What changed in this filing

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Item 1. Business

2024-02-28 compared with 2023-02-23 · 214 added, 261 removed, 305 unchanged (61% of the section changed)

Item 1 — Business

NRG Energy, Inc., or NRG or the Company, is a consumer services company built on dynamic retail brands.

NRG brings the power of energy to customers by producing and selling energy and related products and services, nation-wide in the U.S.

and Canada in a manner that delivers value to all of NRG's stakeholders.

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 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 Energy, Inc., or NRG or the Company, sits at the intersection of energy and home services.

NRG is a leading energy and home services company fueled by market-leading brands, proprietary technologies and complementary sales channels.

Across the U.S.

and Canada, NRG delivers innovative, sustainable solutions, predominately under brand names such as NRG, Reliant, Direct Energy, Green Mountain Energy and Vivint, while also advocating for competitive energy markets and customer choice.

The Company has a customer base that includes approximately 8 million residential consumers in addition to commercial, industrial, and wholesale customers, supported by approximately 13 GW of generation as of December 31, 2023.

NRG sold 152 TWhs of electricity and 1,892 MMDth of natural gas in 2023, making it one of the largest competitive energy retailers in the U.S.

As of the end of 2023, NRG had recurring electricity and/or natural gas sales in 25 U.S.

states, the District of Columbia, and 8 provinces in Canada.

states, the District of Columbia, and 8 provinces in Canada, as well as Vivint served customers in all 50 U.S.

NRG's retail brands, collectively, have the largest share of competitively served residential electric customers in Texas and nationwide.

The following chart represents NRG's sales volumes for the year ended December 31, 2023:

NRG's strategy is to maximize stakeholder value through the safe production and sale of reliable electricity and natural gas to its customers in the markets it serves, while positioning the Company to provide innovative solutions to the end-use energy or service 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.

NRG's strategy is to maximize stakeholder value by being a leader in the emerging convergence of energy and smart automation in the home and business.

Through a diversified supply strategy, the Company sells reliable electricity and natural gas to its customers in the markets it serves, while also providing innovative home solutions to customers.

NRG's unique combination of assets and capabilities enables the Company to develop and sell highly differentiated offerings that bring together every day essential services like powering and securing the home through a seamless and integrated experience.

This strategy is intended to enable the Company to optimize its unique integrated platform to delight customers, generate recurring cash flow, significantly strengthen earnings and cost competitiveness, and lower risk and volatility.

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

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To effectuate the Company’s strategy, NRG is focused on:

(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;

(i) serving the energy needs of end-use residential, commercial and industrial, and wholesale counterparties in competitive markets and optimizing on additional revenue opportunities through its multiple brands and channels;

(ii) offering a variety of energy products and services, including renewable energy solutions and smart home products and services that are differentiated by innovative features, premium service, integrated platforms, sustainability and loyalty/affinity programs;

(iii) excellence in operating performance of its assets;

(iv) optimal hedging of its portfolio;

(iv) achieving the optimal mix of supply to serve its customer load requirements through a diversified supply strategy;

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

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.

The following transactions were completed during 2023 in furtherance of the Company’s strategy:

(i) the March 10, 2023 acquisition of Vivint Smart Home, a leading smart home platform company;

(ii) portfolio optimization, including the sale of the Company’s 44% equity interest in STP for $1.7 billion;

and (iii) disciplined capital allocation through the execution of $1.2 billion in share repurchases and $1.4 billion in debt reduction.

Business Overview

The Company’s core business is the sale of electricity and natural gas to residential, commercial and industrial and wholesale customers, supported by the Company's wholesale generation.

NRG manages its operations based on the combined results of the retail and wholesale generation businesses with a geographical focus.

The Company’s core businesses are the sale of electricity and natural gas to residential, commercial and industrial and wholesale customers, supported by the Company's wholesale electric generation, as well as the sale of smart home products and services.

