⚠ Somebody Else Sets the Capacity PriceModerate threat
Vistra (VST) — threat to the moat
$227 million of net capacity revenue, determined by a stakeholder process that has changed its mind repeatedly.
PJM's capacity market is a construct, not a market outcome. What a generator receives depends on demand curve parameters, reliability requirements, cost-of-new-entry estimates, participation rules and price caps — all set through a stakeholder process under federal regulatory oversight, and all revised regularly.
Vistra's East segment netted $227 million of capacity revenue in 2025 on $793 million sold against $566 million purchased1. That is a meaningful number and it is determined by a committee.
The pressure runs in both directions, which is what makes it hard to forecast. Rising demand and retiring capacity push auction prices up, which is where they have recently gone. High auction prices raise consumer bills, which produces political pressure and rule changes designed to bring them down, and several states within PJM have periodically threatened to leave the capacity construct entirely.
There is a subtler exposure. Vistra both sells and buys capacity — $566 million of purchases in 20252 — so the exposure is a net position that can move against the company depending on where its load and its plants sit.
None of this is a reason to prefer ERCOT's design, which has its own failure mode. It is a reason to treat capacity revenue as policy income rather than as a market return, and to read PJM's auction parameter filings with the same attention as a demand forecast.
- ReportedVistra's East segment netted $227 million of capacity revenue in 2025 on $793 million sold against $566 million purchasedVistra Corp. Form 10-K, FY2025, market discussion — "ERCOT is an ISO that manages the flow of electricity from approximately 83,707 MW of 2025 peak demand to approximately 27 million Texas customers, representing approximately 90% of the state's electric load"; "PJM is an RTO that manages the flow of electricity from approximately 160,709 MW of peak 2025 demand to approximately 67 million customers" across thirteen states and the District of Columbia; "if a less efficient natural gas unit is needed to meet demand, its offer price sets the market clearing price for all dispatched generation in that market, regardless of other units' offer prices"; prices "vary within different zones due to transmission losses and congestion"; under the PUCT-approved Emergency Pricing Program the system-wide offer cap temporarily falls to $2,000/MWh if prices have been at the cap for 12 hours in a rolling 24-hour period, and the maximum point on each ASDC is reduced to $2,000/MWh for the remainder of the calendar year once the Cost of New Entry reference price is exceeded — FY2025 · publ. February 2026 · source ↗
- ReportedVistra both sells and buys capacity — $566 million of purchases in 2025 — so the exposure is a net position that can move against the company depending on where its load and its plants sitVistra Corp. Form 10-K, FY2025, segment revenue note — total revenues by segment for 2025: Retail $14,340M, Texas $5,353M, East $6,174M, West $325M, Sunset $74M, eliminations $(8,528)M, total $17,738M; intersegment sales Retail $107M, Texas $4,419M, East $4,005M, West $3M, Sunset $(3)M, eliminations $(8,531)M; unrealized hedging revenue $(766)M in 2025 against $1,013M in 2024; realized hedging revenue $583M; transferable PTC revenues $229M; East capacity revenue of $793M sold offset by $566M purchased. For 2024 total revenues were Retail $12,797M, Texas $5,394M, East $5,661M, West $839M, Sunset $39M, eliminations $(7,506)M, total $17,224M; for 2023, Retail $10,572M, Texas $3,979M, East $5,890M, West $866M, Sunset $48M, eliminations $(6,576)M, total $14,779M — FY2025 · publ. February 2026 · source ↗