This blog provides guidance to help utilities right-size their application(s) and is the third in a series of blogs intended to help utilities navigate the DOE LPO Energy Infrastructure Reinvestment loan program.
June 11, 2024Utilities typically have large capital plans with multiple projects spanning many years, making it challenging to decide which projects to include in an EIR loan application. This blog provides prospective utility applicants with suggestions to inform initial thinking on scoping EIR loan applications, including when to submit multiple applications and when to combine multiple projects in a single application.
Ensuring All Projects Meet EIR Eligibility Requirements
All projects included in an EIR application must meet the section 1706 eligibility requirements. The Title 17 Program Guidance and first blog in this series provide information on the types of utility projects and associated project costs that are typically eligible. In addition, all EIR projects must comply with the National Environmental Policy Act (NEPA), prevailing wage requirements (Davis-Bacon), and Cargo-Preference Act.
Submitting One or More Applications
A single application may include multiple individual eligible projects. However, it is important that the collection of projects in its entirety can be evaluated as one loan with a singular risk level for diligence and underwriting purposes. In other words, separate borrowing entities that do not pool repayment risk (e.g., do not have a corporate guarantee or do not cross-collateralize) would be best evaluated as separate applications. LPO can work with utilities during the pre-application consultation to advise on preparing an integrated and comprehensive plan to establish the projects within or across applications.
Deciding What Projects to Include
It is easier to remove projects from an application before financial close than to add them, so we recommend including all projects reasonably anticipated to seek funding through the loan guarantee. That said, for time and cost reasons we recommend not oversizing the application with projects or costs that are unlikely to be ultimately funded.
Construction timing of the project is an important factor. Typically, projects with anticipated construction schedules that begin within 8 months of submitting a complete Part II application do not allow LPO enough time to process the Part II application and then complete the required environmental review pursuant to NEPA and the associated regulatory agency and Tribal consultations before the start of construction. Therefore, LPO recommends that Applicants refrain from including such projects in their applications.
Managing Application Costs
There is no fee to apply for an LPO loan, but there are costs to the due diligence process and financial close that should be considered. Specifically, LPO requires that applicants pay the costs of third-party advisors to advise DOE as part of the financing process. (These expenses can be included as eligible project costs and can be amortized in the loan itself.) A more complex loan application, such as one with multiple technologies included, can result in higher advisor costs than a simpler loan application.
Another consideration is the nonrefundable facility fee, which is paid at the time of financial close and based on the total requested loan amount. As mentioned earlier, applicants will want to take into consideration the sizing of the facility fee in connection with the likelihood that a proposed project will ultimately be part of the loan facility.
Integrated Resource Plan (IRP)-Based Applications
Applications tied to utility IRP-based clean energy transitions can be complicated given the number and scope of individual projects often included in an IRP. We’ve provided suggestions below to assist utilities when considering which types of IRP-related projects to include in a loan application. The LPO team is available to discuss specific cases.
- It’s usually preferable to include multiple technologies and individual projects associated with an IRP in a single application. However, if an individual project involves complex or innovative technologies or is otherwise challenging, separating it into a second application may be more appropriate given the aspects of the projects under consideration.
- It’s acceptable to include a combination of identified near-term projects and less defined, longer-term projects associated with an IRP in a single loan application.
- Utilities don’t need to wait for regulatory approval to submit an application. Regulatory approvals can occur during the due diligence phase or can be included as conditions precedent or covenants in the loan.
- Talk with LPO early about projects with construction dates in the next 18-24 months. The LPO team needs time to complete environmental reviews under the National Environmental Policy Act. These reviews must be completed prior to construction, so tight construction timeframes can sometimes preclude the inclusion of near-term projects in a loan application.
- In addition to a NEPA review for each individual project, all projects funded by LPO must meet prevailing wage (Davis-Bacon) and Cargo-Preference Act requirements. We recommend that utilities ensure that RFPs and contracts with EPCs/developers (under build-own-transfer agreements) include these requirements to avoid projects being precluded from LPO funding.
Methane Emissions Avoidance Applications
Projects to update aging natural gas infrastructure and reduce methane leakage can be eligible for EIR funding. We’ve provided suggestions below to assist natural gas utilities considering what to include in an EIR loan application.
- Applicants must explain and provide evidence that the project will avoid enough methane emissions for the project to result in a net reduction in greenhouse gas emissions.
- For multi-year upgrade projects, utilities often don’t have specific sites identified on a year-by-year basis since this is usually determined as part of the yearly planning process. It’s okay to include estimated costs, miles, and emissions impact for each out-year of investment in the application.
- Include in the application a description of the regulatory program under which these investments are occurring. Discuss the program experience to date in terms of meeting construction, methane reduction, and regulatory expectations.
- We recommend engaging with LPO early to discuss project specifics and ensure you understand the NEPA process so that we can advise on the level of environmental review pursuant to NEPA.
Have Questions? Contact Us.
Interested applicants are invited to request a pre-application consultation at any time. LPO’s Outreach and Business Development staff will meet with potential applicants and provide step-by-step assistance to navigate the application process. Requestors should come prepared with a description of the proposed project(s) and identified financing needs.
Other Blogs in this Series
This is the third in a series of blogs intended to help utilities navigate the DOE Loan Programs Office’s (LPO) Energy Infrastructure Reinvestment (EIR, section 1706) loan program.
- Blog 1: Understanding Energy Infrastructure Reinvestment Loan Program Eligibility for Regulated Utilities
- Blog 2: Preparing a Strong Energy Infrastructure Reinvestment Project Application for Efficient Loan Processing
- Blog 3: Right-Sizing a Utility Energy Infrastructure Reinvestment Project Application
- Blog 4: Tips for Regulated Utilities Preparing for the NEPA Review Process as Part of the Energy Infrastructure Reinvestment Program
Jigar Shah
![Headshot of Jigar Shah, LPO Executive Director](/sites/default/files/styles/full_article_width/public/2021-03/DOE-LPO_JIGAR_SHAH_1.jpg?itok=xPzG5ZUG)
Former Director, Loan Programs Office
Jigar Shah served as Director of the Loan Programs Office (LPO) at the U.S. Department of Energy (DOE) from March 2021 to January 2025. He led and directed LPO’s loan authority to support deployment of innovative clean energy, advanced transportation, and Tribal energy projects in the United States. Prior, Shah was co-founder and President at Generate Capital, where he focused on helping entrepreneurs accelerate decarbonization solutions through the use of low-cost infrastructure-as-a service financing. Prior to Generate Capital, Shah founded SunEdison, a company that pioneered “pay as you save” solar financing. After SunEdison, Shah served as the founding CEO of the Carbon War Room, a global non-profit founded by Sir Richard Branson and Virgin Unite to help entrepreneurs address climate change.
Shah was also featured in TIME's list of the "100 Most Influential People" in 2024.
Originally from Illinois, Shah holds a B.S. from the University of Illinois-UC and an MBA from the University of Maryland College Park.