Shares of independent power producer Constellation Energy (CEG 11.76%) fell hard on Friday, declining 9.7% as of 11:06 a.m. EDT.
Constellation rallied nearly 58% in 2025 on surging demand for electricity from AI data centers, which, in turn, has boosted demand for Constellation's leading U.S. nuclear power plant capacity. So, the stock has been riding high into the new year.
However, President Trump and local governors in the Mid-Atlantic PJM utility grid regions unveiled a new plan on Friday, which may complicate utilities' ability to charge more for their existing power generation assets.
NASDAQ: CEG
Key Data Points
A new auction for for tech giants, but with extended price caps
Today, the Trump Administration unveiled a "statement of principles" that appears to have the agreement of mid-Atlantic governors, including Maryland's Wes Moore and Pennsylvania's Josh Shapiro, the PJM grid operator, and various utilities and power producers in the region.
Constellation has an outsize portion of its power generation sold into the PJM region, at roughly 69%. While that percentage will decline following the acquisition of Calpine, which closed earlier this month, the PJM market will still account for 49% of the combined company's revenues going forward, and will remain the company's largest geographic segment.
While the new statement of principles isn't a binding law, at least not yet, it appears to have broad agreement among stakeholders. Under the new deal, large tech companies will bid for 15-year contracts to backstop the construction of new power plants. While that will help pay for needed power plants, as the PJM region is undersupplied relative to 2027 demand by about six gigawatts -- equivalent to about six nuclear power plants -- the agreement appears to also entail price caps on existing power sources.
Image source: Getty Images.
What the new plan could mean for Constellation
PJM electricity prices have exploded in recent years as AI data center operators have flocked to the region. That has been a boon to Constellation's revenue and profits, as evidenced by the stock's recent outperformance. And while the prospect of new plant construction backed by tech giants could very well benefit Constellation's new construction, those new revenues likely wouldn't be as profitable as simply raising electricity prices from existing plants.
Therefore, even though the new plan could help Constellation safely deploy new capital with a guarantee of a return, the more immediate upside case for windfall profits may not happen, due to the political ramifications of annoyed consumers in the region.