NRG manages its electricity and natural gas operations based on the combined results of the retail and wholesale generation businesses with a geographical focus.

Vivint Smart Home operations are reported within the Vivint Smart Home segment.

The Company's business is segmented as follows:

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• West/Services/Other, which primarily includes the following assets and activities:

(i) all activity related to customer, plant and market operations in the West and Canada, (ii) the services businesses, (iii) activity related to the Cottonwood facility, (iv) the remaining renewables activity, including the Company’s equity method investment in Ivanpah Master Holdings, LLC, and (v) activity related to the Company’s equity method investment for the Gladstone power plant in Australia;

(i) all activity related to customer, plant and market operations in the West and Canada, (ii) the Services businesses, (iii) activity related to the Cottonwood facility and other investments;

• Vivint Smart Home;

• Corporate activities.

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.

This 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 more 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 integrated model consists of three core functions in each geographic segment above:

Customer Operations, Market Operations and Plant Operations.

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.

This includes acquisition and retention of all of NRG’s residential, small commercial, commercial and industrial, and government 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.

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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 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.

Customer Operations 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.

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 protection products, carbon offsets, back-up power stations, portable power, portable solar and portable lighting.

NRG sells a variety of products to residential and small commercial customers, including retail electricity and energy management, natural gas, line and surge protection products, HVAC installation, repair and maintenance, home protection products, carbon offsets, back-up power stations, portable power, portable solar and portable lighting.

Home and Services 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.

Through its broad range of service offerings and value propositions, NRG seeks 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.

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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 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.

These solutions include system power, distributed generation, renewable and low-carbon products, carbon management

and specialty services, backup generation, storage and distributed solar, demand response, and energy efficiency and advisory services.

Market Operations

Market Operations has two primary objectives:

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.

to supply energy to customers in the most cost-efficient manner and to maximize the value of the Company's assets in satisfying its customer load requirements.

These objectives are intended to reduce supply costs and maximize earnings with predictable cash flows.

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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.

Physical and Financial Commodity Instruments

NRG 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 primarily 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 laws.

NRG trades power, natural gas, environmental, weather and other physical and financial commodity related products, including forwards, futures, options and swaps.

Fuel Supply and Transportation Contracts

NRG's fuel requirements consist of various forms of fossil fuel and nuclear fuel.

NRG's fuel requirements consist of various forms of fossil fuel.

The prices of fossil fuels can be volatile.

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Natural Gas — NRG operates a fleet of mid-merit and peaking natural gas plants.

Fuel needs are managed by the natural gas commercial group, 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.

Fuel needs are managed by the natural gas commercial group, generally on a spot basis, 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.

Natural gas storage and transportation contracts are utilized to reduce daily volatility.

Coal —NRG actively manages its coal requirements based on forecasted generation, market volatility and its inventory on site.

The Company believes it is adequately hedged, using forward coal supply agreements, for its domestic coal consumption for 2024.

As of December 31, 2022, NRG had purchased forward contracts to provide fuel for approximately 89% of the Company's expected requirements for 2023 and 2024.

As of December 31, 2023, NRG had purchased forward contracts to provide fuel for the Company's expected requirements for 2024.

For the domestic fleet, NRG purchased approximately 13 million tons of coal in 2023, 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 two 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 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.

For fuel transport, NRG has entered into various rail transportation and rail car lease agreements with varying tenures, which will provide for the Company's transportation requirements of Powder River Basin coal for the next two years.

Renewable PPAs

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

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.

As of December 31, 2023, NRG has entered into Renewable PPAs totaling approximately 1.9 GW with third-party project developers and other counterparties, of which approximately 1.1 GW are operational.

The average tenure of these agreements is eleven years.

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

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.

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 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 the Company's capabilities and scale across the natural gas value chain.

Capacity and Other Contracted Revenue or Supply Sources

NRG's revenues and/or cash flows, primarily in the East and West, benefit from capacity/demand payments and other contracted revenue sources, originating from market clearing capacity prices, tolling arrangements and other long-term contractual arrangements.

