What changed in this filing

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Item 1. Business

2023-02-23 compared with 2022-02-24 · 184 added, 197 removed, 382 unchanged (50% of the section changed)

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NRG sells power, natural gas, and home and power services, and develops innovative, sustainable solutions, predominately under the brand names NRG, Reliant, Direct Energy, Green Mountain Energy, Stream, and XOOM Energy.

The Company has a customer base that includes approximately 6 million Home customers as well as commercial, industrial, and wholesale customers, supported by approximately 18,000 MW of generation as of December 31, 2021.

The Company has a customer base that includes approximately 5.4 million Home customers as well as commercial, industrial, and wholesale customers, supported by approximately 16 GW of generation as of December 31, 2022.

On December 6, 2022, NRG and Vivint Smart Home, Inc.

(“Vivint”) announced the entry into a definitive agreement under which the Company will acquire Vivint, a smart home platform company, in an all-cash transaction.

The acquisition will accelerate the realization of NRG’s consumer-focused growth strategy and create a leading essential home services platform fueled by market-leading brands, unparalleled insights, proprietary technologies and complementary sales channels.

The close of the acquisition is targeted for the first quarter of 2023 and is subject to customary closing conditions.

NRG sold 155 TWhs of electricity and 1,918 MMDth of natural gas in 2022, making it one of the largest competitive energy retailers in the U.S.

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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.

Sustainability is a philosophy that underpins and facilitates value creation across our business for our stakeholders.

Sustainability is a philosophy that underpins and facilitates value creation across NRG's business for its stakeholders.

It is an integral piece of NRG's strategy and ties directly to business success, reduced risks and enhanced reputation.

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;

(i) serving the energy needs of end-use residential, commercial and industrial, and wholesale counterparties 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;

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and (v) engaging in disciplined and transparent capital allocation.

The 2021 fiscal year was pivotal for the Company.

NRG completed the acquisition of Direct Energy, doubling the size of its retail portfolio, while further decreasing its physical generation through the sale and planned retirement of certain assets, each as further discussed below.

The completion of these significant activities positioned NRG for the next phase of its strategy focusing on growth.

The Company implemented a four-year plan beginning in 2022 to invest up to $2 billion in order to achieve growth through optimization of the Company's core power and natural gas sales, as well as integrated solution sales within its core network in both power and home services.

Significant Acquisitions, Dispositions and Announced Retirements

On January 5, 2021, the Company acquired Direct Energy.

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.

The acquisition increased NRG's retail portfolio by over 3 million customers and complemented its integrated model.

It also broadened the Company's presence in the Northeast and in states and locales where it did not previously operate, supporting NRG's objective to diversify its business.

NRG realized its planned synergy target of $175 million in 2021 and expects to realize annual synergies of $225 million and $300 million in 2022 and 2023, respectively.

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 December 1, 2021, the Company sold approximately 4,850 MWs of fossil generating assets from its East and West regions of operations to Generation Bridge, an affiliate of ArcLight Capital Partners.

As part of the transaction, NRG entered into a tolling agreement for the 866 MW Arthur Kill plant in New York City through April 2025.

See Item 15 — Note 4, Acquisitions, Discontinued Operations and Dispositions , to the Consolidated Financial Statements for further discussion.

During the second quarter of 2021, the results of the PJM Base Residual Auction for the 2022/2023 delivery year were released, leading the Company to announce the near-term retirement of approximately 1,600 MW of its PJM coal generating assets in June 2022.

On July 30, 2021, PJM identified reliability impacts resulting from the proposed deactivation of one of those assets, Indian River Unit 4.

On August 27, 2021 the Company notified PJM that it would continue operations at Indian River Unit 4 until the reliability upgrades identified by PJM were completed, provided that the unit receives a satisfactory and compensatory reliability must run arrangement.

See Item 15 — Note 11, Asset Impairments, to the Consolidated Financial Statements for further discussion.

The Company is continuing to evaluate the viability of the remaining PJM generating assets.

Extreme Weather Event in Texas During February 2021 and expected Uplift Securitization proceeds

During February 2021, Texas experienced unprecedented cold temperatures for a prolonged duration as a result of Winter Storm Uri, resulting in a power emergency, blackouts, and an estimated all-time peak demand of 77 GW (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.

The Texas Legislature passed House Bill ("HB") 4492, which among other things, authorized ERCOT to obtain $2.1 billion of financing to distribute to LSEs that were charged and paid to ERCOT exceptionally highly priced ORDPA and ancillary service costs during Winter Storm Uri (the "Uplift Securitization").

NRG will receive $689 million from ERCOT based on LSE-level detail published by the PUCT on December 7, 2021.

During the year ended December 31, 2021, Winter Storm Uri's pre-tax financial impact to the Company was a loss of $380 million, which reflects the recovery of $689 million of cost of operations as a result of the proceeds NRG will receive from the Uplift Securitization discussed above, with receipt expected to occur during the second quarter of 2022.

The Company continues to pursue additional mitigants including, but not limited to, customer bad debt mitigation, counterparty default recovery, and additional ERCOT default recovery.

The Company announced in 2021 a four-year plan, that began in 2022, to spend $2 billion in order to achieve growth through optimization of the Company's core power and natural gas sales, as well as integrated solution sales within its core network in both power and home services.

The planned acquisition of Vivint announced in December 2022 will be the primary growth vehicle to achieve this plan.

Business Overview

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The Company's business is segmented as follows:

• Texas, which includes all activity related to customer, plant and market operations in Texas;

• Texas, which includes all activity related to customer, plant and market operations in Texas, other than Cottonwood;

• East, which includes all activity related to customer, plant and market operations in the East;

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• Corporate activities.

As of December 31, 2021, in Texas, 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/Services/Other, the Company’s business is primarily serving retail load and services customers.

