California Attorney General Rob Bonta, together with the California Energy Commission (CEC), has joined a coalition of 18 attorneys general and two governors in filing a lawsuit to prevent the U.S. Department of Energy (DOE) from implementing a new funding cap on state-run energy programs. The policy in question would limit reimbursement for administrative and staffing costs that have traditionally been covered by federal energy programs.
The coalition contends that this cap would deny states essential funds needed to operate these programs effectively. They are requesting the court to overturn the cap and restore previously established reimbursement rates.
“DOE’s funding cap disrupts the very programs helping our communities with energy costs and the transition to clean power,” said Attorney General Bonta. “Slashing budgets will have both immediate and long-term consequences, especially for the underserved communities that rely on them most. This is about equity, sustainability, and basic energy security, and that’s why I, alongside a multistate coalition, am filing a lawsuit against the Trump Administration to halt this funding cap immediately.”
CEC Chair David Hochschild added: “DOE’s new reimbursement rate changes would undermine the federally funded state-run energy programs that help make our energy cleaner, more reliable and more affordable. We are challenging this policy change because it is unfair, unnecessary, and unlawful.”
Federal law has required agencies like DOE to negotiate agreements with states regarding fair reimbursement rates for federally funded programs for decades. These agreements cover necessary administrative or staffing expenses. However, on May 8, 2025, DOE announced its new policy capping indirect and employee benefit costs at 10% of a project’s total budget—regardless of prior negotiations.
According to officials involved in the lawsuit, if implemented, this policy could force reductions in staffing and operations for state-run energy initiatives such as California’s State Energy Program—which supports efficiency and renewable projects—and may lead to delays or cancellations of important projects due to budget shortfalls.
The coalition argues that DOE’s approach violates existing federal regulations requiring respect for negotiated indirect cost rates between states and federal agencies. They also note that similar caps have recently been struck down by federal courts as unlawful.
Attorney General Bonta is joined in this legal action by attorneys general from Colorado, Connecticut, Delaware, Hawai’i, Illinois, Maine, Maryland, Michigan, Minnesota, Nevada, New Mexico, New York, North Carolina, Oregon, Washington, Wisconsin; the District of Columbia; as well as governors from Kentucky and Pennsylvania.
A copy of the lawsuit can be found here.
