The discussion and analysis below has been organized as follows: •Executive summary, including introduction and overview, business strategy, and changes to the business environment during the period, including environmental and regulatory matters; •Results of operations; •Financial condition, addressing liquidity position, sources and uses of liquidity, capital resources and requirements, commitments, and off-balance sheet arrangements; and •Known trends that may affect NRG's results of operations and financial condition in the future. As you read this discussion and analysis, refer to NRG's Condensed Consolidated Statements of Operations to this Form 10-Q, which present the results of operations for the three months endedMarch 31, 2021 and 2020. Also refer to NRG's 2020 Form 10-K, which includes detailed discussions of various items impacting the Company's business, results of operations and financial condition, including: General section; Strategy section; Business Overview section, including how regulation, weather, and other factors affect NRG's business; and Critical Accounting Policies and Estimates section. Executive Summary Introduction and Overview NRG is an integrated power company built on dynamic retail brands with diverse generation assets. NRG brings the power of energy to customers by producing and selling electricity and related products and services in major competitive power and gas markets in theU.S. andCanada in a manner that delivers value to all of NRG's stakeholders. The Company sells energy, services, and innovative, sustainable products and services directly to retail customers under the brand names NRG, Reliant, Direct Energy,Green Mountain Energy , Stream, andXOOM Energy , as well as other brand names owned by NRG, supported by approximately 23,000 MW of generation, including approximately 4,850 MW of fossil generation assets held for sale as ofMarch 31, 2021 . COVID-19 As the COVID-19 pandemic continues, NRG remains focused on protecting the health and well-being of its employees, while supporting its customers and the communities in which it operates and assuring the continuity of its operations. During 2020, NRG migrated a substantial portion of its employees to a remote work environment. The first COVID-19 vaccine became available inthe United States inDecember 2020 . Vaccines have become increasingly accessible since the initial rollout and all adults across the nation became eligible to receive a vaccine as ofApril 19, 2021 . The Company is currently planning to begin returning certain employees to the offices through a phased approach expected to be completed by the end of summer.. While the pandemic presents risks to the Company's business, as further described in the Company's 2020 Form 10-K in Part II, Item 1A - Risk Factors, there was not a material adverse impact on the Company's results of operations for the three months endedMarch 31, 2021 . NRG believes it has sufficient liquidity on hand to continue business operations in light of current circumstances posed by the pandemic. As disclosed in the Liquidity and Capital Resources section, the Company has total available liquidity of$3.2 billion as ofMarch 31, 2021 , consisting of cash on hand, its Revolving Credit Facility, and additional facilities. The situation surrounding COVID-19 remains fluid and the potential for a material adverse impact on the Company exists as long as the virus impacts the level of economic activity inthe United States and abroad. While the Company expects the risk to decrease as vaccinations are administered, NRG cannot reasonably estimate with any degree of certainty the full impact COVID-19, nor any resurgence of COVID-19, may have on the Company's results of operations, financial position, and liquidity. The extent to which the COVID-19 pandemic may impact the Company's business, operating results, financial condition, risk exposure or liquidity will depend on future developments, including the duration of the pandemic, travel restrictions, business and workforce disruptions, any resurgence of the pandemic and the effectiveness of actions taken to contain, mitigate and treat the disease.
Strategy
NRG's strategy is to maximize stockholder value through the safe production and sale of reliable power and gas to its customers in the markets it serves, while positioning the Company to provide innovative solutions to the end-use energy or service consumer. This strategy is intended to enable the Company to optimize the integrated model to generate stable and predictable cash flow, significantly strengthen earnings and cost competitiveness, and lower risk and volatility.
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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 customers in competitive markets through multiple brands and channels; (ii) offering a variety of energy products and services, including renewable energy solutions, that are differentiated by innovative features, premium service, sustainability, and loyalty/affinity programs; (iii) excellence in operating performance of its existing assets; (iv) optimal hedging of NRG's portfolio; and (v) engaging in disciplined and transparent capital allocation. Sustainability is an integral part of NRG's strategy and ties directly to business success, reduced risks and brand value. In 2019, NRG announced the acceleration of its science-based GHG emissions reduction goals to align with prevailing climate science, which seeks to limit global warming in the post-industrial era to 1.5 degrees Celsius. NRG is targeting a 50% reduction by 2025, from its current 2014 baseline, and net-zero emissions by 2050. The Company is on track to meet its 2025 goal.
