Dept. of Energy’s Programs Axed Again

Rolling AnalysisDept. of Energy’s Programs Axed AgainCuts would protect taxpayers from future risky loans.

The U.S. Department of Energy’s Loan Programs find themselves on the chopping block in the Trump administration’s Fiscal Year 2020 (FY20) Presidential Budget Request AGAIN. The DOE’s loan programs have had a rocky history and faced significant hurdles since their creation in the 2005 and 2007 energy bills and expansion in subsequent legislation. The administration’s FY20 budget request, just like its FY18 and FY19 requests, proposes to eliminate funding for the Title 17 Loan Guarantee Programs as well as DOE’s Advanced Technology Vehicles Manufacturing (ATVM) direct loan program.

The Title 17 Loan Guarantee Program has been riddled with problems from day one. Numerous outside reviews over the years have found that the program has lacked needed oversight, technical capabilities, and taxpayer protections. Most notably, the program has provided $12 billion in loan guarantees to the Vogtle nuclear reactor project, which the Title 17 program declared as having no risk (giving it a zero credit subsidy cost estimate). Far from risk-free, the reactors completion date has been pushed back 5 years, and costs have nearly doubled from the original estimate of $14.3 billion to $27 billion. With the project massively over budget, and years behind schedule, taxpayers are currently on the hook for $12 billion.

Authorized in the Energy Independence and Security Act of 2007, ATVM has so far awarded funds to five companies, two of which have defaulted on their loans. Not a great track record. To date, the program has given out approximately $8.06 billion in direct loans, about a third of the program’s $25 billion spending authority. In a 2014 report, the Government Accountability Office (GAO) proposed rescinding the ATVM program’s remaining appropriations citing insufficient demand for the program. The GAO reiterated its proposal to end the ATVM program in a March 2018 update to its report.