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

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.

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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.

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

Plant Operations

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 owns and leases a diversified wholesale generation portfolio with approximately 13 GW of fossil fuel, and renewable generation capacity at 19 plants as of December 31, 2023.

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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The following table summarizes NRG's generation portfolio as of December 31, 2023:

West/Services/Other

West/Services/Other (b)

Natural gas 4,353 80 1,279 5,712

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Oil — 455 — 455

Nuclear 1,132 — — 1,132

Utility Scale Solar — — 216 216

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(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.

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.

MW figures provided represent nominal summer net MW capacity of power generated as adjusted for the Company's owned interest

(b) Includes proportionate share of equity owned investments

Plant Operations is responsible for operating the Company's generation facilities at the highest standards of safety and regulatory compliance, and includes (i) operations and maintenance, (ii) asset management, and (iii) development, engineering and construction.

Operations & Maintenance

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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.

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.

Vivint Smart Home

In March 2023, NRG completed the acquisition of Vivint Smart Home, which is a leading smart home platform that provides subscribers with technology, products and services to create a smarter, greener, safer home.

A smart home has multiple devices integrated into a single expandable platform that incorporates artificial intelligence and machine-learning in its operating system allowing customers to interact with and manage their home from anywhere via the Vivint app on their smart device.

Vivint Smart Home enables a customized solution for the home using integrated smart cameras (indoor, outdoor and doorbell), locks, lights, thermostats, garage door control and a host of other safety and security sensors.

Vivint Smart Home provides a fully integrated solution for consumers, including hardware, software, sales, installation by trained and experienced in-home service professionals, customer service, technical support and professional monitoring.

This seamless integration of high-quality products and services resulted in an average subscriber lifetime of approximately nine years as of December 31, 2023.

The Company believes its ability to offer related or adjacent products and services that leverage the existing smart home platform, as well as energy services, can extend the average subscriber lifetime and increase the lifetime value of subscribers.

Vivint Smart Home's cloud-based home platform currently manages more than 30 million in-home devices as of December 31, 2023.

The average subscriber on Vivint Smart Home's cloud-based home platform engages with the smart home app approximately 16 times per day and has approximately 15 devices in its home.

Through the addition of Vivint Smart Home, NRG identified opportunities to improve gross margin, customer retention and customer lifetime value.

Operational Statistics

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Ending retail 358 396 434

Total Customer count

Average retail - Home 5,543 5,861 3,624

Ending retail - Home 5,406 5,722 3,587

Total Customer count (in thousands)

Average retail - Home - Electricity and Natural gas 5,508 5,543 5,861

Average - Vivint Smart Home (d)

Ending retail - Home - Electricity and Natural gas 5,827 5,406 5,722

Ending - Vivint Smart Home (d)

Total Ending retail and Vivint Smart Home 7,870 5,406 5,722

(a) Includes Services customers

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The whole home warranty business was sold in January 2022

(d) Vivint Smart Home subscribers includes customers that also purchase other NRG products

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

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The net amount of electricity produced is the total amount of electricity generated minus the amount of electricity used during generation by the station.

The tables below presents these performance metrics for the Company's generation portfolio, including leased facilities, for the years ended December 31, 2022 and 2021:

The tables below present these performance metrics for the Company's generation portfolio, including leased facilities, for the years ended December 31, 2023 and 2022:

Year Ended December 31, 2023

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Coal 1,328 6,738 5,774

Oil 7 201 322

Gas 685 537 1,519

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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 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.

The Company sold its interest in STP on November 1, 2023

(b) Includes gas generation of 855 thousand MWh and oil generation of 199 thousand MWh for the year ended December 31, 2021, that was sold to Generation Bridge on December 1, 2021

(c) Includes gas generation of 2,445 thousand MWh for the year ended December 31, 2021, that was sold to Generation Bridge on December 1, 2021

While there has been consolidation in the competitive retail energy 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.