In Texas, the Company’s generation supply is fully integrated with its retail load.

The integrated model provides the advantage of being able to supply a portion of 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 reducing transactions with third parties.

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 in Texas provides the advantage of being able to supply a significant portion of 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 reducing transactions with third parties.

Customer Operations

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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 market.

Following the expansion of the customer base with the acquisition of Direct Energy, Customer Operations now comprises three end-use customer facing teams:

Following the expansion of the customer base with the acquisition of Direct Energy in 2021, Customer Operations now comprises three end-use customer facing teams:

NRG Home, which serves residential customers, NRG Business, which serves business customers, and NRG Services, which primarily includes the services businesses acquired.

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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 Business customers.

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.

to supply energy to customers in the most cost-efficient manner and 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.

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The power commercial group is responsible for end-use electricity supply including power plant optimization and certain fuel supply.

To meet the market operations objectives, NRG enters into supply, power and gas sales and hedging agreements via a wide range of products and contracts, including (i) physical and financial commodity instruments, (ii) fuel supply and transportation contracts, (iii) renewable PPAs and (iv) capacity and other contracted revenue sources, as further discussed below.

To meet the market operations objectives, NRG enters into supply, power and gas hedging agreements via a wide range of products and contracts, including (i) physical and financial commodity instruments, (ii) fuel supply and transportation contracts, (iii) PPAs and Renewable PPAs and (iv) capacity and other contracted revenue or supply sources, as further discussed below.

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.

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For the domestic fleet, NRG purchased approximately 15.3 million tons of coal in 2022, 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 tenors that will provide for most of the Company's transportation requirements of Powder River Basin coal for the next three years.

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 two years.

Nuclear Fuel — STP's owners, including NRG, satisfy their fuel supply requirements by:

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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 (through 2027/2028).

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 of all of STP's requirements through 2025 and 75% for the duration of the original operating license (through 2027/2028).

Similarly, STP has begun the process of covering fuel supply requirements into the extended license period and has secured a fabrication contract with Westinghouse through 2047/2048.

As of December 31, 2022, STP has secured approximately 25% of uranium hexafluoride through 2029.

Other fuel requirements such as uranium, conversion and enrichment remain open at this time.

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The Company's strategy is to procure mid to long-term renewable generation through power purchase agreements.

As of December 31, 2021, NRG has entered into PPAs totaling approximately 2.6 GW with third-party project developers and other counterparties.

The average tenor of these agreements is twelve years.

As of December 31, 2022, NRG has entered into Renewable PPAs totaling approximately 2.4 GW with third-party project developers and other counterparties, of which approximately 45% are operational.

The average tenure of these agreements is twelve years.

The Company expects to continue evaluating and executing similar agreements that support the needs of the business.

The total GW entered into through PPAs may be impacted by contract terminations when they occur.

The total GW entered into through Renewable PPAs may be impacted by contract terminations when they occur.

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 continuing capacity revenues are capacity auctions in PJM and NYISO.

The Company's largest sources of continuing capacity revenues are capacity auctions in PJM.

PJM operates 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 MW 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.

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.

The natural gas commercial group is responsible for all costing, logistics and supply for all of NRG's residential, commercial & industrial and wholesale customers.

The Direct Energy acquisition, which closed on January 5, 2021, significantly increased our capabilities and scale across the natural gas value chain.

NRG has acquired contractual rights to natural gas transportation and storage assets across its footprint that allow for optimal supply economics in support of our various businesses.

Our diversified load coupled with this asset portfolio enables us to deliver supply economically while providing incremental optimization activities when market conditions allow.

The scale of the natural gas operation extends from the wellhead (through our producer services business) to our end use customers (through our various sales channels).

This scale, coupled with our associated assets, gas system platform and people, create significant opportunity across North America.

The Direct Energy acquisition, which closed on January 5, 2021, significantly increased the Company's capabilities and scale across the natural gas value chain.

NRG has contractual rights to natural gas transportation and storage assets across its footprint that allow for optimal supply economics in support of its various businesses.

NRG's diversified load coupled with this asset portfolio enables the Company to deliver supply economically while providing incremental optimization activities when market conditions allow.

The scale of the natural gas operation extends from the wellhead (through its producer services business) to end use customers (through NRG's various sales channels).

This scale, coupled with the Company's associated assets, gas system platform and people, create significant opportunity across North America.

Plant Operations

The Company owns and leases a diversified wholesale generation portfolio with approximately 18,000 MW of fossil fuel, nuclear and renewable generation capacity at 25 plants as of December 31, 2021, including approximately 1,600 MW of its PJM coal fleet with an announced retirement date of June 2022.

The Company owns and leases a diversified wholesale generation portfolio with approximately 16 GW of fossil fuel, nuclear and renewable generation capacity at 23 plants as of December 31, 2022.

The Company's wholesale generation assets are diversified by fuel-type and dispatch level, which helps mitigate the risks associated with fuel price volatility and market demand cycles.

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Total generation capacity 10,029 4,284 2,103 16,416

(a) All Utility Scale Solar are described in MW on an alternating current basis.

(a) Utility Scale Solar is 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.

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Operations & Maintenance

NRG operates and maintains its generation portfolio, as well as approximately 7,377 MW of additional coal and natural gas generation capacity at 12 plants operated on behalf of third parties as of December 31, 2021 using prudent industry practices for the safe, reliable and economic generation of electricity in compliance with all local, state and federal requirements.

NRG operates and maintains its generation portfolio, as well as approximately 7,800 MW of additional coal, natural gas and wind generation capacity at 12 plants operated on behalf of third parties, as of December 31, 2022, 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.

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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.

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 it serves, in accordance with the Company’s strategic goals.

These 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.

