Office of the
Illinois Attorney General
Kwame Raoul

Chicago – Attorney General Kwame Raoul today, as part of a coalition of 19 states, sued 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 coalition argues that by capping certain funding for these programs, the 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.

In Illinois, the new cost cap would endanger long-running programs promoting energy resiliency and efficiency. These programs include the Public Water Infrastructure Energy Efficiency Assessment Program, which helps publicly held water treatment facilities conserve energy and reduce costs for customers, and energy code training for homebuilders, contractors, architects and others in the construction industry to ensure that renovations and new building projects meet the newest standards for efficiency. It would also jeopardize the state’s ability to invest in the Illinois Clean Energy Innovation Fund, a revolving loan fund that supports the development of emerging technologies that enhance grid reliability, resilience and modernization.

 “This illegal action will seriously harm work being done in Illinois and across the nation to improve energy efficiency, strengthen energy resiliency and increase clean energy,” Raoul said. “Access to reliable energy is crucial to the prosperity and well-being of the residents of our states. Prioritizing efficiency and utilizing clean energy help protect our environment. We urge the court to block these funding cuts as we keep fighting this reckless overreach.”

For decades, federal law has required agencies like the 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” costs have never been subject to a cap. On May 8, the 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.

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. 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 would force states to make cuts to staffing and operations, reducing their ability to deliver crucial energy services and potentially delaying or canceling key projects. State budgets would face sudden shortfalls, and agencies would be forced to spend more time and money navigating the DOE’s new budget rules, leaving fewer resources for programs that protect consumers.

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. 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.

Joining Attorney General Raoul in filing this lawsuit are the attorneys general of California, Colorado, Connecticut, Delaware, the District of Columbia, Hawaii, Maine, Maryland, Michigan, Minnesota, New Mexico, New York, North Carolina, Oregon, Washington, and Wisconsin, as well as the governors of Kentucky and Pennsylvania.