Energy Regulatory Matters The Company's regulatory matters are described in the Company's 2020 Form 10-K in Item 1, Business - Regulatory Matters. These matters have been updated below and in Note 17, Regulatory Matters. As participants in wholesale and retail energy markets and owners and operators of power plants, certain NRG entities are subject to regulation by various federal and state government agencies. These include the CFTC,FERC , NRC and the PUCT, as well as other public utility commissions in certain states where NRG's generation or distributed generation assets are located. In addition, NRG is subject to the market rules, procedures and protocols of the various ISO and RTO markets in which it participates. Likewise, certain NRG entities participating in the retail markets are subject to rules and regulations established by the states and provinces in which NRG entities are licensed to sell at retail. NRG must also comply with the mandatory reliability requirements imposed by NERC and the regional reliability entities in the regions where NRG operates. InMarch 2021 ,President Biden announced a framework for his "Build Back Better" initiative. The announced framework includes ideas to address climate change across the whole of the federal government through tax policy and research and development, among other areas of focus. Relatedly, theU.S. House Energy and Commerce Committee released the Climate Leadership and Environmental Action for our Nation's ("CLEAN") Future Act, which is expected to influence legislative drafts of the "Build Back Better" initiative. The CLEAN Future Act proposes, among other things, a clean electricity standard that would require electricity suppliers to procure and retire clean energy credits offsetting, in aggregate, 80% of the energy sold by 2030 and 100% by 2035. It would establish an auction-based mechanism for these credits and award partial credits to certain carbon-emitting generation that have lower-than-average emissions rates. Although these proposals have not yet resulted in any new legislation being enacted or regulations promulgated, NRG is closely monitoring both legislative and executive agency action and expects to be an active participant as proposals evolve into legislation. OnApril 22, 2021 , the President announced thatthe United States' Nationally Defined Contribution to the internationalParis Climate Agreement will be an economy-wide reduction in greenhouse gas emissions of 50-52% by 2030, relative to 2005 levels. No methodology to achieve those targets was announced, but legislation encompassing the "Build Back Better" initiative is expected to be the bulk of the effort, with more details expected to be announced by theNovember 2021 Conference of the Parties 26 meeting inGlasgow, Scotland . NRG's operations within theERCOT footprint are not subject to rate regulation byFERC , as they are deemed to operate solely within theERCOT 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. State and Provincial Energy Regulation State Proceedings Regarding States' Participation in the Wholesale Market - Various states, includingConnecticut ,New Jersey ,New York andIllinois , as well as theDistrict of Columbia have initiated proceedings to investigate resource adequacy alternatives and to consider its participation in the regional wholesale electricity market constructs, specifically withdrawal from the regional market or implementing a state-directed capacity procurement regime. Any actions taken by the states could affect market design and market prices in the respective regional markets. Regional Regulatory Developments NRG is affected by rule and tariff changes that occur in the ISO regions. For further discussion on regulatory developments see Note 17, Regulatory Matters. 37
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East/West
PJM
FERC Changes to Capacity Markets - OnMarch 23, 2021 , the Commission held its first technical conference on Resource Adequacy in the Evolving Electricity Sector to discuss the role of capacity market constructs in PJM, ISO-NE and NYISO. The technical conference included the discussion of the implications of retaining the expanded minimum offer price rule ("Expanded MOPR") in the PJM capacity market, as well as prospective alternative approaches that could replace PJM's Expanded MOPR. OnApril 5, 2021 , the Commission issued a notice inviting post-technical conference comments seeking comments on PJM's capacity market, the implications of Expanded MOPR and potential alternatives to Expanded MOPR in PJM. The Company filed comments onApril 26, 2021 . Any changes to the PJM capacity market construct may impact the outcome of the Base Residual Auction to be held inDecember 2021 for the 2023/2024 delivery year and future auctions. OnApril 22, 2021 , PJM published updated Planning Period Parameters for the 2022/2023 Base Residual Auction that indicated a significant portion of