Adds loan office to support coal, gas, oil, minerals, last paragraph, adds background

By Timothy Gardner

WASHINGTON, Feb 25 (Reuters) - The U.S. Energy Department said on Wednesday it has offered a $26.54 billion loan to subsidiaries of Southern Co SO.N to increase power 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, as electricity bills rise on demand from the boom in AI data centers, cryptocurrencies, and electrification of transportation.

Much of the savings will be made possible by Southern's pledge last year to freeze electricity bill rates for three years, the department said.

The department created the loan office in 2005 and the Trump administration changed its name to the Office of Energy Dominance Financing, to reflect its focus on oil, gas and coal. The office had traditionally offered loans to companies that struggled to get them at banks and at slightly lower rates than commercial loans.

Democrats used the office to provide financing to innovative clean energy, advanced technologies like electric vehicles, and to support a planned re-opening of a nuclear power plant in Michigan.

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

The two roughly 30-year loans to Georgia Power and Alabama Power will help develop 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," Wright said, adding that the department would look for additional opportunities for loans "across the country."

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.

OEDF's Beard said the loan office will soon make announcements to support development of critical minerals, coal, oil, natural gas, geothermal and manufacturing and transportation in addition to nuclear.

(Reporting by Timothy Gardner and Pranav Mathur in Bengaluru; Editing by Shilpi Majumdar, Jan Harvey, Paul Simao and Nick Zieminski)

((timothy.gardner@thomsonreuters.com;))