Operational Statistics

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Home - West/Services/Other

Average retail 510 — —

Ending retail 498 — —

Average retail (c)

Ending retail (c)

Customer count - Natural gas customers (b) (in thousands)

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(b) Dual fuel customers are included within electricity customer counts only

The whole home warranty business was sold in January 2022

The following are industry statistics for the Company's fossil and nuclear plants, as defined by the NERC:

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Fossil and Nuclear Plants (a)

Capacity (MW) (b)

Net Generation (In thousands of MWh) (a)

Capacity (MW) Net Generation (In thousands of MWh) (a)

Annual Equivalent Availability Factor Average Net Heat Rate BTU/kWh Net Capacity

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West/Services/Other 1,172 6,676 84.5 % 7,442 64.9 %

(a) Excludes equity method investments

Year Ended December 31, 2021

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(a) Reflects the Company's undivided interest in total MWh generated by STP

(b) Includes gas generation of 855 thousand MWh, 870 thousand MWh and 903 thousand MWh and oil generation of 199 thousand MWh, 322 thousand MWh and 209 thousand MWh for the years ended December 31, 2021, 2020 and 2019, respectively, that was sold to Generation Bridge

(c) Includes gas generation of 2,445 thousand MWh, 3,002 thousand MWh, and 2,203 thousand MWh for the years ended December 31, 2021, 2020 and 2019, respectively, that was sold to Generation Bridge

(b) Includes gas generation of 855 thousand MWh and 870 thousand MWh and oil generation of 199 thousand MWh and 322 thousand MWh for the years ended December 31, 2021 and 2020, respectively, that was sold to Generation Bridge

(c) Includes gas generation of 2,445 thousand MWh and 3,002 thousand MWh for the years ended December 31, 2021 and 2020, respectively, that was sold to Generation Bridge

While there has been consolidation in the competitive retail space over the past few years, there is still considerable competition for customers.

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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.

Other than ERCOT and AESO, 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.

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.

NRG's business in Texas is subject to standards and regulations adopted by the PUCT and ERCOT 1 , 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 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, 2020 and 2021.

ERCOT is an energy-only market.

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.

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NRG’s retail activities in the East are subject to standards and regulations adopted by the ISOs, state public utility commissions and legislators, 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

Power plants owned, operated and managed by NRG and NRG's demand response assets located in the East region of the U.S.

are within the control areas of PJM, NYISO and MISO.

Power plants owned, operated or managed by NRG and NRG's demand response assets located in the East region of the U.S.

are within the control areas of PJM, NYISO, ISO-NE and MISO.

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 assets in the East region receive a significant portion of their revenues from capacity markets.

PJM uses a forward capacity auction, while NYISO uses a month-ahead capacity auction.

PJM and ISO-NE use a forward capacity auction, while NYISO uses a month-ahead capacity auction.

MISO has an annual auction.

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Additionally, bidding rules allow for the incorporation of a risk premium into generator bids.

In the West region of the U.S., NRG owns equity interests in natural gas-fired power plants located entirely within the CAISO footprint.

1 The Cottonwood facility is located in Deweyville, Texas, but operates in the MISO market

In the West region of the U.S., NRG owns equity interests, operates or manages 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.

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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.

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.

In Canada, NRG sells to residential and commercial retail customers in Alberta, within the AESO footprint, under both regulated rates approved by the AUC as well as through competitive service.

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.

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Federal Energy Regulation

In March 2021, President Biden announced a framework for his "Build Back Better" initiative which includes policies to address climate change across the whole of the federal government through the tax code, an energy efficiency and clean energy incentives, research and development, among other areas of focus.

The "Build Back Better" initiative has taken the form of two separate bills in Congress.

The $1.2 trillion "core infrastructure" bill, which contains spending on new electric vehicle charging programs, among other things, was signed into law by President Biden on November 15, 2021.

The remaining priorities, commonly referred to as "Build Back Better," are being monitored by NRG as they progress through the legislative process.

Inflation Reduction Act — The IRA allocates $369 billion in spending for energy security and addressing climate change.

Much of these investments come through the tax code in the form of clean energy tax credits.

In the past, investment tax credits and production tax credits have played a vital role in the growth of wind and solar projects around the U.S., but they have had short lifespans, phaseouts and the uncertainty of extensions.

The IRA provides 10-year extensions on these tax credits, which will provide more certainty needed for investment decisions to build out these projects in the long-term.

With new renewable generation coming online, renewable energy supply costs will likely become cheaper and more plentiful.

NRG Home can also benefit from increased residential usage to charge electric vehicles ("EV") and special EV products.

The IRA also introduced new tax provisions including a corporate book minimum tax and an excise tax on net stock repurchases with both taxes effective beginning in fiscal year 2023 for NRG.

The Company will continue to evaluate the impact of the corporate book minimum tax when the U.S.

Treasury and the IRS release further guidance.

Additionally, the IRA establishes a tax credit associated with existing nuclear facilities which begins in 2024 and terminates at the end of 2031.

The tax credit will fully apply when gross revenues are at or below $25 per MWh and phases out completely at $43.75 per MWh.

Treasury is in the process of defining the methods by which gross revenues may be calculated pursuant to the IRA.

State and Provincial Energy Regulation

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CEJA focuses on (i) decarbonization, (ii) incentives to transition coal plants into clean energy facilities and (iii) nuclear subsidies.

CEJA requires non-publicly owned coal or oil electric generating units larger than 25 MWs to eliminate CO2e and copollutant emissions by January 1, 2030.

Non-publicly owned electric generating units that are gas-fired, including Joliet, must eliminate CO2e and copollutant emissions, including through unit retirement or the use of 100% green hydrogen, in a timeframe ranging from January 1, 2030 to January 1, 2045 depending on certain emission rates and proximity to environmental justice communities.

Furthermore, CEJA placed restrictions, with immediate effect, on gas-fired units that limits future emissions to their historic baselines.

These limits affect the total potential energy production by gas units in Illinois.

