Review — On June 10, 2020, Constellation Mystic Power LLC filed a complaint at FERC against ISO-NE alleging that ISO-NE violated its Tariff in its addition of language to its planning procedure and in its conduct in carrying out a competitive transmission REP to address the retirements of Mystic Units 8 and 9. On August 17, 2020, FERC issued an order denying the complaint. After a rehearing that was denied by operation of law, on January 4, 2021, Constellation Mystic Power LLC filed an appeal to the D.C. Circuit. The outcome of this proceeding affects the retirement of the Mystic Units 8 and 9, thereby affecting capacity prices in ISO-NE. 19 Paper Hearing on ISO-NE's New Entrant Rule — On July 1, 2020, FERC issued an order establishing a Section 206 hearing initiated by FERC's preliminary finding that the "new entrant rules" may be unjust and unreasonable, specifically as it relates to the seven-year price-lock rule as a result of the D.C. Circuit Court's remand on a FERC Order. The price-lock mechanism permits qualified new resources that clear the auction to receive their first-year clearing price for seven years. On December 1, 2020, FERC issued an order eliminating the seven-year price lock rule beginning in Forward Capacity Auction 16. The elimination of the seven-year price lock rule could affect future capacity prices in ISO-NE. Competitive Auctions with Sponsored Resources Proposal (CASPR) — On January 8, 2018, ISO-NE filed the CASPR proposal which attempts to accommodate state sponsored resources while maintaining competitive market pricing. On November 19, 2020, FERC upheld the order approving CASPR. Multiple parties filed an appeal to the D.C. Circuit. The outcome of this proceeding will potentially affect future capacity market prices. New York New York State Public Service Commission Retail Energy Market Proceedings — On February 23, 2016, the NYSPSC issued an order referred to as the Retail Reset Order. Among other things, the Retail Reset Order placed a price cap on energy supply offers and imposed burdensome new regulations on ESCO's. Various parties have challenged the NYSPSC's authority to regulate prices charged by competitive suppliers. On May 9, 2019 the New York Court of Appeals, the state’s highest tribunal, issued a decision affirming the NYSPSC’s authority to regulate ESCO’s prices as a condition of access to the utilities’ infrastructure. On December 12, 2019, the NYSPSC issued an order limiting ESCO's offers for electric and natural gas to three compliant products: guaranteed savings from the utility default rate, a fixed term capped at 5% of the rolling 12-month average utility default rate, or NY-sourced renewable energy that is at least 50% greater than the prevailing NY Renewable Energy Standard for load serving entities. The Order effectively limited ESCO offers to natural gas customers to only the guaranteed savings and capped fixed term compliant products because no equivalent renewable energy product exists for natural gas. The Order also establishes new ESCO eligibility criteria and certification process, as well as re-certification of current ESCOs. Multiple parties filed for rehearing, which were denied. After extension requests, the NYSPSC ordered compliance effective April 16, 2021. On January 21, 2021, the NYSPSC issued an Order setting a timeline to evaluate additional compliant energy-related value-added products and also provided for a limited one-year waiver whereby ESCOs, including NRG's Green Mountain Energy and XOOM Energy, which currently offer green gas products, could continue to serve existing customers. The limited offerings imposed by the Order, as issued, may impact the Company's retail sales to Mass Market customers in New York, although the Company is currently in the process of moving existing customers to compliant products. New York Buyer Side Mitigation Proceedings — On February 20, 2020, FERC issued multiple orders pertaining to the NYISO capacity market. The orders narrowed certain exemptions to buyer side mitigation measures. Specifically, FERC stated that certain renewable and self-supply resources would be exempt from offer floor mitigation but rejected NYISO’s proposal of a 1,000 MW cap on renewable resources that could qualify for the exemption. FERC ordered NYISO to make a compliance filing narrowly tailoring its cap. The NYISO submitted its compliance filing, which FERC largely accepted. FERC rejected a complaint to exempt new electric storage resources and also rejected a blanket exemption to demand response providers currently subject to mitigation but granted a request for new demand response to receive a blanket exemption from the buyer side mitigation measures. On June 18, 2020, the NYSPSC filed petitions for review with the D.C. Circuit regarding these buyer side mitigation orders, but the appeals were held in abeyance pending FERC's consideration of rehearing requests. On December 7, 2020, FERC denied rehearings by operation of law regarding the exemption to demand response providers. FERC sustained its position in an October 15, 2020 order regarding the rehearing on electric storage resources. Parties have re-appealed the order regarding electric storage resources. Implementation of buyer side mitigation measures to address price suppression provides more accurate capacity price signals in the competitive market. New York Generators' Complaint on Buyer Side Mitigation Rules — On October 14, 2020, two New York generators, Cricket Valley and Empire Generating, filed a complaint at FERC against the NYISO arguing that