Energy Secretary to Reform and Expedite DOE Dispersal of Funds

U.S. Energy Secretary Steven Chu last week announced a sweeping reorganization of the Department of Energy’s (DOE) dispersal of direct loans, loan guarantees, and funding contained in the American Recovery and Reinvestment Act.

The goal of the restructuring is to expedite disbursement of money and to begin investments in a new energy economy within months, Secretary Chu said in a release. The reforms would affect the Loan Guarantee Program established by the Energy Policy Act of 2005, the Advanced Technology Vehicles Manufacturing Loan Program, and the DOE funding contained within the president’s American Recovery and Reinvestment Act.

“These changes will bring a new urgency to investments that will put Americans back to work, reduce our dangerous dependence on foreign oil, and improve the environment. We need to start this work in a matter of months, not years—while insisting on the highest standard of accountability.”

The DOE said it would draw on lessons from the private sector and other agencies, and it would cut paperwork and process applications on a rolling basis to expedite dispersal of the funds.

One of the restructuring plan’s goals was to begin offering loan guarantees under the previous loan guarantees by late April or early May. “These offers may still require recipients to secure their own share of the financing—similar to earnest money in a home mortgage—or meet other conditions prior to closing, but DOE will have completed its review,” the agency said.

It would also aim to start offering loan guarantees under the new Recovery legislation by early summer, though the DOE said that these offers could still require recipients to secure their own financing or meet other conditions prior to closing. Chu stated that the DOE was ultimately seeking to disperse 70% of the investment from the act by the end of next year.

Other reforms to the programs announced by Secretary Chu include:

• Rolling appraisals of applications: Instead of delaying the consideration of an application until a far off deadline, the DOE will review them when they are submitted so that decisions can be made more quickly.
• Streamlining and simplifying loan application forms and other paperwork.
• Accelerated loan underwriting by using outside partners.
• In cases where up-front fees may deter companies from applying, the DOE will offer applicants the opportunity to pay the fees as part of the loan at closing.
• Further reduction of up-front costs by restructuring credit subsidies so they are paid over the life of the loan.
• Additional staff and resources to process applications.
• Working with the industry to attract good projects into the loan guarantee program and helping them navigate the process.
• A website that would provide increased transparency in both process and results, as well as information to help applicants through the process.

Last week, Chu also named Matt Rogers, a former senior partner at management consultant firm McKinsey and Co., to implement these reforms.

Most of these changes are within the authority of the secretary of energy to make in consultation with the director of the Office of Management and Budget. A few will require statutory changes. The DOE said it would move quickly to work with the House and Senate to make the necessary adjustments.

Based on detailed analysis of the programs, Secretary Chu said he was confident the changes would not introduce additional risk to the loan process.

Source: DOE