Attorney General Bonta Files Lawsuit to Halt Trump Administration from Cutting State Energy Programs Funding

OAKLAND – California Attorney General Rob Bonta, alongside the California Energy Commission (CEC), today joined a multistate coalition of 18 attorneys general and two Governors in suing to block the U.S. Department of Energy (DOE) from imposing a new funding cap that slashes support for vital state-run energy programs. The DOE policy would unlawfully deny states critical funds by limiting reimbursement for key administrative and staffing costs that have long been covered by federal energy programs. The coalition argues that by capping certain funding for these programs, DOE is jeopardizing states’ ability to keep them running. The coalition is asking the court to vacate this unlawful cap and restore the legally required reimbursement rates for these essential energy programs.

“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.”

“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,” said CEC Chair David Hochschild. “We are challenging this policy change because it is unfair, unnecessary, and unlawful."

For decades, federal law has required agencies like DOE to negotiate agreements with states that set fair reimbursement rates for federally funded, state-run programs. This includes the basic administrative or staffing costs needed to run federally funded programs. On May 8, 2025, DOE announced a new policy that ignores this longstanding practice, capping indirect and employee benefit costs at 10% of a project’s total budget, regardless of previously negotiated rates.

If allowed to stand, the cap would limit resources states rely on to keep programs operating and ensure federal dollars reach the people they are meant to help. It could force states to make cuts to staffing and operations, reducing their ability to deliver crucial energy services and potentially delaying or cancelling key projects. State budgets would face sudden shortfalls, and agencies would be forced to spend more time and money navigating DOE’s new budget rules, leaving fewer resources for direct consumer assistance. In California, DOE has applied the new indirect cost cap to the State Energy Program, which supports energy efficiency and renewable energy projects, denying this program millions of dollars.

The coalition argues that the new policy violates federal regulations that require agencies to honor negotiated indirect cost rates between states and the federal government. They assert that DOE’s sudden policy shift mirrors similar caps that federal courts have recently struck down, and also additional federal regulations regarding “fringe” costs that pay for employee benefits. The attorneys general emphasize that every court to have ruled on the merits of such blanket limits has found them unlawful, unjustified, and disruptive to essential public programs.

The coalition is asking the court to vacate DOE’s new policy and bar implementation of any unlawful reimbursement caps.

Attorney General Bonta joins the attorneys general of Colorado, Connecticut, Delaware, Hawai’i, Illinois, Maine, Maryland, Michigan, Minnesota, Nevada, New Mexico, New York, North Carolina, Oregon, Washington, Wisconsin, and the District of Columbia, as well as the governors of Kentucky and Pennsylvania, in filing this lawsuit.

A copy of the lawsuit can be found here.