DOE

Agency to defend loan programs today amid continued House GOP skepticism

The Department of Energy has learned from its past loan guarantee stumbles and is in the process of implementing watchdogs' recommendations, even as the overall loan portfolio is performing well, DOE's top loan officer will tell a House subcommittee this morning.

Peter Davidson, head of the loan program office, will appear alongside DOE's deputy inspector general and a representative of the Government Accountability Office to defend the program before the House Energy and Commerce Subcommittee on Oversight and Investigation. While attention to the program has tapered substantially in the years since a string of bankruptcies from supported companies, many congressional Republicans remain skeptical of its continued existence even as DOE moves to back billions of dollars' worth of new projects running the gamut from renewable electricity and efficiency to nuclear power to fossil energy to low-emissions cars and trucks.

Recent reports from DOE's inspector general and GAO have offered several suggestions to improve management and oversight of the program's $30 billion portfolio -- and bolster the process to underwrite up to another $45 billion or so in future loan guarantees with the remaining authority it has under the 2005 and 2007 energy laws. According to his prepared testimony, Davidson will argue that DOE has learned its lesson and stress that total losses to date are very modest.

"Due in large part to the Department's meticulous due diligence, its commitment to establishing protections within all agreements and robust project monitoring, the portfolio as a whole continues to perform very well with total losses to date of only about two percent," he says in written testimony posted to the committee's website last night.

Davidson will face a skeptical inquisitor in Oversight Subcommittee Chairman Tim Murphy (R-Pa.), who said yesterday that he questions whether DOE has truly gotten beyond the problems that led to the infamous bankruptcy of solar panel manufacturer Solyndra in 2011.

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"It became more about political handouts as opposed to anything that had any impact," Murphy told E&E Daily in a brief interview yesterday. "So we need to check and say, what has changed? Are you ready to do this, and what will you be able to do to monitor this?"

The loan program is effectively a three-legged stool comprising the 1703 loan program to support innovative technology, which was established in the 2005 energy law; the Advanced Technology Vehicle Manufacturing (ATVM) program launched by the 2007 energy law; and the now-expired 1705 program, which backed manufacturing facilities in addition to generation projects and was a creation of the 2009 economic stimulus. So far, the 1703 program has backed only a pair of loan guarantees, totaling $6.2 billion, for two new nuclear reactors in Georgia; ATVM has an $8.4 billion portfolio; and more than $15 billion of 1705 loans were distributed.

DOE has $28.7 billion in remaining 1703 authority; in December, it began soliciting applications for about $8 billion worth of loan guarantees for low-emissions fossil energy projects, and last month, it announced that it would be making available up to $4 billion for renewable energy and efficiency loan guarantees. Also in April, DOE updated the ATVM program with the intention of attracting new applications from automakers and suppliers; it has $16.6 billion in remaining authority there.

Rickey Hass, DOE's deputy inspector general for audits, will review for the committee a pair of IG reports released earlier this year, one reviewing the bankruptcy of loan guarantee recipient Abound Solar Manufacturing LLC and the other evaluating DOE's implementation of a set of recommendations crafted following that and other bankruptcies.

DOE, so far, has implemented four of the eight recommendations, but it is too early to provide a full review, Hass says in his prepared testimony.

"[W]hile the Department's actions show promise and substantial progress had been made in implementing recommended improvements, we were unable to make a determination as to whether these efforts will ultimately be fully effective, because, as previously noted, a number of actions, such as clarifying authorities, establishing an external advisory board, and incorporating lessons learned were still ongoing," Hass writes.

GAO Director for Natural Resources and Environment Frank Rusco does not make new recommendations in his testimony beyond those included in a report the office delivered earlier this month, namely that the loan office lacked adequate policies and staff to ensure the portfolio was monitored effectively. DOE generally agreed with the recommendations and is working to implement them, Davidson says, but GAO stresses that the lack of oversight came as the program was especially active.

"As a consequence, during a period of significant program events (2009 to 2013), such as 5 borrower defaults, DOE was making loans and disbursing funds without a fully developed loan monitoring function," Rusco's testimony says.

Twitter: @nickjuliano | Email: njuliano@eenews.net

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