WASHINGTON (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 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."