A federal court has ruled that the U.S. Department of Energy (DOE) acted illegally when it imposed a cap on funding for state energy programs, siding with New York and a coalition of states. The decision was issued by Judge Mustafa Kasubhai in the U.S. District Court for the District of Oregon, who granted summary judgment to the attorneys general challenging the DOE’s policy.
The contested DOE policy would have limited reimbursement for staffing and administrative costs to 10 percent of a project’s budget, which threatened millions in funding for state energy initiatives. According to New York Attorney General Letitia James, “Once again, my office has successfully stopped the federal government from illegally cutting off funding that New Yorkers rely on. These programs help families save money on their energy bills, prepare their homes for extreme weather, and build a more resilient future. DOE’s cap on funding is unlawful and dangerous, and today’s ruling ensures that New York will continue to get the resources it needs to deliver cleaner, safer, and more affordable energy for our communities.”
Attorney General James led a coalition of 18 other attorneys general and two governors in filing suit against the DOE last month. The group argued that capping reimbursements violated federal law and ignored negotiated cost rates between states and the federal government. They also contended that such limits would undermine essential staffing and operations within state energy agencies.
Judge Kasubhai agreed with these arguments, finding that the DOE’s funding cap violated both reimbursement regulations for grants and provisions under the Administrative Procedure Act.
In New York alone, approximately $1.6 million in program funds were at risk due to this policy change. The potential loss could have resulted in significant financial strain for the state—jeopardizing 26 staff positions—and threatened programs aimed at improving grid resilience during extreme weather events or disasters. State officials warned that without full federal support they might have been forced to cancel or delay projects intended to meet energy demand while keeping costs manageable.
The lawsuit was co-led by attorneys general from Colorado, Minnesota, Oregon, as well as representatives from California, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Nevada, New Mexico, North Carolina, Washington State, Wisconsin and Washington D.C., along with governors from Kentucky and Pennsylvania.