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Competitors include regulated utilities, municipalities, cooperatives, other independent power producers, and power marketers or trading companies, including those owned by financial institutions.

The smart home market is an expanding global opportunity and is in the early stages of broad consumer adoption.

It is highly competitive and fragmented.

Major competitors range from large-cap technology companies seeking to expand their core market opportunity who predominantly offer do-it-yourself ("DIY") devices that put a large burden on homeowners to self-install and support many devices, to security-based providers, as well as industrial and telecommunications companies that offer connected home experiences.

Vivint Smart Home provides the full smart home experience, with an end-to-end solution that includes a wide range of unique capabilities and use cases.

Currently, the vast majority of competitors do not offer comprehensive smart home solutions and accompanying services.

Seasonality and Price Volatility

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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.

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.

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Market Framework

NRG sells electricity, natural gas and related products and services to customers throughout the U.S.

NRG sells electricity, natural gas and related products and services, and smart home products and services to customers throughout the U.S.

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.

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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.

are within the control areas of PJM, NYISO 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 and ISO-NE use a forward capacity auction, while NYISO uses a month-ahead capacity auction.

PJM uses 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.

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.

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In addition, the Company sells energy to commercial customers in other provinces.

All sales and operations are subject to applicable federal and provincial laws.

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.

All sales and operations are subject to applicable federal and provincial laws and regulations.

Vivint Smart Home

Vivint Smart Home operates in states that regulate in some manner the sale, installation, servicing, monitoring or maintenance of smart home and electronic security systems.

Vivint Smart Home and Vivint Smart Home sales representatives are typically required to obtain and maintain licenses, certifications or similar permits from governmental entities as a condition to engaging in the smart home and security service business.

Vivint Smart Home is subject to federal and state laws related to consumer financing which may include rules related to fees and charges, disclosures and regulation of the party extending consumer credit.

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

Energy 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, state and provincial agencies.

These include the CFTC, FERC, 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.

These power markets are subject to ongoing legislative and regulatory changes that may impact NRG's wholesale and retail operations.

NRG must also comply with the mandatory reliability requirements imposed by NERC and the regional reliability entities in the regions where NRG operates.

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

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

Illinois Legislation — Illinois enacted the Climate and Equitable Jobs Act ("CEJA") on September 15, 2021, which targets 100% clean energy by 2050.

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

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.

These operations are subject to regulation by the PUCT.

Regional Regulatory Developments

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For further discussion on regulatory developments see Item 15 — Note 24, Regulatory Matters, to the Consolidated Financial Statements.

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 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.

ERCOT subsequently filed two applications requesting the PUCT to issue Debt Obligation Orders ("DOOs") based on the legislation.

On October 13, 2021, the PUCT issued DOOs authorizing ERCOT's securitization of $800 million to cover short payments and reimburse congestion revenue right account holders for amounts related to the default of market participants other than electric cooperatives Brazos and Rayburn, which are discussed below (the "Default Securitization") and $2.1 billion related to highly priced ancillary service and ORPDA during Winter Storm Uri (the "Uplift Securitization").

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 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.

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 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.

Public Utility Commission of Texas’s Actions with Respect to Wholesale Pricing and Market Design — The PUCT continues to analyze and implement multiple options for promoting increased reliability in the wholesale electric market, including the adoption of a reliability standard for resource adequacy and market-based mechanisms to achieve this standard.

During the 88th Regular Session, the Texas Legislature authorized deployment of the Performance Credit Mechanism ("PCM"), which will measure real-time contribution to system reliability and provide compensation for resources to be available, subject to certain "guardrails" such as an annual net cost cap, as part of its adoption of the PUCT Sunset Bill (House Bill 1500).

