US offers historic $26.5 billion energy loan to Southern Co subsidiaries

The U.S. Energy Department said on Wednesday it has offered a $26.54 billion loan to subsidiaries of Southern Co to increase grid reliability, the largest ever such financing by its loan office.

The financing will save power customers in Georgia and Alabama more than $7 billion, the department said. Southern said last year it would freeze increases in power bills for three years. The company's move was made possible by negotiations over the loans, the department said.

The loan office, the name of which the Trump administration has changed to Energy Dominance Financing, was created in 2005 to provide financing to innovative clean energy and advanced technologies like electric vehicles. It offers loans at lower rates than banks, and had been used by Democrats to offer conditional loans and loan guarantees to companies with technologies that could not get loans from banks.

The two roughly 30-year loans to Georgia Power and Alabama Power will help build or upgrade more than 16 gigawatts of power to the electrical grid, with nearly a third of that supporting new natural gas generation and boosting the size of current gas plants.

"These loans will not only lower energy costs but also create thousands of jobs and increase grid reliability for the people of Georgia and Alabama," Energy Secretary Chris Wright said, adding that the department would look for additional opportunities for loans "across the country."

Wright has said the biggest use of the department's loans in the Trump administration would be for nuclear power.

The loans to Southern will also support 6.3 GW of nuclear energy with the enlargement of current nuclear plants, and payment for re-licensing of them. Greg Beard, the head of the department's loan office, said Southern has eight nuclear plants, with six of them needing licensing or boosted capacity over the next eight years.

The loans will also help modernize hydropower plants, and develop 3.5 GW of energy storage including battery systems, and more than 1,300 miles (2,092 km) of transmission and grid enhancement projects, the department said.

Southern CEO Chris Womack said the loans "will help lower the cost of investments in our grid that will enhance reliability and resilience for the benefit of our customers". 

The company said draws from the loans are subject to the satisfaction of conditions, and may be made through September 15, 2033.