Master of Science / Department of Mechanical and Nuclear Engineering / Jeremy A. Roberts / A novel approach based on the Karhunen-Loéve Transform (KLT) is presented for treatment of the energy variable in response matrix methods, which are based on the partitioning of global domains into independent nodes linked by approximate boundary conditions. These conditions are defined using truncated expansions of nodal boundary fluxes in each phase-space variable (i.e., space, angle, and energy). There are several ways in which to represent the dependence on these variables, each of which results in a trade-off between accuracy and speed. This work provides a method to expand in energy that can reduce the number of energy degrees of freedom needed for sub-0.1% errors in nodal fission densities by up to an order of magnitude. The Karhunen-Loéve Transform is used to generate basis sets for expansion in the energy variable that maximize the amount of physics captured by low-order moments, thus permitting low-order expansions with less error than basis sets previously studied, e.g., the Discrete Legendre Polynomials (DLP) or modified DLPs. To test these basis functions, two 1-D test problems were developed: (1) a 10-pin representation of the junction between two heterogeneous fuel assemblies, and (2) a 70-pin representation of a boiling water reactor. Each of these problems utilized two cross-section libraries based on a 44-group and 238-group structure. Furthermore, a 2-D test problem based on the C5G7 benchmark is used to show applicability to higher dimensions.