New York Attorney General Letitia James has filed a lawsuit, joined by 18 other states and the District of Columbia, against the U.S. Department of Energy (DOE) over a new funding policy that would cap federal support for state-run energy programs. The coalition contends that this cap could lead to higher costs for New York households and undermine critical state energy initiatives.
The DOE’s recent policy change restricts reimbursement for administrative and staffing expenses—known as indirect and fringe costs—to 10 percent of a project’s total budget. This represents a significant shift from past practice, where these costs were negotiated between federal agencies and states without such limits.
“New Yorkers count on state energy programs to save money on their bills, prepare homes for extreme weather, and move toward clean, affordable energy,” said Attorney General James. “The Department of Energy’s cuts threaten to pull the rug out from under those efforts. We’re taking them to court to protect the funding that keeps these programs running for families across New York.”
Doreen M. Harris, President and CEO of the New York State Energy Research and Development Authority (NYSERDA), commented on the timing of the DOE’s decision: “During the peak of hurricane season, the Trump administration is putting in jeopardy the state’s capacity to plan for the impacts to our gasoline system and take appropriate action to protect New Yorkers and our economy. This attempt by the U.S. Department of Energy to undermine essential and critical energy planning and emergency response services should not go unchallenged, and I thank Governor Hochul, Attorney General James and their colleagues across the country for taking the decisive and necessary steps to protect and enforce this federal government responsibility.”
According to NYSERDA estimates, one grant—the State Energy Program (SEP) formula grant—would lose about $1.6 million under this cap. Last year, NYSERDA received more than $1.8 million in indirect and fringe cost reimbursements; under DOE’s new rule, that figure would fall sharply to $314,000.
These funds are vital for supporting staff involved in tasks such as developing state energy plans, responding to fuel supply disruptions, ensuring public safety near nuclear plants, managing fuel reserves, maintaining grid resilience during extreme weather events or disasters, analyzing electricity pricing mechanisms, and conducting emergency drills.
Attorney General James argues that DOE’s new policy violates existing federal regulations requiring agencies to honor previously negotiated rates with states—a position supported by previous court rulings against similar blanket limits.
The lawsuit seeks a court order vacating DOE’s new reimbursement cap policy.
Other states joining New York in this legal challenge include California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Michigan, Minnesota, Nevada, New Mexico, North Carolina, Oregon, Washington, Wisconsin; also participating are Kentucky’s governor and Pennsylvania’s governor.
