The alarm business out-earned the power business

NRG Energy sells electricity to about six million American households under the Reliant, Direct Energy and Green Mountain brands, and it also sells them burglar alarms and smart doorbells. In the first quarter of 2026, the alarms earned more. Vivint Smart Home contributed $294m of the group's $1,080m of consolidated adjusted EBITDA, against $216m from the Texas segment that holds the generation fleet and retail book, according to NRG's quarterly results exhibit. Texas came in $83m below the prior year on a mild winter.

One warm quarter is not a business model, but the company's own mix guidance points the same way. NRG expects the 2026 Texas economic gross margin to split roughly half retail energy and half generation on about 85 terawatt-hours of load, it told investors alongside first-quarter results. Half of the Texas earnings base is a retail marketing margin, not a merchant megawatt-hour. Of the three generators the market treats as one AI-power trade, NRG is the least exposed to the thing being traded.

It is also the one where the business genuinely deteriorated. Second-quarter adjusted EBITDA rose 34% to $1.2bn, but adjusted earnings per share of $1.49 fell short of $1.73 a year earlier. Texas adjusted EBITDA dropped $131m because Houston around-the-clock power cleared at an average $33 a megawatt-hour, well under the $52 the company had planned around. A $70m cost drag arrived unbudgeted when Virginia re-entered the Regional Greenhouse Gas Initiative on 1 July, hitting the portfolio NRG bought from LS Power.

The shares closed 21 August at $113.11, precisely their 52-week low and 22.5% below the level of a year ago. NRG now trades at 12.67 times forward earnings against 29.61 times trailing — the cheapest forward multiple of the three. Its price per dollar of trailing gross profit has fallen from roughly 5.6 times a year ago to 3.96 times, while that gross profit grew 19% to $6.03bn. The de-rating did rational work on a $131m shortfall; it has priced considerably more than $131m.

The rent is being capped, not discounted

The force acting on all three is a price ceiling. PJM Interconnection's capacity auction for 2028/29, released on 14 July, cleared at $325 per megawatt-day — the legislated maximum, for a third consecutive auction. PJM's own simulation puts the uncapped clearing price at $555, with buyers paying $29.7bn rather than the $16.4bn they will actually pay. That roughly $13.3bn gap is the scarcity rent data-center load was supposed to hand generators, and it is being legislated to load instead. The auction still left the grid about 6.8 GW short of its reserve margin target and drew only some 525 MW of new resources.

In Texas the compression is physical rather than legal. Roughly 14 GW of batteries arrived ahead of the data centers and flattened the intraday spikes that merchant gas plants monetize; Vistra's management noted that 22 July real-time power cleared at $57 a megawatt-hour despite tight conditions, when absent battery competition it could have cleared $400 to $500. On 3 August Governor Greg Abbott ordered the Public Utility Commission of Texas and ERCOT to audit every data-center project in the interconnection queue, a queue holding more than 474 GW of requests against a grid whose record peak is a fifth of that.

The two that are growing anyway

Vistra, a Texas-based generator and retailer with about 38,700 MW of nuclear, gas, coal, solar and storage capacity, grew second-quarter adjusted EBITDA about 30% to $1.77bn, with the generation segment up 68% to $994m, and reaffirmed 2026 guidance at or above the midpoint. It is hedged roughly 100% for 2026 and 94% for 2027 — the mechanism that turns load growth into contracted earnings, and equally the reason a power-price recovery would take years to reach the income statement. It has also signed a 20-year contract for 1,200 MW of Comanche Peak nuclear output with deliveries starting in late 2027. The shares are down 28.4% over twelve months and sit $1.50 above their 52-week low, at 15.4 times forward earnings and 10.07 times trailing enterprise value to EBITDA.

Talen Energy, a Houston-based merchant producer with roughly 10.7 GW built around the Susquehanna nuclear station, raised 2026 adjusted EBITDA guidance to $2.03–2.23bn on 5 August and cleared over 10 GW in the capped PJM auction. Its trailing gross profit rose 157% to $1.57bn over the past year. Its price per dollar of that gross profit fell in a straight line — about 28 times a year ago, 18 times in February, 13 times in May, 9.07 times now. The Amazon contract supplies up to 1,920 MW through 2042 but reaches only about 35% of long-term contracted gross margin at full ramp, against a 50% target: concentration, but not the whole company.

Talen fell 11.44% on 18 August, the day the 30-year Treasury yield touched a 19-year high of 5.323%. The yield was not the reason: Lower Mount Bethel Township shelved the rezoning vote for a data-center campus next to Talen's Martins Creek plant and rescheduled it for 14 September. Nor does duration carry Vistra's month — it had already fallen 11.2% between 22 July and 14 August, before the yield high.

The setup

Where it stands — Two of the three merchant generators raised or held guidance into a twelve-month de-rating; only NRG's earnings actually weakened. Would confirm — NRG's third-quarter Texas adjusted EBITDA falls again on realized Houston power below the $52 planning assumption. Would invalidate — Vistra or Talen cutting full-year adjusted EBITDA guidance at third-quarter results, making the price decline an earnings call. Watch next — Lower Mount Bethel Township's rescheduled rezoning vote on Talen's Martins Creek data-center campus, 14 September. Valuation — NRG at 12.67x forward against 29.61x trailing; Vistra 15.4x forward; Talen 9.07x trailing gross profit versus roughly 28x a year ago.