the NYISO's offer floor rules are unjust and unreasonable because they do not address price suppression in the market. The complaint requests that FERC order the NYISO to implement a MOPR that covers out-of-market support to new and existing resources, similar to that in PJM. The outcome of this proceeding could affect capacity market prices in New York. The complaint remains pending at FERC. Texas Public Utility Commission of Texas’ Actions Related to COVID-19 — On March 26, 2020, the PUCT adopted the COVID-19 Electricity Relief Program ("ERP") aimed to mitigate the impact of COVID-19 on residential customers in the competitive retail electric market who are experiencing economic hardship as a result of the pandemic. The COVID-19 ERP protected residential customers deemed eligible by the PUCT’s third party administrator from disconnection for nonpayment until September 30, 2020 and established an emergency fund to allow Retail Electric Providers ("REPs") to recover a certain amount of credit losses incurred while continuing to serve these customers. Final reimbursement requests by REPs were due by November 30, 2020. 20 California California Resource Adequacy Proceedings — Since a summer 2020 heat storm that resulted in emergency load curtailments, the State of California and CAISO have embarked on numerous new regulatory activities while redirecting existing proceedings related to the topic of resource adequacy. In a rulemaking docket, on December 28, 2020, the CPUC directed the state's major investor-owned utilities to engage in emergency procurement for 2021 and 2022. In the same docket, the CPUC is considering ways to increase the volume of demand response available to the state during emergency conditions. The CPUC is also considering longer term structural reforms of the resource adequacy policy in California. Additionally, the CAISO has indicated it will procure resources to a higher reserve margin in 2021 than it employed in 2020, while evaluating the conditions likely to exist at early-evening hours when peak load, net of solar resources, is highest. Midway-Sunset RMR Proceeding — San Joaquin Energy, LLC, a subsidiary of NRG, owns a 50%, non-controlling interest in the Midway-Sunset Cogeneration Company ("MSCC"). MSCC owns a cogeneration facility near Fellows, CA and submitted mothball notices for the cogeneration facility to the CAISO in the latter half of 2020. On December 17, 2020, the CAISO Board effectively rejected the mothball notices by authorizing its staff to designate the MSCC facility as a reliability must-run resource conditioned on execution of a RMR contract. In a letter dated December 16, 2020 sent to the CAISO Board, MSCC indicated that it did not object to the RMR designation but noted certain permitting and maintenance requirements for RMR operation. On January 29, 2021, MSCC made its RMR filing at FERC. Canada Alberta Energy Market — In December 2020, prior to its acquisition by NRG, Direct Energy filed a Non-Energy Rate Application with the AUC to approve cost recovery for the 2020-2022 period. Major cost elements of this application relate to bad debt, corporate costs, and customer care and billing contracts. The Company is engaged in a mediation and settlement process. Typically, AUC proceeding take 12-18 months to reach resolution, if settlement procedures do not result in the resolution of contested issues more quickly. The AUC's decision ultimately will result in a surcharge or rebate to adjust collected revenues to AUC-approved costs for the 2020-2022 period. The Company also is waiting on a final review and approval from the AUC of a negotiated rate settlement for its electricity focused 2020-2022 Energy Price Setting Plan, of which a decision is expected during the first quarter of 2021. The Company is also in the process of repaying the remainder of amounts advanced to it from the Balance Pool and the Alberta government as part of its 90 day utility bill deferral program. This program, effective March 18, 2020, was designed to assist residential, farms, and small business customers who were negatively affected by COVID-19 related economic circumstances by temporarily deferring their utility bill payments. The program was also designed to mitigate bad debt risks associated with the implementation of the program. Environmental Regulatory Matters NRG is subject to numerous environmental laws in the development, construction, ownership and operation of power plants. These laws generally require that governmental permits and approvals be obtained before construction and maintained during operation of power plants. Federal and state environmental laws historically have become more stringent over time. Future laws may require the addition of emissions controls or other environmental controls or impose restrictions on the Company's operations. Complying with environmental laws often involves specialized human resources and significant capital and operating expenses, as well as occasionally curtailing operations. The COVID-19 pandemic may prevent the Company from complying with certain of its environmental requirements, which federal and state regulators have recognized. NRG decides to invest capital for environmental controls based on the relative certainty of the requirements, an evaluation of compliance options, and the expected economic returns on capital. A number of regulations that affect the Company have been revised recently by the EPA, including ash storage and disposal requirements, NAAQS revisions and implementation and effluent limitation