PJM, the PJM Independent Market Monitor and the Illinois Environmental Protection Agency have exchanged

correspondence to obtain clarification on the implications of these restrictions.

The new energy law also provides $174 million in incentives to develop solar and battery storage at coal generating sites that may be available to NRG.

A component of CEJA is the Coal-to-Solar Energy Storage Grant Program.

On June 1, 2022, the Illinois Department of Commerce and Economic Opportunity announced that NRG is eligible to receive almost $160 million over 10 years to develop battery storage at both the Waukegan and Will County power plant sites.

Regional Regulatory Developments

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Public Utility Commission of Texas’ Actions with Respect to Wholesale Pricing and Market Design — In September 2021, the PUCT opened a rulemaking project to evaluate whether it should amend its rules to modify the High System Wide Offer cap ("HCAP") and the ORDC, which is intended to ensure prices in the competitive market appropriately reflect the value of operating reserves as the system approaches scarcity conditions.

This rulemaking project concluded in December 2021, resulting in a rule amendment that lowered the HCAP to $5,000 per MWh and which expands the minimum contingency level to 3,000 MW.

This rulemaking project concluded in December 2021, resulting in a rule amendment that lowered the HCAP to $5,000 per MWh and which expands the minimum contingency level to 3,000 MW in Phase I.

These two changes are broadly offsetting in their effect on overall average energy prices.

In 2022, the PUCT has focused on the development of a winter firm fuel product.

The PUCT directed ERCOT to issue a Request for Proposal to procure dual fuel capability with on-site fuel storage as part of the initial firm fuel procurement for the winter of 2022 and 2023.

The procurement amount was 2,940MW with a total cost of $53 million.

The PUCT engaged an independent consultant, E3, to evaluate various resource adequacy proposals and recommend a policy direction to increase incentives for investment in dispatchable generation in ERCOT.

On November 10, 2022, the independent consultant provided a report including various market design options such as a Forward Reliability Market, Load Serving Entity Reliability Obligation, and a new concept called a Performance Credit Mechanism ("PCM").

The PCM measures real-time contribution to system reliability and provides compensation for resources to be available.

The PUCT staff filed a summary of comments and their recommendations, which support PCM.

On January 19, 2023, the Commission approved an order adopting the PCM as their policy direction for resource adequacy in ERCOT, however, implementation is delayed until the legislature reviews.

Activity on Securitization and ERCOT Pricing during Winter Storm Uri — The Texas Legislature acted to pass a variety of securitization vehicles to finance exceptionally high power and gas costs from Winter Storm Uri, including HB 4492.

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The DOOs require ERCOT to issue loans or securitized bonds through a bankruptcy remote special purpose entity as the borrower and distribute the proceeds to affected market participants for default-related short payments and to LSEs for certain ancillary-service and ORDPA costs using an allocation of proceeds based on an LSE's exposure to relevant costs as calculated by the LSE's prevailing load-ratio share during the period of Winter Storm Uri, and a further redistribution of proceeds initially allocated to other LSEs and customers who opt-out of securitization.

In turn, ERCOT will charge non-bypassable fees related to the Default Securitization and Uplift Securitization to all qualified scheduling entities and to all LSEs (other than those that have opted-out), respectively.

In turn, ERCOT charges non-bypassable fees related to the Default Securitization and Uplift Securitization to all qualified scheduling entities and to all LSEs (other than those that have opted-out), respectively.

The Uplift Securitization provided for a one-time opt-out for certain LSEs or individual transmission-level customers who in exchange for foregoing any securitization-related proceeds likewise avoid future fees assessed by ERCOT for the use of repaying ERCOT's debt obligations.

However, nearly all competitive REPs were required by the law to participate, ensuring the charge established by the law is competitively neutral.

These opt-outs and calculations of the allocation of proceeds have been finalized.

Based on LSE-level detail published by the PUCT on December 7, 2021, NRG will receive $689 million of Uplift Securitization proceeds, with receipt expected to occur during the second quarter of 2022.

The $2.1 billion Uplift Securitization was disbursed by ERCOT in June 2022, with NRG's LSEs collectively receiving $689 million.

NRG's LSEs that assessed customers certain ancillary-service and ORDPA costs during the period of Winter Storm Uri provided a refund or credit to those customers proportionate to the LSE's total recovery.

The $800 million Default Securitization was disbursed by ERCOT in November 2021, with NRG receiving $12 million.

Electric Cooperative Bankruptcy and Securitization — Of the defaults in the ERCOT market, two electric cooperatives, Brazos and Rayburn, constitute the vast majority.

Brazos currently is in bankruptcy.

NRG and ERCOT have both filed a proof of claim in the bankruptcy proceeding of Brazos, and Brazos has challenged ERCOT's claims in a manner that may prejudice NRG's claims against Brazos.

During the fourth quarter of 2021, ERCOT filed a motion to dismiss Brazos' complaint relating to ERCOT's proof of claim, which NRG joined in support, but this motion was denied by the Bankruptcy Court, and ERCOT, NRG and certain other parties appealed.

On January 11, 2022, the United States District Court for the Southern District of Texas entered an order allowing the appellants to seek direct review from the Fifth Circuit Court of Appeals of the Bankruptcy Court's decision on the motion to dismiss.

On January 18, 2022, ERCOT, NRG and certain other parties filed a petition for direct review by the United States Court of Appeals for the Fifth Circuit.

The Court of Appeals granted the petition on February 4, 2022.

On February 7, 2022, the Bankruptcy Court entered an order granting summary judgement in favor of Brazos on whether ERCOT's sales to Brazos were in the ordinary course of Brazos' business.

The Bankruptcy Court ruled that the portion of ERCOT's claims for charges incurred by Brazos after the intervention of the PUCT and ERCOT were not in the ordinary course and thus are not entitled to administrative expense status under the Bankruptcy Code.

