ATLANTA (AP) — Federal energy officials on Wednesday announced a record $26.5 billion loan to electric utilities in Georgia and Alabama, saying the loan will save customers money as the companies undertake a huge expansion driven by demand from computer data centers.
A total of $22.4 billion will go to Georgia Power and $4.1 billion to Alabama Power. Both are subsidiaries of Atlanta-based Southern Company, one of the nation's largest utilities. The companies plan to use the cash to build new natural-gas fueled power plants, build new transmission lines and upgrade existing power plants.
Energy Secretary Chris Wright said the loan will result in more than $7 billion in savings over decades from a lower, federally subsidized interest rate.
“We’re focused on driving down costs,” Wright said. He added that the loan would help ensure Southern customers “have access to affordable, reliable and secure energy for decades to come.”
Wright and President Donald Trump have frequently made the case for their fossil fuel-friendly policies — including orders over the past nine months to keep some coal-fired plants open past planned retirement dates — as necessary to ensure reliability of the nation’s electric grid.
Wright says the orders have saved utility customers millions of dollars and helped keep lights on during last month’s winter storm. Critics say the orders are unnecessary and have raised electric bills as utilities keep older, more expensive plants operating.
“These loans will help lower the cost of investments in our grid that will enhance reliability and resilience for the benefit of our customers,” said Chris Womack, Southern’s chairman, president and CEO.
Scrutiny of rising utility bills
The new loan comes amid scrutiny on rising utility bills, with electricity prices increasing faster than inflation in many states. There is also widespread opposition to new data centers for artificial intelligence.
Trump in his State of the Union Tuesday announced a “ratepayer protection pledge” against higher utility bills tied to AI. He said tech companies will provide their own power as they build data centers. Trump didn't provide details but claimed prices will go down.
It is unclear whether any tech companies have signed pledges to build their own power plants, but Wright said on a call with reporters Wednesday that “every name you know that’s developing a data center has been in dialogue with us.”
He cited “cooperation” from giants such as Microsoft, Google and Meta, but he didn't specify any written agreements.
Federal officials have long given utility loans, including $12 billion in loans that the first Trump administration and President Barack Obama’s administration guaranteed for two costly nuclear reactors at Georgia’s Plant Vogtle, partially owned by Georgia Power.
Trump’s tax and budget bill last year reshaped the loan program to focus on increasing capacity to generate and transmit electricity. Loan guarantees under President Joe Biden focused on green energy goals.
Aiming for affordability
Gregory Beard, who directs the newly renamed Office of Energy Dominance Financing, said Wednesday that cutting interest rates and discarding Biden's policy “will get us back on the right track in terms of affordability.”
The loan office will review individual projects to ensure they're financially viable, he said. “We’re not going to build this plant or deploy this capital until we are sure that it’s the right thing to do for the local community, for the local ratepayer,” Beard said in an interview.
Those requirements don’t seem to be laid out in loan agreements that Southern released Wednesday. Jennifer Whitfield, an attorney for the Southern Environmental Law Center who represented Georgia Power expansion opponents, said the loans will save money for Georgians, but questioned their wisdom.
"As a taxpayer, it’s hard to avoid the fact that this is a bailout paid for by every taxpaying citizen of the United States,” she said.
Any savings for customers must be approved by the elected Public Service Commissions in Alabama and Georgia. Commissioners last July approved a three-year rate freeze requested by Georgia Power, while commissioners in Alabama approved a two-year rate freeze in December. Company officials tout the freezes when utilities nationwide have been seeking record increases. But opponents complain company-friendly regulators locked in high prices and high utility profits.
Voters booted two Republican incumbents off the Georgia commission in November amid complaints about rising bills.
Commissioner Peter Hubbard, one of two new Democrats, unsuccessfully tried to roll back approval for Georgia Power's expansion in recent weeks. He said Wednesday that the declining costs of solar, wind and battery power could make new natural gas plants uneconomic over time.
“It’s locking us into a costlier option,'' he said of the federal loan. ”And so I think it just is not meeting the moment of affordability.”
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Daly reported from Washington.