guidelines. Some of these recent revisions may, in turn, be revised by the new U.S. presidential administration. NRG will evaluate the impact of these regulations as they are revised but cannot fully predict the impact of each until anticipated revisions and legal challenges are resolved. Air The CAA and related regulations (as well as similar state and local requirements) have the potential to affect air emissions, operating practices and pollution control equipment required at power plants. Under the CAA, the EPA sets NAAQS for certain pollutants including SO 2 , ozone, and PM2.5. Many of the Company's facilities are located in or near areas that are classified by the EPA as not achieving certain NAAQS (non-attainment areas). The relevant NAAQS may become more stringent. The Company maintains a comprehensive compliance strategy to address continuing and new requirements. Complying with increasingly stringent air regulations could require the installation of additional emissions control equipment at some NRG facilities or retiring of units if installing such controls is not economic. Significant changes to air regulatory programs affecting the Company are described below. 21 CPP/ACE Rules — The attention in recent years on GHG emissions has resulted in federal and state regulations. In October 2015, the EPA promulgated the CPP, addressing GHG emissions from existing EGUs. On February 9, 2016, the U.S. Supreme Court stayed the CPP. In July 2019, EPA promulgated the ACE rule, which rescinded the CPP, which had sought to broadly regulate CO 2 emissions from the power sector. On January 19, 2021, the D.C. Circuit vacated the ACE rule (but on February 22, 2021, at the EPA's request, stayed the issuance of the portion of the mandate that would vacate the repeal of the CPP). Accordingly, we expect the EPA to promulgate a new rule to regulate GHG emissions from power plants. Greenhouse Gas Emissions — NRG emits CO 2 (and small quantities of other GHGs) when generating electricity at a majority of its facilities. The graphs presented below illustrate NRG's domestic emissions of CO 2 e for the 2014, and the 2018 through 2020 period. Nearly all (>99%) of NRG's GHG emissions are subject to federal (U.S. EPA) GHG reporting requirements. In 2019, NRG announced the acceleration of its science-based GHG emissions reduction goals to align with prevailing climate science, which seeks to limit global warming in the post-industrial era to 1.5 degrees Celsius. NRG is targeting a 50% reduction by 2025, from its current 2014 baseline, and net-zero emissions by 2050. From 2014 to 2020, the Company's CO 2 e emissions decreased from 63 million metric tons to 28 million metric tons, representing a cumulative 55% reduction. The decrease is attributed to reductions in fleet-wide annual net generation, a market-driven shift away from coal as a primary fuel to natural gas, and in 2020 reduced load as a result of the COVID-19 pandemic. The Company believes the 2020 emissions level may change as load recovers from the impact of COVID-19. The Company is continuing to target a 50% reduction by 2025 and is on track to meet that goal. As of December 31, 2020, less than 10% of the Company's consolidated operating revenues were derived from coal-fired operating assets. The following tables reflect the Company’s generation portfolio, including leased facilities and those accounted for through equity method investments. Prior year information was adjusted to remove divested assets. Byproducts, Wastes, Hazardous Materials and Contamination In April 2015, the EPA finalized the rule regulating byproducts of coal combustion (e.g., ash and gypsum) as solid wastes under the RCRA. In September 2017, the EPA agreed to reconsider the rule. On July 30, 2018, the EPA promulgated a rule that amended the existing ash rule by extending some of the deadlines and providing more flexibility for compliance. On August 21, 2018, the D.C. Circuit found, among other things, that the EPA had not adequately regulated unlined ponds and legacy ponds. In 2019 and 2020, the EPA proposed several changes to this rule. On August 28, 2020, the EPA finalized "A Holistic Approach to Closure Part A: Deadline to Initiate Closure," which amended the April 2015 Rule to address the August 2018 D.C. Circuit decision and extend some of the deadlines. On November 12, 2020, the EPA finalized "A Holistic Approach to Closure Part B: Alternative Demonstration for Unlined Surface Impoundments," which further amended the April 2015 Rule to, among other things, provide procedures for requesting approval to operate existing ash impoundments with an alternate liner. The Company has updated its estimates of required environmental capital expenditures to address this revised rule. 22 Domestic Site Remediation Matters Under certain federal, state and local environmental laws, a current or previous owner or operator of a facility, including an electric generating facility, may be required to investigate and remediate releases or threatened releases of hazardous or toxic substances or petroleum products. NRG may be responsible for property damage, personal injury and investigation and remediation costs incurred by a party in connection with hazardous material releases or threatened releases. These laws impose liability without regard to whether the owner knew of or caused the presence of the hazardous substances, and the courts have interpreted liability under such laws to be strict (without fault) and joint and several. Cleanup obligations can often be triggered during the closure or