The amount and priority of ERCOT's claim for amounts incurred prior to such intervention or after such intervention ceased are issues to be determined at trial.

The Bankruptcy Court's summary judgement ruling may also apply to NRG's claims again Brazos.

Trial on the merits of the ERCOT proof of claim and Brazos' complaint is set to commence before the Bankruptcy Court on February 22, 2022.

To the extent the Bankruptcy Court reduces or disallows claims against Brazos, this presents risk for NRG.

ERCOT's market protocols provide for short payments to be extinguished through a process of uplift, whereby the cost of defaults is allocated to all market participants, including retailers, generators, municipal and cooperative utilities, and financial traders.

However, the total amount of this uplift is limited by ERCOT's current protocols of $2.5 million per month.

Consequently, it would take approximately 63 years for the net short-pay balance of $1.887 billion related to Brazos to be uplifted to the market under the current market rules.

NRG's undiscounted share of the uplift based on its current market share

is estimated to be approximately $121 million and has been short-paid $68 million.

The remaining $53 million has been discounted based on the 63 year repayment term and present value of $9 million was recorded as an additional liability.

Rayburn announced that it intended to securitize the amounts owed to ERCOT and payment from such securitization is expected in the first quarter of 2022.

Reliability and Plant Operations Standards — The PUCT established a rulemaking to establish weatherization standards, and issued a notice for comments in response to provisions of Texas Senate Bill 3 ("SB3") that require mandatory standards for power generators and others within the electric-power sector.

SB3 provides that the standards adopted by the PUCT be implemented by generation owners, be subject to ERCOT inspections, and that ERCOT provide asset owners with a reasonable period of time to remedy any violation.

Continuing violations would be subject to an administrative penalty and a requirement that a third-party contractor assess the asset owner's weatherization plans.

On August 24, 2021, Commission Staff issued a proposal of weatherization standards for publication.

NRG, through its trade association, filed comments.

On October 21, 2021, Commissioners of the PUCT voted to adopt the rule without substantial modifications from the proposal.

PJM’s Variable Resource Requirement Curve — On July 9, 2021, the Court of Appeals for the D.C.

Circuit issued a decision denying in part and granting in part an appeal by several PJM state consumer advocates regarding FERC’s order approving revisions to PJM’s Variable Resource Requirement Curve (“VRR”).

The court upheld PJM's use of a greenfield gas-fired combustion turbine as the reference unit to establish Net Cost of New Entry ("Net CONE").

However, the court remanded back to FERC the issue of allowing generators to have a 10% adder to their offer to supply capacity in the PJM market, and on January 20, 2022, FERC issued an order removing the 10% adder.

The VRR is the demand curve that represents the slope of bids in the auction that ultimately results in the price and quantity of capacity allocated to load-serving entities, including NRG.

The VRR curve is based on several inputs, including the Net CONE.

The outcome could affect PJM’s capacity market prices.

Electric Cooperative Bankruptcy and Securitization — Of the defaults in the ERCOT market the majority was attributable to Brazos, who filed bankruptcy on March 1, 2021 following the events of Winter Storm Uri.

Brazos' bankruptcy case culminated in a settlement between Brazos and ERCOT that was embodied in Brazos' chapter 11 plan of reorganization.

Brazos' chapter 11 plan was confirmed by the Bankruptcy Court on November 14, 2022, and the chapter 11 plan became effective on December 15, 2022.

Under the terms of the Brazos' chapter 11 plan, Brazos and ERCOT are providing market participants a recovery of funds that were short-paid in relation to Brazos based on elections made by each market participant.

NRG elected the accelerated cash recovery option and has received 43% of the $68 million of its short pay.

NRG expects to receive an additional 22% of its short pay in various installments over the following 12-year period.

The plan and ERCOT settlement also provide that there be no default uplift under the current ERCOT protocols in relation to the Brazos short payments.

In February 2022, Rayburn successfully completed a securitization transaction and fully paid its outstanding obligations to ERCOT.

Reliability and Plant Operations Standards — The PUCT created a rulemaking to establish weatherization standards and issued a notice for comments in response to provisions of Texas Senate Bill 3 ("SB3") that require mandatory standards for power generators and others within the electric-power sector.

On October 21, 2021, Commissioners of the PUCT voted to adopt Phase I of the rule without substantial modifications from the proposal, and those rules are now in effect.

On May 26, 2022, the

PUCT issued a proposal for publication to repeal Phase I rules and implement Phase II rules.

The new rules entail conducting a weather study by ERCOT and directing the State Climatologist to create a percentile-based standard of weatherization and implement weatherization plan audits based on weather related outages that occur during weather emergencies.

NRG filed comments to the rulemaking on June 23, 2022.

On September 29, 2022, the PUCT adopted the Phase II Weatherization Standards.

PJM Delays Base Residual Auction Results and Files to Update Tariff — The Base Residual Auction for the 2024/2025 delivery year commenced on December 7, 2022 and closed on December 13, 2022.

On December 19, 2022, PJM announced that it would delay the publication of the auction results.

On December 23, 2022, PJM made a filing at FERC to revise the definition of Locational Deliverability Area Reliability Requirement in the Tariff.

This would allow PJM to exclude certain resources from the calculation of the Local Deliverability Area Reliability Requirement.

If accepted by FERC, the proposal will affect the clearing price of the auction.

NRG has protested the filing.

Capacity Performance Penalties and Bonuses from Winter Storm Elliott — PJM experienced approximately 23 hours of Capacity Performance events from December 23-24, 2022 across PJM's entire footprint.

The Company will be subject to penalty or bonus payments related to the events with settlements to occur in 2023.

PJM anticipates that certain market participants who incurred penalties may encounter challenges in paying penalties levied upon them.

This may result in bonus payments being prorated.

