BILL ANALYSIS Ó 1 SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE ALEX PADILLA, CHAIR AB 1678 - Gordon Hearing Date: June 17, 2014 A As Amended: June 4, 2014 FISCAL B 1 6 7 8 DESCRIPTION Current law directs the California Public Utilities Commission (CPUC) to require each electrical, gas, water, and telephone corporation, and each wireless telecommunications service provider, with gross annual revenues exceeding $25 million, to submit annually a plan for increasing procurement with women, minority, and disabled veteran business enterprises, generally known as the Supplier Diversity program. (Public Utilities Code § 8283) This bill requires this annual plan to also increase procurement with lesbian, gay, bisexual, or transgender (LGBT) enterprises. Current law requires each utility to submit an annual report to the CPUC regarding implementation of its Supplier Diversity program and requires the CPUC to annually report to the Legislature on the progress of utilities in implementing these programs. (Public Utilities Code § 8283) This bill requires the CPUC's report to the Legislature to include information about LGBT procurement starting with the 2016 report. Current law requires the CPUC to adopt criteria for verifying eligibility of women and minority enterprises and the Department of General Services to verify disabled veteran enterprises. (Military and Veterans Code § 999.2) This bill requires the CPUC to adopt criteria for verifying eligibility of LGBT enterprises in consultation with LGBT chambers of commerce and other entities with relevant expertise. Current law makes a person or corporation subject to a fine of up to $5,000 and jail for up to one year for falsely representing a business as eligible for the Supplier Diversity program. This bill would make those provisions apply to any false representation of being a LGBT enterprise. BACKGROUND Supplier Diversity Program - Beginning in 1986, the Legislature enacted a series of statutes, and the CPUC adopted General Order (GO) 156, to establish a Supplier Diversity program to encourage the award of a fair proportion of all utility contracts for products and services to diverse enterprises. Each electrical, gas, water, and telephone corporation (including wireless telecommunications providers), with gross annual revenues exceeding $25 million, and their CPUC-regulated subsidiaries and affiliates, are required to participate. CPUC-regulated water utilities originally were not required to participate in the program but were added in 2009. AB 1386 (Bradford, 2011) encouraged voluntary participation by cable television corporations and direct broadcast satellite providers, which are not generally subject to CPUC jurisdiction. The utilities are required to annually submit a detailed and verifiable plan, with goals and timetables, for increasing supplier diversity in all procurement categories, including technology, equipment, supplies, services, materials, and construction. A separate annual report on progress made in meeting those goals also is required. GO 156 specifies guidelines for the utilities to follow in meeting diversity requirements, including the following procurement goals: 5% of all procurement from woman-owned business enterprises; 15% from minority-owned business enterprises, and 1.5% for disabled veteran-owned businesses enterprises. There is no penalty for failure of a utility to meet its goals. The CPUC is required to make an annual report to the Legislature on utility progress in meeting Supplier Diversity program goals. In May 2011, the CPUC issued a decision (D.11-05-019) reaffirming its support of the policy goals of GO 156, particularly the economic benefits to ratepayers and communities, and amended GO 156 to enhance transparency and accountability of the program. In March 2014, the CPUC reported that companies participating in its Supplier Diversity program achieved a new record in 2013, procuring approximately $8.5 billion in goods and services from diverse suppliers, an increase of about $500 million over 2012 procurement. According to the CPUC, more than 30 companies participate in the program, with the following doing the most business with diverse firms in 2013: Pacific Gas and Electric Company: $2.3 billion, or 42.1 percent; Southern California Edison: $1.4 billion, or 40.99 percent; AT&T: $1.2 billion, or 51.57 percent; AT&T Wireless: $999 million, or 27.74 percent; Sprint: $546 million, or 41.88 percent; San Diego Gas & Electric: $453 million, or 44.88 percent; Southern California Gas Company: $428 million, or 45.38 percent; Verizon: $115 million, or 48.84 percent; and Comcast $64 million, or 22.35 percent. LGBT Certification - According to the National Gay & Lesbian Chamber of Commerce (NGLCC), there are an estimated 1.4 million LGBT-owned businesses in the United States, although less than 10% currently contract with state or local governments. The NGLCC has established a process to certify enterprises that are at least 51% owned, operated, managed, and controlled by an LGBT person or persons who are either U.S. citizens or lawful permanent residents. Qualifiers of LGBT status include: Certified copy of domestic partnership registration, civil union certification, or marriage certification; Proof of domestic partnership health insurance utilization; Evidence of completed or attempted parenting and family building efforts made by LGBT applicant and same sex partner; Apartment lease, automobile title, financing agreement, or utility bills with name of applicant and partner listed; Proof of joint property ownership; Physician or attorney letter on official letterhead attesting to the LGBT status of the applicant; and Legal petition for name change (for transgender applicants). NGLCC reports that there are currently 96 certified LGBT businesses nationwide, with about 60 in the process of being certified. Pacific Gas & Electric Company (PG&E) leadership decided to include LGBT-owned business enterprises certified by the NGLCC to its Supplier Diversity program at the end of 2012. Last October, PG&E hosted the first Supplier Diversity business development workshop for LGBT business owners in collaboration with the Golden Gate Business Association and the NGLCC. COMMENTS 1. Author's Purpose . According to the author, the CPUC's Supplier Diversity program has been effective in encouraging utilities to contract with diverse suppliers that may not have the knowledge or expertise to initiate such a partnership. The estimated 1.4 million LGBT-owned businesses in the United States have a low rate of contracting with state or local governments currently, although 80% of LGBT businesses responded to a survey that they would like that opportunity. It is important to recognize the contributions LGBT businesses, large and small, have had and continue to have on California's economy and to ensure that these businesses also have the opportunity to participate in the state's success. 2. Evolving Program . The Supplier Diversity program began in the late 1980s with efforts to increase utility contracting with women- and minority-owned businesses. Disabled veterans were added in 1990. Adding LGBT enterprises to the program reflects a policy choice to extend the benefits of the Supplier Diversity program to another distinct group with a history of limited participation in utility contracting. 3. Related Legislation . AB 2760 (Bradford) defines "renewable energy" for purposes of the CPUC Supplier Diversity program. Status: Set for hearing in the Senate Committee on Energy, Utilities and Communications June 23rd. ASSEMBLY VOTES Assembly Floor (54-20) Assembly Appropriations Committee (12-5) Assembly Utilities and Commerce Committee (10-3) POSITIONS Sponsor: National Gay and Lesbian Chamber of Commerce Support: AT&T Ace Mailing Blue Wave Solutions, Inc. California Communities United Institute California Small Business Association Desert Business Association Design Work Place, Inc. Envirolution, Inc. Golden Gate Business Association Green Viking Consulting, LLC InSight Consulting Partners, Inc. Landis Communications Inc. London Guest Suites Long Beach Gay & Lesbian Chamber of Commerce Los Angeles Gay & Lesbian Chamber of Commerce OutSmart Office Solutions, Inc. OutThink Partners Rainbow Chamber of Commerce Silicon Valley Riviera Advisors, Inc. San Francisco Small Business Network Small Business California Southern California Edison Vaughan Benz WriteAway Communications Corporation Many Individuals Oppose: None on file Jacqueline Kinney AB 1678 Analysis Hearing Date: June 17, 2014