Press Releases
08/15/2025
Attorney General Tong Sues to Stop Federal Cuts That Threaten State Energy Programs
(Hartford, CT) -- Attorney General William Tong today joined 18 other states and the District of Columbia 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 prevent states from using critical federal funds by limiting reimbursement for key administrative and staffing costs that have long been covered by these federal energy programs. The coalition argues that by capping certain funding for these programs, DOE is jeopardizing states’ ability to keep them running. The states are asking the court to vacate this unlawful cap and restore the legally required reimbursement rates for these essential energy programs.
“We’re suing to stop Donald Trump from making it harder for states like Connecticut to drive down energy costs and reduce our reliance on fossil fuels. Connecticut families and small businesses are getting socked by skyrocketing utility bills, and now Trump is lawlessly defunding efforts to help us save. And why? So that he can funnel even more tax breaks to billionaires. We’re not going to let him,” said Attorney General Tong.
"This DOE policy contradicts past practices and effectively precludes the reasonable use of State Energy Program funds to meet staffing expenses. Staffing is a primary expense for most state energy offices and the arbitrary restriction on this use does not serve any state or federal policy goal. The implementation of this policy would limit our energy options and our ability to deliver affordable and clean energy to Connecticut consumers,” said Department of Energy and Environmental Protection Deputy Commissioner Joe DeNicola.
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. These “indirect” and “fringe” costs have never been subject to a cap. On May 8, 2025, DOE announced a new policy that ignores this longstanding practice, capping indirect and employee benefit costs at 10 percent 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 Connecticut, the Department of Energy and Environmental Protection uses State Energy Program funding to support work on energy efficiency, building decarbonization, renewable energy, affordable housing energy retrofits, resilience, and transmission and distribution planning. This includes promoting heat pumps and energy-efficient heating and lighting, public transit and ridesharing, water conservation and recycling. DOE’s policy to cut indirect costs to 10 percent of the overall award and include fringe benefits in that cap would seriously limit the flexibility of these funds for Connecticut and could prevent Connecticut from using the funds as needed.
The states argue that the new policy violates federal regulations that require agencies to honor negotiated indirect cost rates between states and the federal government. They assert the policy mirrors similar caps that federal courts have recently struck down, and also additional federal regulations regarding fringe. The coalition emphasizes 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.
Joining Attorney General Tong in filing this lawsuit, which was led by New York Attorney General Letitia James, Minnesota Attorney General Keith Ellison, and Colorado Attorney General Phil Weiser, are the attorneys general of California, Delaware, Hawai’i, Illinois, Maine, Maryland, Michigan, Nevada, New Mexico, North Carolina, Oregon, Washington, Wisconsin, and the District of Columbia, as well as the governors of Kentucky and Pennsylvania.
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Media Contact:
Elizabeth Benton
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