The Texas Legislature also directed the PUCT to implement additional market design changes such as the creation of a new ancillary service called Dispatchable Reliability Reserve Service ("DRRS") to further increase ERCOT's capability to manage net load variability and firming requirements for new generation resources which penalize poor performance during periods of low grid reserves.

The PUCT directed ERCOT to implement DRRS as a standalone product which will delay implementation until late 2025 or 2026.

Additionally, through Senate Bill 2627, the Texas Legislature created the Texas Energy Fund, which received voter approval in November 2023, and will provide grants and low-interest loans to incentivize the development of more dispatchable generation and smaller backup generation in ERCOT.

The PUCT has initiated a rulemaking proceeding to establish the process by which the Texas Energy fund loan proceeds will be distributed.

A final rule creating the general structure of the loan program is expected to be adopted in March 2024.

Operating Reserve Demand Curve ("ORDC") — On August 3, 2023, the PUCT approved implementation of an enhancement to the ORDC as a bridge solution that was recommended by the ERCOT Technical Advisory Committee and the ERCOT board of directors.

The ORDC enhancement will install price floors of $10 and $20 at reserve levels of 7,000 MW and 6,500 MW or below, respectively.

ERCOT completed implementation on November 1, 2023.

Ruling on Pricing during Winter Storm Uri — On March 17, 2023, the Third Court of Appeals issued a ruling in Luminant Energy Co.

PUCT, which is an appeal relating to the validity of two orders issued by the PUCT on February 15 and 16, 2021, respectively, governing scarcity pricing in the ERCOT wholesale electricity market during Winter Storm Uri.

The Third Court found that the PUCT exceeded its statutory authority by ordering the market price of energy to be set at the high system wide offer cap due to scarcity conditions as a result of firm load shed occurring in ERCOT.

The Third Court reversed the PUCT's orders and remanded the case.

On March 23, 2023, the PUCT filed a petition for review to the Supreme Court of Texas seeking reversal of the Third Court's decision, which was granted on September 29, 2023.

The Court received briefing on the merits and oral arguments occurred on January 30, 2024.

The outcome of this appeal could potentially require a retroactive repricing of the ERCOT market prices during the subject time period.

Voluntary Mitigation Plan ("VMP") Changes — On March 13, 2023, the PUCT Staff determined that a portion of NRG's VMP should be terminated due to the increase in procurement of ancillary services by ERCOT, specifically non-spin reserve services, following Winter Storm Uri.

As such, PUCT Staff terminated part of the VMP for NRG which provides protection from wholesale market power abuse accusations related to offers for ancillary services.

NRG agreed with these changes to the VMP.

At the March 23, 2023 open meeting, the PUCT approved the amended VMP.

On February 23, 2024, NRG filed a notice of intent with the PUCT to terminate its existing VMP as of March 1, 2024.

ERCOT Request for Proposals for Winter Capacity — On October 2, 2023, ERCOT issued a Request for Proposals for Capacity ("RFP") for Winter 2023-2024.

Proposals were due in early November to provide capacity for the December 1, 2023 to February 29, 2024 period.

The RFP requirements were limited to demand response resources that have not participated in ERCOT or price responsive products.

Ultimately, ERCOT cancelled the procurement due to lack of participation by qualified participants.

Lubbock, Texas Transition to Competition — The customers of Lubbock Power and Light ("LP&L"), a municipally owned utility, will enter the Texas retail competitive market in March 2024.

Starting in January 2024, LP&L customers can shop for a REP.

Customers who do not select a REP by February 15, 2024 will be assigned to one of three default REPs, one of which is Reliant.

LP&L customers will start transitioning to their chosen REP or a default REP on March 4, 2024.

Revisions to PJM Local Deliverability Area Reliability Requirement — 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.

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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.

On February 21, 2023, FERC accepted PJM's filing.

Multiple parties, including NRG, filed for rehearing.

Rehearing was denied by operation of law, and multiple parties, including the Company, filed appeals to the Third Circuit Court of Appeals.

The price of the auction cleared significantly lower as a result of the PJM Tariff change.