Dominion zone load, presumably the Dominion Energy Virginia utility, elected the Fixed Resource Requirements ("FRR") Alternative. PJM approved the plan and adjusted the reliability requirements downward for the RTO and the respective local delivery areas. Under the existing PJM rules, an FRR election has a minimum 5-year term. Removing capacity from the auctions could impact the auction results. Independent Market Monitor Market Seller Offer Cap Complaint - OnFebruary 21, 2019 , the Independent Market Monitor filed a complaint alleging that the current Market SellerOffer Cap is too high. A number of parties, including PJM, filed protests to the filing arguing that, among other things, the Market Monitor failed to support its claim that the expected number of performance hours used to calculate the cap is overstated. OnMarch 18, 2021 , finding that the calculation of the default Market SellerOffer Cap was unjust and unreasonable, the Order permitted the current PJMMay 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 within 45 days. As a result of this proceeding, default market caps could be lower.Indiana Municipal Power Agency andCity of Lawrenceburg, Indiana Complaint onStation Power - OnSeptember 17, 2020 ,FERC issued an order in response to a complaint and request for declaratory judgement challenging the station power wholesale netting provisions in PJM's tariff.FERC found that it does not have jurisdiction over the supply of station power and the provision of station power is a retail sale subject to state jurisdiction. The order established a Section 206 proceeding and required PJM to submit a filing to show why the station service netting provisions of its tariff are just and reasonable.Lawrenceburg Power, LLC filed for rehearing, which was denied by operation of law onNovember 19, 2020 and they subsequently appealed to theUnited States Court of Appeals for the District of Columbia Circuit . The matter is pending. OnNovember 23, 2020 , PJM submitted its station power compliance filing toFERC . In anApril 27, 2021 Order,FERC found that PJM's Tariff regarding station power whole netting was unjust and unreasonable, but accepted in part and rejected in part PJM's compliance filing, and required PJM to make an additional compliance filing within 30 days of the Order. This decision could affect the rates that plants pay for station power.New England Mystic's Complaint on Transmission Reliability Review - OnJune 10, 2020 ,Constellation Mystic Power LLC filed a complaint atFERC against ISO-NE alleging that ISO-NE violated its Tariff in its addition of language to its planning procedure and in its conduct in carrying out a competitive transmission request for proposal to address the retirements of Mystic Units 8 and 9. OnAugust 17, 2020 ,FERC issued an order denying the complaint. After a rehearing that was denied by operation of law, onJanuary 4, 2021 ,Constellation Mystic Power LLC filed an appeal to the D.C. Circuit. The ISO-NE auction for the 2024-2025 delivery year concluded onFebruary 8, 2021 . Subsequently, onFebruary 18, 2021 ,Constellation Mystic Power LLC withdrew the appeal.Texas Legislative Activity Post-Winter Storm Uri -The Texas Legislature convened extensive fact-finding hearings the week after Winter Storm Uri, and subsequently has been highly engaged in policymaking in respect to the energy sector. The focuses of the legislation pertinent to the competitive power sector include the design and governance of theERCOT wholesale market, the weatherization of sources of power and fuel supply and related infrastructure, retail customer protections for the limited number of residential customers exposed to real-time wholesale-price index products, communications protocols before and during power outage events, and the financial security of market participants and customers including a variety of securitization proposals. The legislative session concludes at the end of May, but may reconvene in special session. A significant number of legislative proposals would direct regulatory agencies, such as the PUCT, to engage in extensive rulemaking. Due to the preliminary nature of the legislation and rulemaking process, it is unclear what, if any, impact these proposals would have on the Company or theERCOT wholesale market. 38