On February 2, 2023, PJM made a filing at FERC that, if approved, would give PJM the ability to extend the payment period for PJM member who incurred penalties for an additional 9 months.

Indian River RMR Proceeding — On June 29, 2021, Indian River notified PJM that it intended to retire Unit 4, effective May 31, 2022, due to expected uneconomic operations.

On July 30, 2021, PJM responded to the deactivation notice and stated that PJM had identified reliability violations resulting from the proposed deactivation of Unit 4.

NRG filed a cost based RMR rate schedule at FERC on April 1, 2022.

FERC accepted the rate schedule with a June 1, 2022 effective date, subject to refund and established hearing and settlement procedures.

Multiple parties protested.

Parties are currently in settlement negotiations.

PJM Revisions to Minimum Offer Price Rule — On July 30, 2021, PJM filed proposed tariff changes at FERC to largely eliminate the current minimum offer price rules ("MOPR") except in very narrow cases.

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On December 21, 2021 and December 30, 2021, respectively, the Third Circuit Court of Appeals and the Seventh Circuit Court of Appeals issued an order holding the appeals in abeyance.

The proposed revisions would allow PJM to address specific and narrow instances of buyer-side market power through subsequent filings at FERC.

The Seventh Court appeal is being held in abeyance while the appeal in the Third Court is moving forward with briefing and oral argument.

Any changes to the PJM capacity market construct may impact the outcome of future Base Residual Auctions.

PJM's ORDC Filing and Compliance Directives — On May 21, 2020, PJM proposed energy and reserve market reforms to enhance price formation in reserve markets, which included modifying ORDC and aligning market-based reserve products in Day-Ahead and Real-Time markets.

PJM's ORDC Filing and Compliance Directives — On May 21, 2020, PJM proposed energy and reserve market reforms to enhance price formation in reserve markets, which included modifying its ORDC and aligning market-based reserve products in Day-Ahead and Real-Time markets.

In addition to approving PJM's proposal, FERC also directed PJM to implement a forward-looking Energy and Ancillary Services Offset to be used in PJM's capacity markets.

After multiple compliance filings, parties filed appeals at the Court of Appeals for the D.C.

Circuit of FERC’s orders, and on August 13, 2021, FERC filed a motion and was granted a voluntary remand the case back to the agency.

Circuit of FERC’s orders, and on August 13, 2021, FERC filed a motion and was granted a voluntary remand of the case back to the agency.

On December 22, 2021, FERC issued its order on voluntary remand affirming in part and reversing in part FERC's determination.

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(i) eliminate the more robust ORDC curves and reserve penalty adders and maintain the existing (lower) curves and (lower) penalty adders and (ii) restore its tariff provisions related to its prior backward-looking Energy and Ancillary Services Offset.

At the direction of FERC, on January 21, 2022, PJM filed a compliance fling proposing a new schedule for the Base Residual Auctions.

Independent Market Monitor Market Seller Offer Cap Complaint — On March 18, 2021, finding that the calculation of the default Market Seller Offer Cap was unjust and unreasonable, the Order permitted the current PJM May 2021 capacity auction for the 2022/2023 delivery rule to continue under the existing rules and set a procedural schedule for parties to file briefs with possible solutions.

In response to requests for rehearing of the December 2021 order, FERC issued a notice denying the rehearings by operation of law and providing for further consideration on February 22, 2022.

Multiple parties filed appeals in various appellate courts and those appeals are now all before the Sixth Circuit Court of Appeals for consideration.

Independent Market Monitor Market Seller Offer Cap Complaint — On March 18, 2021, finding that the calculation of the default Market Seller Offer Cap was unjust and unreasonable, FERC issued an Order, which permitted the current PJM May 2021 capacity auction for the 2022/2023 delivery rule to continue under the existing rules and set a procedural schedule for parties to file briefs with possible solutions.

On September 2, 2021, FERC issued an order in response to a complaint filed by the PJM Independent Market Monitor's proposal, which eliminates the Cost of New Entry-based Market Seller Offer Cap and implements a limited default cap for certain asset classes based on going-forward costs and provides for unit specific cost review by the Independent Market Monitor for all other non-zero offers into the auctions.

As required by the Order, PJM submitted its compliance tariff on October 4, 2021.

On October 4, certain parties filed a motion for rehearing.

which was denied.

On October 4, 2021, as required by the Order, PJM submitted its compliance tariff and certain parties filed a motion for rehearing, which was denied by operation of law.

On February 18, 2022, FERC addressed the arguments raised on rehearing and rejected the rehearing requests.

Multiple parties filed appeals at the Court of Appeals for the D.C.

The appeals are currently being held in abeyance.

The removal of the Offer Caps may impact the outcome of future Base Residual Auctions.

A decision is pending.

NYISO's Revisions to the Buyer Side Mitigation Rules — On January 5, 2022, the NYISO filed its Comprehensive Mitigation Review proposing changes to the buyer-side mitigation rules.

The proposal would remove certain facilities to be reviewed under the buyer-side mitigation rules to serve the goals of New York's Climate Leadership and Community Protection Act, adopt a marginal capacity accreditation market design and adjust the rules surrounding installed and unforced capacity.

On February 9, 2022 FERC issued a deficiency notice, focusing on capacity accreditation issues, which NYISO responded.

On May 10, 2022, FERC issued an order accepting the NYISO's Comprehensive Mitigation Review.

Changes to NYISO's Buyer Side Mitigation rules may impact the outcome of future capacity auctions.

California Resource Adequacy Proceedings — On March 25, 2021, the CPUC directed the state's major investor-owned utilities to engage in up to 1.5 GW of emergency procurement for 2021 and 2022 and is currently evaluating further procurement directives through 2023.

In the same docket, the CPUC approved a new demand response program for use during emergency conditions.