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.

The proposal would eliminate:

(i) the current MOPR for new entrant natural gas resources effective with the 2023/2024 delivery year and (ii) the expanded MOPR established in FERC's December 2019 Order to address out-of-market subsidies.

On September 30, 2021, PJM's proposal went into effect by operation of law because the FERC Commissioners were split 2-2 as to the lawfulness of the change.

Multiple parties filed motions for rehearing and ultimately appealed to the federal court of appeals.

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 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 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 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.

Specifically, FERC reversed itself and ordered PJM to:

(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.

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.

The Company is subject to penalty and bonus payments related to the events.

On April 3, 2023, FERC approved PJM's request to allow Winter Storm Elliott penalty payments to be spread over 9 months (with interest) and allow future penalties to have a 9 month window to be satisfied without interest.

Multiple generators filed various complaints against PJM at FERC alleging that PJM violated its Tariff in, among other things, the manner in which it operated the system during Winter Storm Elliott and the resulting assessment of capacity performance penalties.

On June 5, 2023, FERC issued an order setting the various complaints for settlement.

A settlement in principle was filed with FERC on September 29, 2023 and was approved on December 19, 2023.

PJM Base Residual Auction Revisions and Delay — On April 11, 2023, PJM filed, and FERC subsequently approved, to delay the Base Residual Auctions for the 2025/2026 to 2028/2029 delivery years.

On October 13, 2023, PJM made two filings proposing to develop market reforms to improve the operation of the capacity market through changes to the Market Seller Offer Cap rules, changes to PJM's resource adequacy risk modeling and capacity accreditation processes, and changes to capacity performance enhancements.

On January 30, 2024, FERC accepted certain reforms to PJM's resource adequacy risk modeling and accreditation processes;

on February 6, 2024, FERC rejected PJM's proposed changes to certain Market Seller Offer Cap rules and capacity performance enhancements.

The approved changes will be in effect for the 2025/2026 Base Residual Auction scheduled to occur in July 2024, and will impact both demand and supply characteristics.

PJM Files to Make Changes to the Performance Assessment Interval Trigger — On May 30, 2023, PJM filed proposed tariff revisions at FERC that narrow the definition of Emergency Actions used to determine Performance Assessment Intervals ("PAIs").

On July 28, 2023, FERC accepted the tariff revisions, and PJM made its compliance filing on August 28, 2023.

The new definition narrows the instances of when PAIs can occur and therefore decrease the instances of when capacity performance penalties are assessed.

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 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 eliminated the Cost of New Entry-based Market Seller Offer Cap, implemented a limited default cap for certain asset classes based on going-forward costs and provided for unit specific cost review by the Independent Market Monitor for all other non-zero offers into the auctions.

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.

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

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 — 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").

MSCC owns a cogeneration facility near Fellows, California 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 ("RMR") resource conditioned on execution of a RMR contract.

On January 29, 2021, MSCC made its RMR filing at FERC.

Multiple parties filed protests and on March 16, 2021, MSCC filed a response to those protests.

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.

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

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.

Circuit, and on August 15, 2023, the Court denied the petitions for review.

On January 12, 2024, the generator trade association filed a petition for review with the U.S.

Supreme Court to overturn the August 15, 2023 judgment.

California Resource Planning Proceedings — As part of the Integrated Resource Procurement docket, the CPUC is requiring that all LSEs procure a pro rata share of 15.5 GW of new non-fossil resource adequacy ("RA") from 2023 to 2026.

The new RA program rules adopted in 2023 are now in an implementation phase with a compliance process likely to be continually recalibrated through the first quarter of 2024.

CPUC jurisdictional retail providers will be required to procure RA that meets their hourly load shape beginning in 2025.

The result of these changes may create upward pressure on RA prices through 2024, and if LSEs cannot meet their RA obligations, penalties and restrictions on serving new customers may be issued.