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Public Utility Commission of Texas' Actions with Respect to Winter Storm Uri OnFebruary 15, 2021 , the PUCT issued an emergency order that required the energy prices of theERCOT market to reflect the "Value of Lost Load" so long as load was being involuntary curtailed during Energy Emergency Alert 3 ("EEA3") conditions, as directed byERCOT . This action effectively set the price of energy at$9,000 per megawatt-hour for the duration of the EEA3 event. Additionally, in the same order, the PUCT temporarily suspended the Low System WideOffer Cap ("LCAP"), reasoning that if triggered it would have the unintended effect of raising the price cap of theERCOT market above$9,000 per megawatt-hour. OnFebruary 16, 2021 , the PUCT largely reaffirmed its judgement, but rescinded the retroactive applicability of itsFebruary 15, 2021 order to the early hours ofFebruary 15, 2021 . Consequently, energy prices remained at$9,000 /MWh from lateFebruary 15, 2021 to earlyFebruary 19, 2021 , whenERCOT declared the EEA3 conditions terminated. OnFebruary 21, 2021 , citing a public emergency and imperative public necessity, the PUCT issued an order directing retail electricity providers ("REP") to suspend late fees and prohibiting REPs from disconnecting residential and small commercial customers for non-payment. Although the late fee suspension was ended by the PUCT by order datedMarch 3, 2021 , the PUCT has yet to lift its prohibition against disconnection. OnMarch 4, 2021 , after the PUCT lifted its temporary suspension of the LCAP,ERCOT transitioned from using the System WideOffer Cap ("SWCAP") to the LCAP, which resulted in the offer cap being reduced from$9,000 per MWh to$2,000 per MWh, or 50 times the Katy fuel index price for the balance of the year, whichever is greater.ERCOT makes the transition from the SWCAP to LCAP after a hypothetical gas-fired peaker, using actual power prices, would have made$315,000 MW/year (achieved onFebruary 16, 2021 ), which is equal to three times the assumed net cost of new entry. The PUCT has instituted a rulemaking to fix the LCAP value at$2,000 per MWh. This transition of the offer cap may reduce the balance of year 2021 power prices due to the lower offer cap. Since Winter Storm Uri, all three then-sitting PUCT commissions have resigned. The Governor has appointedWill McAdams andPeter Lake to the PUCT, designating the latter to become Chairman upon taking office. Messrs. McAdams and Lake were confirmed by theTexas State Senate during the week ofApril 19, 2021 . Regulatory and Legislative Activity on ERCOT Pricing during Winter Storm Uri - The ERCOT Independent Market Monitor ("IMM") proposed that the PUCT reprice the market such that prices during 32 hours ofFebruary 18 and 19 would not automatically be fixed at$9,000 /MWh, reasoning thatERCOT had recalled all directives to transmission and distribution utilities to shed load by the late evening ofFebruary 17, 2021 . The PUCT rejected this proposal. Thereafter, theTexas Senate passed SB2142 which directs the PUCT as recommended by the IMM, byMarch 20, 2021 , to reprice the market such that prices during 32 hours ofFebruary 18 and 19 would not automatically be fixed at$9,000 /MWh. TheTexas House has not referred the bill and House leadership has come out publicly against the repricing. It appears Legislative members are now focused on securitization as a way to address the financial issues from Winter Storm Uri. A number of parties have either moved the PUCT to rehear itsFebruary 15 and 16 orders, arguing that they were adopted without due process and in violation of law, or have directly appealed those orders to state court. The PUCT had untilApril 12, 2021 to consider the pending motions for rehearing and, not having taken action, these requests were considered denied by operation of law. Certain parties consequently filed a petition for judicial review inTravis County District Court onApril 22 . Separately, a party has also challenged theFebruary 15 and 16 PUCT orders before theCourt of Appeals for theThird District . Briefing in that matter has been scheduled into the summer. ERCOT Defaults and Securitization Legislation - A number of market participants defaulted on theirERCOT transactions following Winter Storm Uri. Defaulting parties result inERCOT short-paying other market participants that are owed net payments in the market operator's settlement process. The cumulative short pay amount as ofApril 30, 2021 totaled$2.992 billion . Two electric co-operatives represent 84% of this amount, with Brazos Electric Co-operative constituting an overall majority of the sum ($1.879 billion ). Brazos has filed for bankruptcy protection andERCOT is an unsecured creditor in the proceeding.ERCOT's market protocols provide for the short pay to be extinguished through a process of uplift, whereby the cost of defaults is allocated to all market participants, including retailers, generators, municipal and co-operative utilities, and financial traders. However, the total amount of this uplift is limited byERCOT's current protocols to$2.5 million per month. Consequently, it would take approximately 96 years for the current net short-pay balance 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$185 million and has been short-paid$83 million . The remaining$102 million has been discounted based on the 96 year repayment term and the present value of$12 million was recorded as an additional liability. The legislature is actively considering proposals to securitize these default balances. If enacted, the PUCT would either be required or allowed to issue a financing order that authorizes the issuance of bonds, the proceeds of which would resolve the existing short pay, backed by a property right to a stream of payments by market participants of anERCOT surcharge associated with the bonds' principal and interest. Other securitization proposals also have been introduced that specifically 39
