The Department of Energy said today that it closed a $3.26 billion loan to AEP Texas to help fund nearly 100 transmission projects like reconductoring existing lines and building new infrastructure.
The projects span about 2,800 miles of transmission lines and will help AEP Texas improve grid reliability while adding potentially 41 gigawatts of new load through 2030, largely from data centers, the utility said in a statement.
It’s the third loan that DOE’s Office of Energy Dominance Financing has made to a utility since the start of the second Trump administration. The office, formerly known as the Loan Programs Office, inked another deal with American Electric Power — the parent company of AEP Texas — last year totaling $1.6 billion. That loan guarantee was similarly directed toward transmission projects across the company’s subsidiaries covering Indiana, Michigan, Ohio, Oklahoma, and West Virginia. In February, EDF also closed loan guarantees with Southern Company totaling $26.5 billion, aimed at offsetting the cost of building new gas plants, battery storage, and transmission lines.
The deals underscore EDF’s approach of leveraging its loan authority to help boost grid capacity and blunt rising energy costs, an issue that’s top of mind for voters heading into the midterm elections. The office said its investment will save 1 million Texas households an estimated $685 million in electricity costs over the next three decades.
AEP Texas spokesman Omar Lopez said in an email that these savings are derived from leveraging federal financing, which has lower interest rates than commercial debt. That lowers the utility’s cost of capital, which ultimately gets passed on to its customers. EDF can cover up to 80% of project costs, while a borrower like AEP is responsible for the rest.
Lopez said that total is still undetermined because AEP Texas’ list of transmission projects isn’t finalized yet. The 100-project portfolio reflects the full scope of its long-term planning, but many projects are in early development. There are eight DOE-approved “anchor projects” so far, and future ones will still have to be reviewed and approved by the department.
“Because that federal review is required, the details of the remaining projects — including final scope, mileage, and work type — are not yet fully finalized,” Lopez said.
AEP Texas’ parent company in May increased its five-year capex plan to $78 billion through 2030, with $33 billion earmarked from transmission upgrades across its entire footprint.
The utility is also trying to insulate ratepayers from the costs of serving data centers and other large loads through special tariffs. State energy regulators in four of AEP’s service territories have approved those tariffs: Indiana, Kentucky, Ohio, and West Virginia. PUCs in Michigan, Oklahoma, Texas and Virginia are considering similar proposals.
