On October 15, 2025, AEP Transmission LLC, a wholly owned subsidiary of American Electric Power Company (AEP), closed a $1.6 billion term-loan financing guaranteed by the US Department of Energy (DOE), marking the first DOE loan guaranteed financing to close since President Trump’s inauguration in January. AEP operates the nation’s largest electric transmission system, spanning more than 40,000 miles and serving over five million customers. The company sought DOE financing to rebuild and reconductor approximately 5,000 miles of transmission lines across five states – Indiana, Michigan, Ohio, Oklahoma and West Virginia – modernizing grid infrastructure and improving reliability for millions of consumers.
The credit facility was structured as a low-interest term loan advanced by the Federal Financing Bank and fully guaranteed by the DOE under its Energy Infrastructure Reinvestment authority. The federal financing backed by DOE’s guarantee will significantly reduce borrowing costs and allow AEP to accelerate capital deployment at a time when private financing for large-scale transmission upgrades may be constrained.
The AEP transaction may very well serve as an early model for subsequent electric power infrastructure financings under the DOE’s newly branded Energy Infrastructure Reinvestment and Energy Dominance Financing Programs.
A Program Built to Bridge Innovation and Capital
The DOE’s loan guarantee program was created under Title XVII of the Energy Policy Act of 2005 (then called “Incentives for Innovative Technologies”) to help finance innovative energy technologies that, at time of financing, wouldn’t meet market norms for “commercial technology.” By providing federal guarantees for loans provided by the Federal Financing Bank, or potentially private lenders, the program aimed to close the financing gap between innovative technology and market-tested (i.e., bankable) deployment.
Over the years, the DOE’s Loan Program Office (LPO), created to administer the loan guarantee program, financed projects that redefined the US energy landscape: utility-scale solar farms, advanced vehicle manufacturing, and more recently, next-generation carbon-capture facilities among them. Through these investments, DOE has been perhaps the principal actor in the US helping to move new-generation clean energy technologies from the margin to the mainstream.
Following the inauguration of President Biden, the loan guarantee program received a boost from both the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA), which among other things increased the funds authorized for the program. The IRA also created a new category of projects eligible for funding under Section 1706 of Title XVII named the Energy Infrastructure Reinvestment Financing program (EIRF). In its guidance, the Biden era LPOdescribed the new funding as aiming to provide a “bridge to bankability,” especially for new projects that contribute to the reduction of greenhouse gas pollution that may have trouble arranging financing from commercial lenders.
A New Mandate: Financing Energy Dominance
The new Trump Administration hassignificantly shifted US energy policy, rejecting the concept of climate change, and emphasizing instead fossil fuels as the means to achieving energy security and dominance.
The new Congress reflected President Trump’s pivot in passing the One Big Beautiful Bill Act (OBBBA). The OBBBA revised Section 1706, rebranding it as the “Energy Dominance Program” and changing its emphasis from promoting clean energy generation to facilitating projects using fossil resources, as well as mining projects, for the sake of national security. The OBBBA rescinded the unobligated funds inked by the IRA for Section 1706 but at the same time appropriated $1 billion to DOE to “carry out activities” under section 1706 (of which not more than 3 percent is to be used for administrative expenses) and authorized $250 billion in new loan guarantees for the revised Energy Dominance program through September 30, 2028.
Consistent with the policy shift to encompass fossil resources, Section 50403 of the OBBBA removed a Section 1706 eligibility criterion that a project must “avoid, reduce, utilize, or sequester air pollutants or anthropogenic emissions.” Additionally, program eligibility is expanded to include projects that will “increase capacity or output” or “support or enable the provision of known or forecastable electric supply at time intervals necessary to maintain or enhance grid reliability or other system adequacy needs.” The OBBBA also revised the definition of “Energy Infrastructure” to become a facility (and associated equipment), used to enable “production, processing, transportation, transmission, refining and generation needed for energy and critical minerals.”
On October 28, DOE published an Interim Final Rule which amends the DOE’s loan guarantee regulations to implement the Energy Dominance Financing provisions of the OBBBA. Among other provisions it will add a requirement that an electricity utility infrastructure project applying for funding from the 1706 program demonstrate that the financial benefits from a DOE guarantee will be shared with its customers, or the associated community served by it. Significantly, no similar requirement is made in the Interim Final Rule with respect to other types of Energy Infrastructure covered by the Energy Dominance program. While it is “effective” as of October 28, the period for public comment on the Interim Final Rule expires on December 29, 2025. The text of he rule and information on how to provide comments can be found here.
The above notwithstanding, Title XVII survived mostly unchanged, except for the revised Section 1706. As an important example, the OBBB did not change Section 1706 (a)(1) under which the AEP financing was closed, and which contemplates guarantees for projects to “retool, repower, repurpose or replace energy infrastructure that has ceased operations.” Moreover, the OBBBA did not amend Section 1703 of the Energy Policy Act, which authorizes DOE loan guarantees for projects that “avoid, reduce, or sequester air pollutants or anthropogenic emissions of greenhouse gases and employ new or significantly improved technologies as compared to commercial technologies in service in the United States at the time the guarantee is issued”, including, among others, Renewable Energy Systems, carbon capture projects and those projects that increase the domestically produced supply of critical minerals. However, the OBBBA in practice defunded the innovative energy program (among other programs) for future projects.
The AEP Transmission Financing: A Case Study in Transition
Bracewell’s representation of AEP in this transaction provides some unique insights into how DOE’s pre-existing loan guarantee framework will evolve to operate effectively within the new energy-dominance policy environment. AEP, like several utilities in the DOE queue, applied for funding and executed a preliminary term sheet before President Trump’s second inauguration in January.
The AEP deal advanced under challenging conditions – not only the change in administration after term sheet signing, but also the longest ever federal government shutdown that halted some agency operations. Despite these challenges, the transaction closed smoothly in October, aided by a pragmatic and flexible approach implemented by both the AEP and DOE teams to navigate the DOE’s existing procedural complexities, while balancing the policies and interests of DOE in following governmental norms with the commercial interests of AEP in achieving a resilient and administratively manageable financing structure under its 30-year tenure.
The willingness of both parties to overcome challenges within existing statutory and policy constraints was essential. The transaction helped establish a working model for balancing regulatory compliance with project-level realities. It provides a roadmap for future DOE-guaranteed financings, not only for the small group of forthcoming utility-oriented financings already in the queue, but also for new projects under the OBBBA’s expanded eligibility scope.
Looking Forward
Under the energy-dominance framework and its expanded reach, the DOE loan guarantee program is poised to continue to be a strategic financing platform encompassing the full spectrum of US energy infrastructure, with an emphasis on innovation, reliability, security and independence, and agnostic on type of fuel or feedstock. To prove this point, in late October DOE closed a second loan, a $1.5 billion loan to Wabash Valley Resources to finance the restart and repurposing of a coal to ammonia fertilizer facility in Indiana that was idled since 2016. The revamped facility will produce 500,000 mtpy of anhydrous ammonia from coal from a nearby mine and pet coke as feedstock. And, on November 18, Constellation Energy announced a $1 billion loan from DOE to restart Three Mile Island nuclear facility.
For utilities and other project investors, the lesson is clear: US federal credit support remains one of the most powerful tools for accelerating capital into a changing environment for the energy infrastructure that underpins US economic strength.