As part of the Integrated Resource Procurement docket, the CPUC approved a decision on June 24, 2021 that will require all Load Serving Entities to procure a pro rata share of 11.5 GW of new non-fossil resource adequacy from 2023 to 2026.

To replace the retiring Diablo Canyon nuclear plant, this will consist largely of GHG-free energy, long-duration storage, baseload renewables and energy storage.

A new resource adequacy docket opened in October 2021 will consider changes to the reserve margin and qualifying capacity of different resource types, and the CPUC and CAISO will continue to evaluate major structural reforms to the resource adequacy program in California that would begin in 2024.

California Resource Adequacy Proceedings — As part of the Integrated Resource Procurement docket, the CPUC approved a decision on June 24, 2021 that requires all LSEs to procure a pro rata share of 11.5 GW of new non-fossil resource adequacy from 2023 to 2026.

In that same docket, the CPUC ordered the state's major investor-owned utilities to procure additional summer reliability resources through 2023.

On June 23, 2022, the CPUC approved a decision that raises the reserve margin from 15 percent to 16 percent in 2023 and at least 17 percent in 2024.

SB846 establishes a pathway for PG&E's Diablo Canyon Nuclear power plant, which units are scheduled to close in 2024 and 2025, to remain open for at least five additional years.

Finally, the CPUC completed a series of 2022 stakeholder meetings regarding details for implementation of a new Resource Adequacy ("RA") program beginning in 2025 which will require procurement to meet needs during every hour of the day.

The result of these changes will likely keep RA prices elevated in the near term and if LSEs cannot meet their RA obligations, penalties may be issued.

Midway-Sunset Reliability Must Run Proceeding — San Joaquin Energy, LLC, a subsidiary of NRG, owns a 50%, non-controlling interest in the Midway-Sunset Cogeneration Company ("MSCC").

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On April 2, 2021, FERC accepted the RMR filing, suspended it to become effective February 1, 2021, subject to refund and established hearing and settlement judge proceedings.

The parties are engaging in settlement proceedings.

On September 27, 2021, the CAISO gave notice to MSCC extending the term of the reliability designation through December 31, 2022.

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 engaged in a mediation and settlement process, and on April 20, 2021 an all-party settlement was executed, and was filed with the AUC on April 23, 2021.

The AUC approved the settlement agreement on June 4, 2021.

Separately, the Company received approval from the AUC of a negotiated rate settlement for its electricity focused 2020-2022 Energy Price Setting Plan which went into effect on July 1, 2021.

The Company has completed the last repayment to the Balancing 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.

On April 29, 2022, the participants in the settlement proceeding filed a Joint Offer of Settlement with the FERC, which was approved by FERC on July 28, 2022.

Environmental Regulatory Matters

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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 current U.S.

presidential administration.

A number of regulations that affect the Company have been revised recently and continue to be revised by the EPA, including ash storage and disposal requirements, NAAQS revisions and implementation and effluent limitation guidelines.

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.

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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).

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.

In January 2023, the EPA proposed increasing the stringency of the PM2.5 NAAQS.

The Company maintains a comprehensive compliance strategy to address continuing and new requirements.

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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).

On October 29, 2021, the U.S.

Supreme Court agreed to review the D.C.

Circuit's decision, which should provide some clarity regarding the scope of the EPA's authority to regulate CO 2 under the Clean Air Act.

The Company expects the EPA to promulgate a new rule to regulate GHG emissions from power plants after a decision from the U.S.

Supreme Court.

On June 30, 2022, the U.S.

Supreme Court held that the "generation shifting" approach in the CPP exceeded the powers granted to the EPA by Congress.

The Court did not address the related issues of whether the EPA may adopt only measures applied at each source.

The Company anticipates that there will be additional rulemaking by the EPA over the next several years.

Cross-State Air Pollution Rule ("CSAPR") — In April 2022, the EPA proposed revising the CSAPR to address the good-neighbor provisions of the 2015 ozone NAAQS.

If the rule were finalized as proposed, it would apply to 25 states (including Texas) beginning in 2023.

In 2023, the revised Group 3 trading program (previously established in the Revised CSAPR Update Rule) would have emission budgets based on NO x emission rates that the EPA says are achievable by existing controls at power plants.

Starting in 2026, the NO x budgets would be reduced significantly based on levels achievable if SCR controls were installed at coal-fueled power plants that do not currently have such controls.

Starting in 2025, the budgets would be updated annually to account for retirements, changes to operations, and new units.

The proposal also contemplates heightened surrender requirements for units that exceed certain NO x emission rate thresholds.

The Company cannot predict the outcome of this proposed revision and anticipates that this rulemaking will be subject to legal challenges after it is finalized.

The EPA anticipates finalizing the revised rule in Spring 2023.

Greenhouse Gas Emissions — NRG emits CO 2 (and small quantities of other GHGs) when generating electricity at a majority of its facilities.

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Greenhouse gas emissions include directly controlled emissions, emissions from NRG's purchased energy, and emissions from employee business travel.

In 2021, NRG's climate goals were certified by the Science Based Targets initiative as aligned with a 1.5 degree Celsius trajectory.

In early 2021, NRG's climate goals were certified by the Science Based Targets initiative as aligned with a 1.5 degree Celsius trajectory.

From the current 2014 baseline to 2022, the Company's CO 2 e emissions decreased from 60 million metric tons to 35 million metric tons, representing a cumulative 42% reduction.

The decrease is attributed to reductions in fleet-wide annual net generation and a market-driven shift away from coal as a primary fuel to natural gas.

The increase in emissions in 2021, as compared to 2020, was primarily due to higher power demand which was a result of the easing of COVID-19 pandemic lockdowns and the associated economic recovery.

The Company is continuing to target a 50% reduction by 2025 and is on track to meet that goal.

As of December 31, 2021, less than 5% of the Company's consolidated operating revenues were derived from coal-fired operating assets.