As relief to the tightness of the RA market, the CPUC adopted a final decision in December 2023 to extend PG&E's

Diablo Canyon nuclear facility.

The decision would allow the RA and GHG-free attributes of this 2-GW facility to be allocated to all LSEs to provide some relief to all LSEs' RA positions.

Other Regulatory Matters

From time to time, NRG entities may be subject to examinations, investigations and/or enforcement actions by federal, state and provincial licensing agencies and may face the risk of penalties for violation of financial services, consumer protections and other applicable laws and regulations.

Environmental Regulatory Matters

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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.

Federal and state environmental laws 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 including unit retirements.

Complying with environmental laws often involves specialized human resources and significant capital and operating expenses, as well as occasionally curtailing operations.

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 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.

A number of regulations that affect the Company have been and continue to be revised by the EPA, including requirements regarding coal ash, 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 finally resolved.

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.

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The relevant NAAQS may become more stringent.

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

On February 7, 2024, the EPA released a prepublication version of a final rule that when published in the Federal Register will increase the stringency of the PM2.5 NAAQS.

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

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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.

In 2019, the 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.

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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.

On May 23, 2023, the EPA proposed significantly revising the manner in which new and existing EGU's GHG emissions should be regulated including using hydrogen as a fuel, capturing and storing/sequestering CO 2 and requiring new units to be more efficient.

The EPA has stated that it intends to finalize these revisions in 2024.

The Company expects that the final rule will be challenged in the courts and accordingly uncertain over the next several years.

Cross-State Air Pollution Rule ("CSAPR") — On March 15, 2023, the EPA signed and released a prepublication of a final rule that sought to significantly revise the CSAPR to address the good-neighbor obligations of the 2015 ozone NAAQS for 23 states after earlier having disapproved numerous state plans to address the issue.

Several states, including Texas, challenged the EPA's disapproval of their state plans.

On May 1, 2023, the United States Court of Appeals for the Fifth Circuit stayed the EPA's disapproval of Texas' and Louisiana's state plans, which disapprovals are a condition precedent to the EPA imposing its plan on Texas and Louisiana.

Several other states are also similarly situated because of similar stays.

Nonetheless, on June 5, 2023, the EPA published this rule in the Federal Register.

On July 31, 2023, the EPA promulgated an interim final rule that addresses the various judicial orders that have stayed several State-Implementation-Plan disapprovals by limiting the effectiveness of certain requirements of the final rule promulgated on June 5, 2023 in Texas and five other states.

The final rule decreases, over time, the ozone-season NOx allowances allocated to generators in the states not affected by the judicial stays beginning in 2023 by assuming that participants in this cap-and-trade program had or would optimize existing NOx controls and later install additional NOx controls.

The Company cannot predict the outcome of the legal challenges to the:

(i) various state disapprovals;

(ii) the final rule promulgated on June 5, 2023;

and (iii) the interim final rule promulgated on July 31, 2023 that seeks to address the judicial orders.

Regional Haze Proposal — On May 2023, the EPA proposed to withdraw the existing Texas Sulfur Dioxide Trading Program and replace it with unit-specific SO 2 limits for 12 units in Texas to address requirements to improve visibility at National Parks and Wilderness areas.

If finalized as proposed, the rule would result in more stringent SO 2 limits for two of the Company's coal-fired units in Texas.

The Company cannot predict the outcome of this proposal.

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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EPA) GHG reporting requirements.

NRG's climate goals are to reduce greenhouse gas emissions by 50% by 2025, from its current 2014 baseline, and to achieve net-zero emissions by 2050.

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

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 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.

NRG's climate goals are to reduce greenhouse gas emissions by 50% by 2025, from its current 2014 base year, and to achieve net-zero emissions by 2050.

Greenhouse gas emissions included in NRG's goals are directly controlled emissions, emissions from purchased electricity for NRG's consumption and emissions from employee business travel.

