WASHINGTON, Dec 18 (Reuters) - The inspector general of

the U.S. Department of Energy urged the agency's loan office to

immediately halt issuing billions of dollars in loans to green

projects, saying contractors who vet them may be serving both

the agency and potential borrowers.

The watchdog in an interim report issued late on Tuesday

urged the DOE's Loan Programs Office to stop the financing until

it can ensure that contracting officers and their

representatives are "complying with conflicts of interest

regulations and enforcing conflict of interest contractual

obligations."

The LPO administers more than $385 billion in low-interest

loans to companies with green energy projects such as batteries,

nuclear power and advanced vehicles. It has about $20 billion in

loan authority that it could issue before President Joe Biden, a

Democrat, leaves office on Jan. 20. The LPO issued a record $15

billion conditional loan to California-based electric utility

PG&E ( PCG ) earlier on Tuesday.

A DOE spokesperson said the interim report is filled with

errors. "The Inspector General fundamentally misunderstands the

implementation of contracting in LPO. We stand confident in

knowing LPO is in full compliance with the Department of

Energy's conflicts of interest regulations and take conflicts of

interest very seriously."

Jigar Shah, the head of the LPO, said in a response included

in the interim report that "despite a months-long audit

involving over one hundred contract files, (the inspector

general) has not identified any organizational conflicts of

interest."

The inspector general, Teri Donaldson, will issue a full

report when the office completes its work. Donaldson was

previously general counsel for the U.S. Senate environment

committee, hired by Senator John Barrasso, a conservative

Republican from Wyoming, the top coal-producing state, who has

long accused the LPO of favoritism in grant practices.

Then-President Donald Trump nominated Donaldson in 2018 as

DOE's inspector general.

A DOE spokesperson said the agency "will continue moving

forward in its work as Congress has instructed."