The following charts reflect the Company’s domestic generation portfolio, including leased facilities and those accounted for through equity method investments.

Prior year information was adjusted to remove divested assets.

The increase in emissions in 2022, as compared to 2021, was primarily due to increased generation driven by power market conditions and weather.

The Company is continuing to target a 50% reduction in greenhouse gas emissions by 2025, however, assuming no mitigating events occur, current power market forecasts suggest that the projected reduction in NRG's greenhouse gas emissions at that time will be less than the targeted goal.

The Company expects these forecasts to continue to evolve over time given recent and expected future changes in regulatory policies and prices in electricity and natural gas markets.

The Company continues to actively monitor and explore various options to meet the goal when both economically and legally feasible.

As of December 31, 2022, less than 5% of the Company's consolidated revenues were derived from coal-fired operating assets.

The following charts reflect the Company’s domestic generation portfolio, including leased facilities and those accounted for through equity method investments, but excluding the battery storage and remaining renewables activity.

Prior year information on U.S.

CO 2 e emissions and U.S.

generation 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 July 30, 2018, the EPA promulgated a rule that amended the 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.

Circuit found, among other things, that the EPA had not adequately regulated unlined ponds and legacy surface impoundments.

On August 28, 2020, the EPA finalized "A Holistic Approach to Closure Part A:

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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.

NRG anticipates further rulemaking related to the Federal Permit Program and legacy surface impoundments.

Domestic Site Remediation Matters

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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 23, 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.

Jewett Mine Lignite Contract — The Company's Limestone facility historically burned lignite obtained from the Jewett mine.

Active mining ceased as of December 31, 2016;

however, the Company remains responsible for reclamation activities and is responsible for all reclamation costs.

NRG has recorded an adequate ARO liability.

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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.

DOE has been in default of the federal government's obligations to begin accepting spent nuclear fuel ("SNF"), and high-level radioactive waste ("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.

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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.

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.

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While the EPA is developing the new rule, the existing rule (as amended in 2020) will stay in place, and the EPA expects permitting authorities to continue to implement the current regulation.

The EPA anticipates releasing a proposed rule in fall 2022.

In October 2021, NRG informed its regulators that the Company intends to comply with the ELG by ceasing combustion of coal by the end of 2028 at its domestic coal units outside of Texas, and installing appropriate controls by the end of 2025 at its two plants in Texas.

The Company anticipates that the EPA will release a proposed rule in the first half of 2023.

Regional Environmental Developments

Ash Regulation in Illinois — On July 30, 2019, Illinois enacted legislation that requires the state to promulgate regulations regarding coal ash at surface impoundments.

Ash Regulation in Illinois — On July 30, 2019, Illinois enacted legislation that required the state to promulgate regulations regarding coal ash at surface impoundments.

On April 15, 2021, the state promulgated the implementing regulation, which became effective on April 21, 2021.

The new regulation requires NRG to apply for initial operating permits for its coal ash surface impoundments by October 31, 2021 and construction permits (for closure) starting in 2022.

NRG has applied for initial operating permits and has begun to apply for construction permits (for closure) as required by the regulation.

Houston Nonattainment for 2008 Ozone Standard — During the fourth quarter of 2022, the EPA changed the Houston area’s classification from Serious to Severe nonattainment for the 2008 Ozone Standard.

Accordingly, Texas is required to develop a new control strategy and submit it to the EPA.

NRG sells to a wide variety of customers, primarily end-use customers in the residential, commercial and industrial sectors.

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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.

The Company strives to begin meetings 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 Wellness

For several years, NRG has invested in the well-being of its employees and their families.

For several years, NRG has invested in the health and 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.

During 2021, the Company continued its support of employees by partnering with the National Council for Behavioral Health to roll out their Mental Health First Aid program.

This program safely, respectfully and effectively opens the conversation about mental illness and addiction, encourages employees to recognize and take responsibility for their mental health, teaches managers to recognize and speak to an employee with a mental health concern before it creates performance problems, complements and supports existing benefit and wellness programs and company’s policies and procedures.

For the 2022 plan year, the Company included well-being goals in the Annual Incentive Plan (AIP), ensuring participants are motivated to improve their physical, emotional and financial well-being.

Accordingly, certain key employee programs were evaluated and enhanced for 2023:

several new programs were added to NRG's voluntary benefits offerings, NRG’s retirement savings plan match was increased by 50% in the U.S.

and by 100% in Canada, and paid parental leave was increased to 6 weeks regardless of gender.

Diversity, Equity and Inclusion

NRG is committed to diversity, equity and inclusion ("DE&I") as an integral part of the Company.

NRG is committed to diversity, equity and inclusion ("DE&I") as an integral way the Company operates.

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.

In 2021, the Company focused on embedding DE&I in the Company’s operations, culture and communications, by working with diverse suppliers, finding diverse talent, facilitating engagement and awareness of DE&I by employees, and committing to be accountable for our DE&I progress.

The study demonstrated equitable pay practices after accounting for education, experience, performance and location.

The Company committed to conduct this study every three years, including in 2023.

In 2022, the Company used a portion of its cash balances to invest in a money market fund in which a portion of the fund’s fee is donated to Rio Bank, a Texas-based minority-owned financial institution.

This commitment demonstrates the Company's support for the communities in which it is located and does business .

NRG also held its first company-wide Day of Service in honor of Martin Luther King, Jr.

Employees were encouraged to participate in events held across multiple states to listen, learn and serve their communities.

Talent Development

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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.

In 2021, the Company launched an Executive Leadership Program to strengthen the identified pipeline of future leaders and create a cohort of high potential candidates for the program.

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.

In 2021, the Company launched an annual Executive Leadership Program to strengthen the identified pipeline of future leaders and create a cohort of high potential candidates for the program.

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.

NRG seeks to provide market competitive 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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business