Energy Department Scrambling to Spend Stimulus Funds

Energy Department Scrambling to Spend Stimulus Funds

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Energy Secretary Steven Chu on Thursday announced plans to expedited the disbursement of loans and grants to inject stimulus funding into the economy as quickly as possible.

“The Department of Energy now has $32.7 billion in grants authority and $130 billion in loan authority to speed up this recovery, and we intend to make those investments efficiently, effectively and responsibly,” Chu said during a roundtable discussion with reporters at the Washington offices of Platts, a commodities information division of McGraw-Hill Cos.

The bulk of the funding will be invested in energy efficiency and renewable energy projects; research in biofuels, fossil fuels, nuclear physics and fusion energy; technologies to modernize and expand energy transmission; as well as loans and grants to develop advanced batteries. But the urgency he described coincides with a looming personnel shortage in the Office of the Chief Financial Officer, which has responsibility for handling the funding applications.

Hours before Chu made his remarks, Energy’s Inspector General Gregory Friedman released a report on the department’s loan guarantee program for innovative energy technologies that found serious shortcomings in the program, especially related to the implementation of effective control measures. The program was established by the 2005 Energy Policy Act to guarantee loans for new or significantly improved energy production technologies that avoid, reduce or sequester greenhouse gases. The IG acknowledged that pressure to spend the stimulus funds would likely amplify dramatically in the coming months.

In addition to announing the reforms to the loan guarantee program, Chu said he had tapped Matt Rogers to serve as his senior adviser responsible for overseeing the program’s reforms and stimulus spending. Rogers, formerly a senior partner with McKinsey & Co., served on the Obama transition team and has been working closely with Energy’s CFO office.Chu said he spent much of his first three weeks on the job examining the way the agency makes loans and loan guarantees. Rogers plans to streamline the cumbersome administrative processes currently needed to disperse funding for energy projects in the hopes of shorting the length and time needed to complete the process.

The planned reforms will simplify loan application forms and accelerate the loan underwriting process by using outside partners. Essentially this would require applicants to get backing from commercial banks. The idea is if a commercial lender deems an investment viable through its due diligence process, then Energy would accept that assessment as sufficient for its own investment decision. Amortize loan application fees over the course of the loan so as to not deter companies for whom those costs may be prohibitive. Chu also said the department would create a Web site to help companies navigate the application process and answer their questions.

“The goal is to begin these investments in months, and not years,” he said. The department expects to begin offering loan guarantees by early summer and would like to make 70 percent of the investments by the end of 2010.