In March 2021, the Science Based Targets initiative validated NRG's 2025 and 2050 goals as aligned with a 1.5 degree Celsius trajectory.

This validation was based on NRG’s business in 2020, prior to its acquisition of Direct Energy and Vivint.

Following the acquisitions, the magnitude of NRG’s indirect emissions changed, and the Company is currently in the process of analyzing these emissions.

From the current 2014 base year through 2023, the Company's directly controlled CO 2 e emissions decreased from 58 million metric tons to 24 million metric tons, representing a cumulative 58% reduction.

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

The achievement of NRG's 2025 emissions reduction targets could be impacted by volatility within the power markets, driven by market conditions and changes in regulatory policies.

As of December 31, 2023, less than 5% of the Company's consolidated revenues were derived from coal-fired operating assets.

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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.

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.

In 2015, the EPA finalized a rule regulating byproducts of coal combustion (e.g., ash and gypsum) as solid wastes under the RCRA.

On August 21, 2018, the D.C.

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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.

On May 23, 2023, the EPA proposed establishing requirements for:

(i) inactive (or legacy) surface impoundments at inactive facilities and (ii) all CCR management units (regardless of how or when the CCR was placed) at regulated facilities.

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

Domestic Site Remediation Matters

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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 ("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.

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.

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 ("ELG") 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.

Effluent Limitations Guidelines — In 2015, the EPA revised the Effluent Limitations Guidelines ("ELG") 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.

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and (iii) changing several deadlines.

On July 26, 2021, the EPA announced that it is initiating a new rulemaking to evaluate revising the ELG rule.

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

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 that have coal-fired units in Texas.

On March 29, 2023, the EPA proposed revisions to the ELG and sought comments, which the EPA is analyzing.

Regional Environmental Developments

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

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

NRG has applied for initial operating permits and construction permits (for closure and retrofits) as required by the regulation and is waiting for permits to be issued by the Illinois EPA.

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.

Accordingly, Texas is required to develop a new control strategy and submit it to the EPA, which is expected by May 2024.

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

The Company owns and operates power plants to generate and sell power to wholesale customers, such as utilities and other intermediaries.

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Human Capital

As of December 31, 2022, NRG and its consolidated subsidiaries had 6,603 employees, approximately 12% of whom were covered by U.S.

As of December 31, 2023, NRG and its consolidated subsidiaries had 18,131 employees, including 5,187 active smart home direct sales and installation individuals, which are largely seasonal.

Approximately 4% of the Company's employees were covered by U.S.

collective bargaining agreements.

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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.

The following chart reflects the Company's 5 year safety record, excluding Vivint Smart Home which uses different industry specific safety benchmarks.

Health and Wellness

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For the 2023 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 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 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.

In 2023, NRG completed a gender and race pay equity study to analyze the Company's pay decisions in light of gender, race, or other similar factors.

The study demonstrated equitable pay practices after accounting for job level, experience, tenure and location.

The Company first conducted this study in 2020 and committed to conduct the study every three years.

In 2023, Forbes and Statista recognized NRG as one of The Best Employers for Diversity.

Also in 2023, NRG created designated reflection rooms in its headquarters to accommodate religious practices and reflection.

NRG held its first Lunar New Year's celebrations hosted by VIVIDH, the Company's Asian American Pacific Islander Business Resource Group.

The Company also hosted its inaugural listening session in recognition of Canada's National Day for Truth and Reconciliation sponsored by RISE, its Indigenous Communities Business Resource Group.

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.

NRG deploys various talent development strategies and programs with the goal of ensuring a pipeline of leadership that 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.

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 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 Emerging Leaders Program to strengthen the identified pipeline of future leaders and create a cohort of high potential candidates for leadership positions.

In 2023, the Company launched a front-line leader program called Peak Leadership with the intent to onboard first-level leaders into their leadership role in select business units and is planning to expand its impact in 2024.

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.

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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.

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.

NRG continues to evaluate its benefits and 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.

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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