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permit co-operatives to securitize debts, including theirERCOT defaults, and for costs associated with online reliability deployment price adders and ancillary services to be securitized. However, the details and the scope of any securitization legislation continue to be a matter of debate at the legislature.California California Resource Adequacy Proceedings - Since a summer 2020 heat storm that resulted in emergency load curtailments, theState of California and CAISO have embarked on numerous new regulatory activities while redirecting existing proceedings related to the topic of resource adequacy. OnMarch 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. In the same docket, the CPUC approved a new demand response program for use during emergency conditions. The CPUC is also considering longer term structural reforms of the resource adequacy policy inCalifornia . Midway-Sunset Reliability Must Run Proceeding -San Joaquin Energy, LLC , a subsidiary of NRG, owns a 50%, non-controlling interest in theMidway-Sunset Cogeneration Company ("MSCC"). MSCC owns a cogeneration facility nearFellows, California and submitted mothball notices for the cogeneration facility to the CAISO in the latter half of 2020. OnDecember 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. In a letter datedDecember 16, 2020 sent to the CAISO Board, MSCC indicated that it did not object to the RMR designation but noted certain permitting and maintenance requirements for RMR operation. OnJanuary 29, 2021 , MSCC made its RMR filing atFERC . Multiple parties filed protests and onMarch 16, 2021 , MSCC filed a response to those protests. OnApril 2, 2021 ,FERC accepted the RMR filing, suspended it to become effectiveFebruary 1, 2021 subject to refund and established hearing and settlement judge proceedings. The parties are engaging in settlement proceedings.Canada Alberta Energy Market - InDecember 2020 , prior to its acquisition by NRG, Direct Energy filed a Non-Energy Rate Application with theAlberta Utilities Commission ("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 onApril 20, 2021 an all-party settlement was executed, and was filed with the AUC onApril 23, 2021 . The Company expects an AUC decision approving the settlement agreement this year. Separately, the Company received approval from the AUC of a negotiated rate settlement for its electricity focused 2020-2022 Energy Price Setting Plan. The Company is also in the process of repaying the remainder of amounts advanced to it from theBalance Pool and theAlberta government as part of its 90 day utility bill deferral program. This program, effectiveMarch 18, 2020 , was designed to assist residential, farms, and small business customers who were negatively affected by COVID-19 related economic circumstances by temporarily deferring their utility bill payments. The program was also designed to mitigate bad debt risks associated with the implementation of the program. Environmental Regulatory Matters NRG is subject to numerous environmental laws in the development, construction, ownership and operation of power plants. These laws generally require that governmental permits and approvals be obtained before construction and maintained during operation of power plants. Federal and state environmental laws historically have become more stringent over time. Future laws may require the addition of emissions controls or other environmental controls or impose restrictions on the Company's operations. Complying with environmental laws often involves specialized human resources and significant capital and operating expenses, as well as occasionally curtailing operations. The COVID-19 pandemic may prevent the Company from complying with certain of its environmental requirements, which federal and state regulators have recognized. NRG decides to invest capital for environmental controls based on the relative certainty of the requirements, an evaluation of compliance options, and the expected economic returns on capital. A number of regulations that affect the Company have been revised recently by theEPA , 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 newU.S. presidential administration. NRG will evaluate the impact of these regulations as they are revised but cannot fully predict the impact of each until anticipated revisions and legal challenges are resolved. The Company's environmental matters are described in the Company's 2020 Form 10-K in Item 1, Business - Environmental Matters and Item 1A, Risk Factors. These matters have been updated in Note 18, Environmental Matters, to the condensed consolidated financial statements of this Form 10-Q and as follows. Air The CAA and the resulting regulations (as well as similar state and local requirements) have the potential to affect air emissions, operating practices and pollution control equipment required at power plants. Under the CAA, theEPA sets NAAQS for certain pollutants including SO2, ozone, and PM2.5. Many of the Company's facilities are located in or near areas that are 40