decommissioning of a facility, in addition to spills during its operations. Further discussions of affected NRG sites can be found in Item 15 — Note 24, Commitments and Contingencies , to the Consolidated Financial Statements. Jewett Mine Lignite Contract — The Company's Limestone facility historically burned lignite obtained from the Jewett mine, which was operated by TWCC. In 2019, the Jewett mine and related lignite supply agreement with NRG were acquired by Westmoreland Jewett Mining LLC ("Jewett Mining"), a subsidiary of Westmoreland Mining LLC pursuant to a plan of reorganization confirmed by the Texas Bankruptcy Court. Effective August 5, 2020, NRG's subsidiary, NRG Texas LLC, acquired all of the equity interests of Jewett Mining. Active mining under the lignite supply agreement ceased as of December 31, 2016; however, under the terms of the lignite supply agreement, Jewett Mining remains responsible for reclamation activities and NRG is responsible for all reclamation costs. NRG has recorded an adequate ARO liability. The Railroad Commission of Texas has imposed a bond obligation of approximately $99 million for the reclamation of the Jewett mine, which NRG supports through surety bonds. The cost of the reclamation may exceed the value of the bonds. NRG may provide additional performance assurance if required by the Railroad Commission of Texas. Nuclear Waste — The federal government's program to construct a nuclear waste repository at Yucca Mountain, Nevada was discontinued in 2010. Since 1998, the U.S. DOE has been in default of the federal government's obligations to begin accepting spent nuclear fuel, or SNF, and high-level radioactive waste, or HLW, under the Nuclear Waste Policy Act. Owners of nuclear plants, including the owners of STP, had been required to enter into contracts setting out the obligations of the owners and the U.S. DOE, including the fees to be paid by the owners for the U.S. DOE's services to license a spent fuel repository. Effective May 16, 2014, the U.S. DOE stopped collecting the fees. On February 5, 2013, STPNOC entered into a settlement agreement with the U.S. DOE for payment of damages relating to the U.S. DOE's failure to accept SNF and HLW under the Nuclear Waste Policy Act through December 31, 2013, which has been extended three times through addendums to cover payments through December 31, 2022. There are no facilities for the reprocessing or permanent disposal of SNF currently in operation in the U.S., nor has the NRC licensed any such facilities. STPNOC currently stores all SNF generated by its nuclear generating facilities on-site. STPNOC plans to continue to assert claims against the U.S. DOE for damages relating to the U.S. DOE's failure to accept SNF and HLW. Under the federal Low-Level Radioactive Waste Policy Act of 1980, as amended in 1985, the state of Texas is required to provide, either on its own or jointly with other states in a compact, for the disposal of all low-level radioactive waste generated within the state. Texas is currently in a compact with the state of Vermont, and the compact low-level waste facility located in Andrews County in Texas has been operational since 2012. Water The Company is required under the CWA to comply with intake and discharge requirements, requirements for technological controls and operating practices. As with air quality regulations, federal and state water regulations have become more stringent and imposed new requirements. Effluent Limitations Guidelines — In November 2015, the EPA revised the Effluent Limitations Guidelines for Steam Electric Generating Facilities, which imposed more stringent requirements (as individual permits were renewed) for wastewater streams from FGD, fly ash, bottom ash, and flue gas mercury control. On September 18, 2017, the EPA promulgated a final rule that, among other things, postponed the compliance dates to preserve the status quo for FGD wastewater and bottom ash transport water by two years to November 2020 until the EPA amended the rule. On October 13, 2020, the EPA amended the 2015 ELG rule by: (i) altering the stringency of certain limits for FGD wastewater; (ii) relaxing the zero-discharge requirement for bottom ash transport water; and (iii) changing several deadlines. The Company is in the process of estimating the environmental capital expenditures that will be required to comply. The capital expenditures required to comply will depend on elections regarding future operations of each coal-fired unit. NRG expects to make these elections for each unit in Q4 2021 at which time the EPA will be notified as required. Accordingly, we do not expect to provide estimates of ELG compliance costs until early 2022. Regional Environmental Developments NY NOx — On December 31, 2019, the New York State Department of Environmental Conservation finalized a more stringent NOx regulation that will result in the retirement of the Company's combustion turbines in Astoria, New York in 2023. 