Wholesale power in the Houston zone of the Texas grid averaged $33 a megawatt-hour in the second quarter — 8% below a year earlier, and $19 under the $52 that NRG Energy budgeted when it set 2026 plans. That single gap, plus Virginia's unexpected 1 July re-entry into the Regional Greenhouse Gas Initiative (RGGI), a carbon-permit compact that added about $70m of cost NRG had not underwritten, is most of what separated the two largest independent power producers this earnings season.

Two quarters, two directions

NRG Energy, the Houston company that owns gas, coal, nuclear and battery capacity and sells electricity to roughly six million customers under the Reliant, Direct Energy and Green Mountain retail brands, grew adjusted EBITDA 34% to $1,217m and free cash flow before growth to $1,025m, reaffirming full-year guidance. The per-share line went the other way: adjusted earnings fell to $1.49 from $1.73 and missed the $1.82 consensus, as interest expense doubled to $310m from $148m following the LS Power acquisition. Texas segment EBITDA fell $131m. A $721m build programme pushed NRG's 3x net-leverage target from 2028 to 2029.

Vistra, the Irving, Texas generator and retailer with about 38,700 megawatts across gas, nuclear, coal, solar and storage and 4.3 million customers in 20 states, ran the opposite way. Adjusted EBITDA rose more than 30% to $1.767bn, generation up 68% to $994m on hedging and higher capacity revenue, retail flat at $773m. Reported revenue fell 5.5% to $4.017bn yet operating income rose 7.4% and operating margin widened from 12.12% to 13.77%. Guidance for 2026 ($6.8–7.6bn EBITDA, $3.925–4.725bn free cash flow before growth) and the 2027 range of $7.4–7.8bn were both held — and 2027 still excludes the pending Cogentrix purchase and a long-term Meta power-purchase agreement at PJM nuclear plants, together worth roughly $700m.

Verdict on the business: the de-rating CONFIRMS at NRG, where interest cost and Texas prices are real and per-share earnings fell. It CONTRADICTS at Vistra, whose profit, margin and guidance all improved.

The dividing line is Texas, not merchant power

The generators exposed to the eastern PJM market fared differently. Constellation Energy, the largest US nuclear operator, raised 2026 guidance to $11.50–12.50 a share from $11–12 and signed about 920 megawatts of long-term nuclear contracts at 18.5-year average tenor; Talen Energy, another PJM nuclear owner, is roughly flat over twelve months. PJM's 2028/29 capacity auction cleared at the $325 per megawatt-day cap, 2.5% below the prior year — but only because the ceiling bound: it cleared 6,831 MW short of the reliability requirement, against PJM's own uncapped simulation of $554.72. Scarcity is worsening; the price cap stops generators collecting on it.

Texas supplied the genuine bad news. On 3 August the state paused all data-centre interconnections pending a statewide audit of a queue that now totals roughly 474 GW; BloombergNEF estimated the audit could delay 49.8 GW of load and cost projects up to $15bn. Vistra called it a two-month pause and put realistic Texas data-centre load at 12–15 GW by 2030. Meanwhile Texas battery capacity is heading toward roughly 37 GW by end-2027 with solar output nearly doubling, which is what is capping midday prices. The offset: FERC's 18 June show-cause orders to all six grid operators pulled co-location rules forward to early 2027 from 2029.

NRG's answer — a 1.2 GW gas plant for an unnamed investment-grade hyperscaler, $3.2bn of capex for $500m of run-rate EBITDA — is only "aligned on principal commercial terms," with land, approvals and a final investment decision outstanding and first power targeted for late 2029.

What the multiples now say

Vistra trades at 24.4x trailing and 16.1x forward earnings and 10.6x trailing enterprise value to EBITDA, against roughly 73x trailing when this desk last examined it in May, and below Constellation at 23.8x forward and 14.6x EV/EBITDA, and below regulated Dominion Energy at 18.8x forward. Consensus has Vistra earning $9.06 in 2026 and $10.93 in 2027. NRG sits at 13.5x forward, 11.5x EV/EBITDA and 0.69x sales — down from 1.07x in May — or 11.0x its $10.93 2027 consensus, a 28% discount to Dominion. Sell-side targets were cut but remain far above spot: Evercore to $195, Scotiabank to $211.

Verdict on valuation: CONTRADICTS the bear case at Vistra, where the multiple has compressed faster than earnings have grown. INCONCLUSIVE at NRG, where the cheapness is real but so is the leverage.

The tape agrees only with the NRG half. NRG fell 15.5% in one session on 4 August to a 52-week low; Vistra dropped 8.2% in sympathy but is up 2.5% over three months. Both slipped back into downtrends by 12 August, with their 50-day averages below their 200-day, while Constellation's improved.

The setup

Where it stands — Cheap Texas power cut NRG's quarter; Vistra's improved, yet both trade below nuclear-heavy PJM peers. Would confirm — Houston zone prices staying near $33/MWh through the summer and Vistra guiding 2027 to the low end. Would invalidate — Vistra raising 2027 EBITDA above $7.8bn once Cogentrix and the Meta contract are folded in. Watch next — Texas regulators' data-centre audit results and Vistra's Q3 guidance update after Cogentrix closes. Valuation — Vistra 24.4x trailing, 16.1x forward; NRG 31.5x trailing, 13.5x forward, versus Constellation's 23.8x forward.