The simple version

A power purchase agreement is a long-term contract to buy electricity at an agreed price. One side promises to deliver power for a set number of years. The other side promises to pay for it.

The contract is not the interesting part. What the contract makes possible is. A guaranteed buyer for twenty years turns a power plant upgrade from a gamble into a predictable revenue stream, and that is something a lender will finance.

So the order runs backwards from what you would expect. The contract gets signed first. The turbines get ordered after.

The numbers

• A 20-year power purchase agreement covering 890 megawatts of new nuclear capacity on the PJM Interconnection grid, announced October 6, 2026 (Constellation Energy press release)
• Investments at 11 Constellation-owned nuclear units across six sites in Illinois, Pennsylvania and New Jersey (Constellation Energy press release)
• More than $4.3 billion of new investment by Constellation, with the first capacity increase expected to be delivered by 2028 (Constellation Energy press release)
• A separate 15-year energy supply agreement covering an additional 2,700 megawatts in PJM (Constellation Energy press release)
• Roughly 4,400 existing jobs sustained and approximately 7,200 new construction jobs during the building period (Constellation Energy press release)

Why the contract comes before the turbines

The contract is the financing. Upgrading a reactor costs money now and repays over decades, so nobody orders the turbines until someone signs a long contract for the output.

A twenty-year promise from a creditworthy buyer converts a risky rebuild into a schedule of payments. Lenders price schedules. They do not price hope.

In a power purchase agreement, the megawatts are the product and the years are the security. A one-year deal finances nothing. A twenty-year deal finances turbines.

The actual math on 890 megawatts

890 megawatts here is not a new plant. The release describes upgrading turbines, steam generators and digital control systems at reactors that already run, which is why the first increase arrives in 2028 rather than in the 2030s.

More than $4.3 billion for 890 megawatts works out to at least $4.8 million per megawatt of new capacity. Because the release says "more than," that is a floor rather than a price, and it is the figure twenty years of contracted sales have to cover.

The separate 2,700 megawatt agreement is a different animal and it is worth not confusing them. That one runs 15 years and covers generation that already exists. It adds no new capacity to the grid.

What this means

When a large buyer signs a long contract for new supply, the cost of building that supply sits inside the contract. The release states the arrangement is meant to bring new capacity to PJM without passing costs on to residential customers.

The alternative route is the one Virginia households already know. There, the cost of grid investment arrived through a regulated rate case, and a typical residential bill rose $11.24 per month in 2026.

Same electricity, two different payers. Which route a build takes is decided by who signs the contract, and that is why the contract is the thing to look at.

What this is NOT

This article explains what a power purchase agreement is and how a long contract pays for generating equipment, using the Google and Constellation Energy agreement announced October 6, 2026 as the example. It is not a recommendation to buy, sell, or hold Constellation Energy, Alphabet, or any security, and it takes no view on the price of the agreement or on whether either side got the better of it. It does not predict whether the capacity arrives in 2028, what any electricity bill will do, or what any regulator will approve. It is not a claim that power purchase agreements hold household bills down in general, which depends on the terms and on what a state regulator allows, and it takes no position on PJM's proposals, on the federal UPRISE program, or on any policy pledge the release references. The per-megawatt figure is our arithmetic on the release's own numbers, and because the release says "more than $4.3 billion" that figure is a floor rather than a cost. The $11.24 comparison is carried from our earlier article on the Virginia rate case and is a different kind of charge, set by a regulator rather than a contract. ClearMoneySchool uses AI tools from Anthropic, and Google is an investor in Anthropic. This is not a political endorsement or criticism of anyone.

Sources

• Constellation Energy, "Google and Constellation Announce Landmark Agreement to Bring 890 MW of New Nuclear Capacity to PJM Grid as Part of Long-Term Power Deal," October 6, 2026
• Constellation Energy, "Constellation and Amazon Announce 20-Year Power Purchase Agreement Adding 190 Megawatts of Nuclear Capacity at Calvert Cliffs," September 30, 2026