Attorney General Phil Weiser sues to stop federal cuts that threaten state-run energy programs

Aug. 15, 2025 (DENVER) – Attorney General Phil Weiser today co-led a coalition of 19 states and the District of Columbia in suing to block the U.S. Department of Energy from imposing a new funding cap that slashes support for vital state-run energy programs.

The Energy Department policy would limit state reimbursements 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, the Energy Department is jeopardizing states’ ability to keep them running. The attorneys general are asking the court to void this unlawful cap and restore the legally required reimbursement rates for these essential energy programs.

“Colorado receives critical annual funding from the Energy Department to increase affordable access to clean energy in rural and urban areas across the state, boost investment and economic growth, and create clean energy jobs. Indirect costs are fundamental to this work, and the funding cuts will have a lasting impact on Coloradans. Secretary Wright was wrong to impose this illegal new policy, and we’re in court to overturn it,” said Attorney General Weiser.

For decades, federal law has required agencies like the Energy Department to negotiate agreements with states that set fair reimbursement rates for federally funded, state-run programs, including the basic administrative or staffing costs needed to run the programs. These “indirect” and “fringe” costs have never been subject to a cap. On May 8, 2025, the Energy Department 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.

The Colorado Energy Office, for example, is budgeted to receive from the Energy Department $1,025,870 for program year 2025, of which $470,395 are indirect costs. Under the new department policy, however, the indirect costs would be slashed to $102,587. The shortfall in reimbursement for indirect costs would force the office to make cuts to staffing and operations, reducing its ability to support the state’s progress towards energy affordability and greenhouse gas reduction targets and a clean energy economy.

Attorney General Weiser and the coalition 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 additional federal regulations regarding fringe costs. The attorneys general emphasize that every court that has ruled on the merits of such blanket limits has found them unlawful, unjustified, and disruptive to essential public programs.

The attorneys general are asking the court to vacate the Energy Department’s new policy and bar implementation of any unlawful reimbursement caps.

Attorney General Weiser is co-leading this lawsuit along with the attorneys general of Minnesota and New York. They are joined by the attorneys general of California, Connecticut, Delaware, the District of Columbia, Hawai’i, Illinois, Maine, Maryland, Michigan, Nevada, New Mexico, North Carolina, Oregon, Washington, and Wisconsin, as well as the governors of Kentucky and Pennsylvania.

Read a copy of the lawsuit (PDF).

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Media Contact:
Lawrence Pacheco
Chief Communications Officer
(720) 508-6553 office
lawrence.pacheco@coag.gov