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classified by the
Byproducts, Wastes, Hazardous Materials and Contamination InApril 2015 , theEPA finalized the rule regulating byproducts of coal combustion (e.g., ash and gypsum) as solid wastes under the RCRA. InSeptember 2017 , theEPA agreed to reconsider the rule. OnJuly 30, 2018 , theEPA promulgated a rule that amends the existing ash rule by extending some of the deadlines and providing more flexibility for compliance. OnAugust 21, 2018 , the D.C. Circuit found, among other things, that theEPA had not adequately regulated unlined ponds and legacy ponds. In 2019 and 2020, theEPA proposed several changes to this rule. OnAugust 28, 2020 , theEPA finalized "A Holistic Approach to Closure Part A: Deadline to Initiate Closure," which amended theApril 2015 Rule to address theAugust 2018 D.C. Circuit decision and extend some of the deadlines. OnNovember 12, 2020 , theEPA finalized "A Holistic Approach to Closure Part B: Alternative Demonstration for Unlined Surface Impoundments," which further amended theApril 2015 Rule to, among other things, provide procedures for requesting approval to operate existing ash impoundments with an alternate liner. The Company has updated its estimates of required environmental capital expenditures to address this revised rule. Domestic Site Remediation Matters Under certain federal, state and local environmental laws, a current or previous owner or operator of a facility, including an electric generating facility, may be required to investigate and remediate releases or threatened releases of hazardous or toxic substances or petroleum products. NRG may be responsible for property damage, personal injury and investigation and remediation costs incurred by a party in connection with hazardous material releases or threatened releases. These laws impose liability without regard to whether the owner knew of or caused the presence of the hazardous substances, and the courts have interpreted liability under such laws to be strict (without fault) and joint and several. Cleanup obligations can often be triggered during the closure or decommissioning of a facility, in addition to spills during its operations. Further discussions of affected NRG sites can be found in Note 16, Commitments and Contingencies, to the condensed consolidated financial statements. Nuclear Waste - The federal government's program to construct a nuclear waste repository atYucca Mountain ,Nevada was discontinued in 2010. Since 1998, theU.S. DOE has been in default of the federal government's obligations to begin accepting spent nuclear fuel, or SNF, and high-level radioactive waste, or HLW, under the Nuclear Waste Policy Act. Owners of nuclear plants, including the owners of STP, had been required to enter into contracts setting out the obligations of the owners and theU.S. DOE , including the fees to be paid by the owners for theU.S. DOE's services to license a spent fuel repository. EffectiveMay 16, 2014 , theU.S. DOE stopped collecting the fees. OnFebruary 5, 2013 , STPNOC entered into a settlement agreement with theU.S. DOE for payment of damages relating to theU.S. DOE's failure to accept SNF and HLW under the Nuclear Waste Policy Act throughDecember 31, 2013 , which has been extended three times through addendums to cover payments throughDecember 31, 2022 . There are no facilities for the reprocessing or permanent disposal of SNF currently in operation in theU.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 theU.S. DOE for damages relating to theU.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 ofTexas 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 ofVermont , and the compact low-level waste facility located inAndrews County inTexas has been operational since 2012. Water The Company is required under the CWA to comply with intake and discharge requirements, requirements for technological controls and operating practices. As with air quality regulations, federal and state water regulations have become more stringent and imposed new requirements. Effluent Limitations Guidelines - InNovember 2015 , theEPA revised the Effluent Limitations Guidelines for Steam Electric Generating Facilities, which imposed more stringent requirements (as individual permits were renewed) for wastewater 41
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streams from FGD, fly ash, bottom ash, and flue gas mercury control. On