23 Ash Regulation in Illinois — On July 30, 2019, Illinois enacted legislation that requires the state to promulgate regulations regarding coal ash at surface impoundments. On March 30, 2020, the state released its proposed implementing regulations. The Company expects the state to promulgate the final implementing regulations in March 2021, at which time regulated entities will then prepare and submit permit applications. Customers NRG sells to a wide variety of customers, primarily end-use customers in the residential, commercial and industrial sectors. The Company owns and operates power plants to generate and sell power to wholesale customers, such as utilities and other intermediaries. The Company had no customer that comprised more than 10% of the Company's consolidated revenues for the year ended December 31, 2020. Human Capital As of December 31, 2020, NRG and its consolidated subsidiaries had 4,104 employees, approximately 23% of whom were covered by U.S. collective bargaining agreements. During 2020, the Company did not experience any labor stoppages or labor disputes at any of its facilities. NRG believes its employees are vital to its success and is committed to offering employees a rewarding career that provides opportunities for growth and the ability to make valuable contributions toward the achievement of the Company’s business objectives. NRG focuses on safety, health and wellness, diversity and inclusion, talent development and total rewards for its employees. Safety Safety is embedded in the culture at NRG. The Company strives to begin each meeting with a safety moment and regularly reminds its employees that safety comes first. NRG has achieved its targeted top decile safety record of Occupational Safety and Health Administration recordable injury rates in each of the 5 previous years. Health and Wellnes s For several years, NRG has invested in the well-being of its employees and their families. NRG provides programs that holistically support its employees’ physical, emotional and financial wellness, allowing employees the opportunity to take control of their well-being and focus on what matters most to them for a healthy, secure future. During 2020, the Company evaluated its approach to health and well-being in light of the circumstances resulting from the COVID-19 pandemic. In response to COVID-19, NRG implemented additional programs to provide services to support the needs of employees, including those working from home, such as programs that provided back-up childcare, expanded access to telemedicine (for both physical and mental health), and supported mental and emotional well-being through programs such as mindfulness. For a further discussion on the Company’s overall response to COVID-19, please see above in this Item 1 — Business under the caption COVID-19. 24 Diversity and Inclusion NRG is committed to diversity and inclusion as an integral part of the Company. In 2020, NRG completed a gender and race pay equity study to ensure that the Company's pay decisions were not influenced by gender, race, or other similar factors. The study showed equitable pay practices after accounting for education, experience, performance and location. NRG also conducted company-wide unconscious bias training to help all employees recognize, understand, and reduce implicit bias and offers various other related guides and tools to its employees and management. Talent Development NRG deploys various talent development strategies and programs with the goal of ensuring a pipeline of leadership who can execute on the Company’s strategy and drive value for all stakeholders. The Board of Directors regularly engages with management on leadership development and succession planning, including providing feedback on development plans and bench strength for key senior leader positions. The Board of Directors also has a structured program that allows directors to interact directly with individuals deeper within the organization whom management, through a robust talent assessment program, as well as mentoring relationships, has identified as high potential future leaders. The Company has a performance management tool that emphasizes a continuous feedback loop and a robust online training curriculum with topics including leadership, communication and productivity. Total Rewards NRG seeks to provide the median target of compensation and benefits, benchmarked against direct peers, industry, and, where appropriate, general peers. To ensure incentives are properly aligned with business needs and can attract and retain qualified employees, the Compensation Committee of the Board of Directors actively reviews the Company's total rewards programs, including benchmarking programs against peer groups, assessing the risks of programs and evaluating the design of the annual and long-term incentive programs. The Company offers full-time employees incentives designed to motivate and reward success. NRG continues to evaluate its offerings taking into consideration the needs of its employees to ensure they are competitive and best serve its employees. Every two years, the Company engages an independent third party to benchmark its compensation and benefits programs against its peers and report the results to the Compensation Committee of the Board of Directors. For additional information and recent available data regarding the Company’s efforts and programs please see the Company’s 2020 Proxy Statement and 2019 Sustainability Report, which are available on the Company’s website at: www.nrg.com . Information included in these documents is not intended to be incorporated into this Form 10-K. Available Information NRG's annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the Exchange Act are available free of charge through the SEC's website, www.sec.gov , and through the Company's website, www.nrg.com , as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The Company also routinely posts press releases, presentations, webcasts, sustainability reports and other information regarding the Company on the Company's website. The information posted on the Company's website is not a part of this report. 25