The Energy Department’s largest loan package to date will help two utilities prepare their grid for data center development and manufacturing expansion, while protecting ratepayers from a portion of the costs.
DOE’s Office of Energy Dominance (formerly the Loan Programs Office) said Wednesday that it closed loan guarantees totaling $26.5 billion to Georgia Power and Alabama Power. The deal is aimed at offsetting the costs of building new gas plants, battery storage, grid-enhancing technologies, and transmission lines, as well as expanding existing nuclear and hydropower sites.
The package is many times larger than any other loan closed in the first year of the Trump administration, including $1 billion to help restart Three Mile Island.
It shows how DOE is willing to leverage its loan authority to try and blunt rising energy costs ahead of the midterm elections, with affordability top of mind for voters, as well as invest in battery storage after rebranding its loan office for baseload power like gas, coal, nuclear, and even geothermal.
The DOE on Wednesday announced a separate $171.5 million funding opportunity to support field-scale tests for advanced geothermal projects.
The loan guarantees for Southern Company originated under the Biden administration, according to a former DOE loan official familiar with the deal. But rather than run the risk that the second Trump administration would stonewall the project — or throw it out altogether — Southern Company opted to negotiate and finalize the loans after Trump was in office, with a restructure to more closely align with the new administration’s focus on baseload power. The most significant change is the addition of 5 GW of new gas generation, according to the former official, who spoke to Latitude Media on background.
And it’s notable that the package covers battery storage projects, the official added: “This loan shows that the administration is not anti-batteries.”
Alex Fitzsimmons, acting undersecretary of energy, told Latitude Media at an event in D.C. on Wednesday that EDF is interested in financing more energy storage projects, provided they are “affordable, reliable, and secure.”
That interest does not extend to solar, at least in the context of these massive loan guarantees — even though both Georgia Power and Alabama Power are planning to build thousands of megawatts in the next few years, and hyperscalers themselves are doubling down on solar paired with storage to meet speed-to-power demands for AI data centers.
The structure of a loan guarantee enables DOE to effectively act as a guarantor, meaning it will step in and repay if the utility operator defaults on loans. With that safety guarantee, lenders can offer significantly lower interest rates, bringing down the cost of capital that utilities pass on to ratepayers. In this case, DOE is guaranteeing a direct loan from Treasury. Without DOE backing, Southern Company would have to borrow the $26.5 billion at market rates, costing ratepayers significantly more. DOE estimates Southern Company ratepayers will save over $300 million per year in interest alone.
Southern Company and its subsidiaries, like others around the country, are confronting massive load growth from data centers. Rising electricity prices across the South have pushed the utilities to shift capital recovery further out. Last year, energy regulators in Alabama and Georgia approved rate freezes through 2027 and 2028, respectively, out of concern that ratepayers would be on the hook for grid investments to serve data centers.
In an earnings presentation in February, Southern Company said it was increasing its spending plan from $76 billion to $81 billion between 2025 and 2029, making it one of the most expensive in the industry. That plan relies heavily on natural gas to meet the region’s 75 GW large load pipeline.
Georgia Power, for its part, is no stranger to loan guarantees under Title 17. Over the last decade, DOE has issued around $12 billion to the utility and its partners to expand the long-delayed Vogtle nuclear plant. About $8.3 billion was finalized during the Obama administration, and an additional $3.7 billion under the first Trump administration — the only loan finalized by LPO during that term.
Southern Company’s political calculus
Financing for Southern Company stems from the overhaul of the Energy Infrastructure Reinvestment program by the GOP’s One Big Beautiful Bill last summer. The 2022 Inflation Reduction Act initially established EIR under Section 1706 to “retool, repower, or replace energy infrastructure that had ceased operations, or enable operating infrastructure to run more cleanly.”
OBBB rebranded and expanded the office’s loan authority under Section 1706 as the “Energy Dominance Financing program” — not to be confused with the recently renamed office itself.
But even in its rebranded form, which removed emissions criteria and expanded its eligibility to include fossil fuels, the funding is essentially technology neutral.
“Really, what [Section 1706] is doing is reducing the overall cost of interest across the company to reduce rates for ratepayers,” explained the former DOE official. “So it doesn’t really matter what it funds, because it’s all blended together under the umbrella of the utility.”
To date, just a few loan guarantees have been issued under Section 1706. They include a $1.6 billion loan guarantee to help AEP upgrade thousands of miles of transmission lines, which the Trump administration closed in October, a $1.52 billion loan to help restart the Palisades nuclear plant, and a $15 billion package for PG&E, finalized on the Biden administration’s last day in office.
That loan guarantee — structurally very similar to the one issued Wednesday to Southern Company — would have saved ratepayers more than $100 million annually, the utility said at the time. PG&E told investors early last year that uncertainty over the fate of that deal, which would have given the utility significantly lower interest rates for those projects, will increase ratepayer costs.
Southern Company’s loan guarantee could have been finalized before President Trump’s inauguration in January, the former official said, but the company asked LPO to “put it on ice” post-election, preferring not to have the deal associated with the Biden administration amid the political shift. The original loan application was for around $20 billion, included solar projects, and was heavily focused on transmission, the former official said.
Southern Company didn’t return a request for comment about that characterization.
But that restructuring has ostensibly paid off. In the last year, DOE has rescinded billions of dollars in Biden-era clean energy funding, largely for projects slated for blue states. The Office of Energy Dominance Financing said at the end of last year that it was “restructuring, substantially revising, or eliminating” 80% of the portfolio it inherited from the Biden administration.
Of that amount, $29.9 billion worth of loans and conditional commitments are being de-obligated, the office said. Nearly $5 billion worth stems from the cancellation of a loan guarantee for the Grain Belt Express project, an interregional power line designed to deliver 5,000 megawatts of electricity from renewables projects in Kansas to more densely populated parts of the Midwest.
Whether those cancellations are legal, however, is a question currently making its way through the federal court system.
Editor’s note: This story was updated on February 26, 2026, to clarify the nature of the loan. The loan is originating in the Treasury Department, and DOE is acting as a guarantor.