Significant Events The following significant events have occurred during 2021 as further described within this Management's Discussion and Analysis and the condensed consolidated financial statements: Extreme Weather Event in Texas DuringFebruary 2021 DuringFebruary 2021 ,Texas experienced unprecedented cold temperatures for a prolonged duration, resulting in a power emergency, blackouts, and an estimated all-time peak demand of 77 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 itsU.S. fleet. During the quarter endedMarch 31, 2021 , Winter Storm Uri's financial impact to loss before income taxes was a loss of$967 million . A number of factors may mitigate or increase the financial impact, such as recently proposed regulatory securitization packages, finalizing meter and settlement data, potential customer and counterparty risk includingERCOT's shortfall payments and uplift charges, and one-time cost savings. Direct Energy Acquisition OnJanuary 5, 2021 , the Company acquired Direct Energy, a North American subsidiary of Centrica. Direct Energy is a leading retail provider of electricity, natural gas, and home and business energy related products and services inNorth America , with operations in all 50 U.S. states and 8 Canadian provinces. The acquisition increases NRG's retail portfolio by over 3 million customers and complements its integrated model. It also broadens the Company's presence in the Northeast and into states and locales where it does not currently operate, supporting NRG's objective to diversify its business. The Company paid an aggregate purchase price of$3.625 billion in cash and an initial purchase price adjustment of$77 million . The Company funded the purchase price using a combination of$715 million of cash on hand,$166 million from a draw on its Revolving Credit Facility (of which$107 million was used to fund acquisition costs and financing fees that are not included in the aggregate purchase price above), as well as approximately$2.9 billion in secured and unsecured corporate debt issued inDecember 2020 . The final purchase price adjustment resulted in a reduction of$38 million . The Company expects to receive this payment from Centrica during the second quarter of 2021. The Company also increased its collective liquidity and collateral facilities by$3.4 billion through a combination of amending its Revolving Credit Facility, amending its credit default swap facility, entering into a revolving accounts receivable financing facility, entering into an uncommitted repurchase facility and entering into multiple agreements for the issuance of letters of credit. Sale ofAgua Caliente OnFebruary 3, 2021 , the Company completed the sale of its 35% ownership inAgua Caliente to Clearway Energy, Inc. for$202 million . NRG recognized a gain on the sale of$17 million , including cash disposed of$7 million . OnOctober 21, 2019 , the Company had repaid the Agua Caliente Borrower 1 notes associated with the project of$83 million . 42
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Sale of 4.8 GW of Fossil Generation Assets OnFebruary 28, 2021 , the Company entered into a definitive purchase agreement withGeneration Bridge , an affiliate ofArcLight Capital Partners , to sell approximately 4,850 MW of fossil generating assets from its East and West regions of operations for total proceeds of$760 million , subject to standard purchase price adjustments and certain other indemnifications. As part of the transaction, NRG is entering into a tolling agreement for its 866 MW Arthur Kill plant inNew York City throughApril 2025 . The transaction is expected to close in the fourth quarter of 2021, and is subject to various closing conditions, approvals and consents, includingFERC , NYSPSC, and antitrust review under the Hart-Scott-Rodino Act. Renewable Power Purchase Agreements The Company's strategy is to procure mid to long-term generation through power purchase agreements. As ofMarch 31, 2021 , NRG has entered into PPAs totaling approximately 2.2 GW with third-party project developers and other counterparties. The tenor of these agreements is an average between twelve and thirteen years. The Company expects to continue evaluating and executing similar agreements that support the needs of the business. Due to COVID-19, certain of these PPA contracts have been amended to allow for the delay of project completion dates from mid-2021 into 2022. These amendments include improved terms for NRG. Trends Affecting Results of Operations and Future Business PerformanceThe Company's trends are described in the Company's 2020 Form 10-K in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations - Business Environment. Changes in Accounting Standards See Note 2, Summary of Significant Accounting Policies, for a discussion of recent accounting developments. 43
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