BILL ANALYSIS Ó
AB 865
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Date of Hearing: April 13, 2015
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Anthony Rendon, Chair
AB 865
(Alejo) - As Introduced February 26, 2015
SUBJECT: State Energy Resources Conservation and Development
Commission: grants and loans: diversity
SUMMARY: Establishes the EmPower California Act; requires the
California Energy Commission (CEC) to develop business diversity
requirements as a condition for receipt of loans and grants, and
requires the CEC to develop and implement various programs aimed
at increasing the inclusion of women, minority, disabled
veteran, and LGBT business enterprises in the CEC's procurement
process. Specifically, this bill:
a)Requires that the CEC require each recipient of a grant or
loan administered by the commission do both of the following
as a condition for the receipt of that grant or loan:
i. Annually submit a detailed and verifiable plan for
increasing engagement with women, minority, disabled
veteran, and LGBT business enterprises in categories
including renewable energy, advanced technologies and
demonstration projects.
ii. Provide an annual report to the commission on
the progress of implementing the aforementioned plan.
b)Requires the CEC to establish guidelines for all grant or loan
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recipients to utilize in the process of developing and
implementing diversity outreach and procurement programs.
c)Requires the CEC to develop, and require every grant or loan
recipient to implement, an outreach program to inform and
recruit diverse business enterprises (DBE).
d)Requires the CEC to establish a Diversity Task Force that will
consider and make recommendations about diversity in the
energy industry.
EXISTING LAW:
1.Requires the CEC to administer various grant and loan
programs. (Public Resources Code, Section 25412.5)
2.Directs the CEC to oversee much of California's investments in
clean energy research, clean transportation and energy
efficiency. (Public Resources Code, Sections 25007, 25008,
25400)
3.Declares that it is the policy of California to aid in the
interests of women, minority, disabled veteran, and LGBT
businesses enterprises, and encourages greater economic
opportunity for these groups and promotes competition among
utilities to procure contracts with diverse businesses.
(Section 8281 of the Public Utilities Code)
FISCAL EFFECT: Unknown.
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COMMENTS:
1)Author's Statement: AB 865 will ensure that California's
clean energy future is inclusive of diverse communities. This
bill will help working families and working-class communities
make economic and environmental gains with its investments.
The CEC currently directs much of California's investments in
clean energy research, clean transportation, and energy
efficiency. This bill helps ensure California's climate
change policies and investments have maximum co-benefits to
reduce pollution and poverty.
2)Following in the steps of the CPUC: Beginning in 1986, the
Legislature enacted a series of statutes, resulting in the
CPUC adopting General Order (GO) 156. GO 156 established the
Supplier Diversity program, symbolizing an evolving state
effort to increase utility contracting with women and
minority-owned businesses. Disabled veterans were added in
1990, and LGBT enterprises were added to the program in 2012.
This timeline reflects a policy pattern of extending benefits
of the Supplier Diversity program to distinct groups with a
history of limited participation in utility contracting.
Under GO 156, each electrical, gas, water, and telephone
corporation with gross annual revenues exceeding $25 million,
and their CPUC-regulated subsidiaries and affiliates, are
required to participate in the Supplier Diversity program.
Under this program, utilities regulated by the CPUC are
required to annually submit a detailed and verifiable plan,
with goals and timetables, for increasing supplier diversity
in all procurement categories. A separate annual report on
progress made in meeting those goals is also required. AB 865
follows the precedent set by GO 156, and emulates the CPUC's
undertaking of a Supplier Diversity program.
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3)Incremental success of the CPUC: 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
continue to participate in the program. This number includes
some of the most dominant utilities in California, like
Pacific Gas and Electric, Southern California Edison and AT&T,
among others. Though there are still questions about the
long-term effectiveness of this program, the CPUC's Supplier
Diversity program represents an incremental success.
Given this attainment of the CPUC's Supplier Diversity
Program, it is financially and morally logical for the CEC and
other regulatory bodies address issues of diversity, and to
follow the CPUC's example.
4)Continuing an important dialogue: There is a startlingly
disproportionate representation of minority groups in
California's business climate. For example, according to the
National Gay & Lesbian Chamber of Commerce (NGLCC), there is
an estimated 1.4 million LGBT-owned businesses in the United
States, and only 10% of these businesses contract with state
or local governments, although a vast majority of LGBT-owned
businesses have shown interest in these contracts. There is
additionally a significant lack of data on workforce diversity
in renewable energy and energy efficiency business in
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California.
AB 865 actively addresses this lack of data and the
disproportionate representation by continuing the dialogue on
the issue, specifically in terms of government contracts with
these groups. This bill builds on the pattern of social and
financial investment in California's historically
underrepresented groups.
5)Auditor Report: A recent State Auditor's report, titled
Disabled Veteran Business Enterprise Program, released in
February 2014, analyzes the current way the state contracts
with Disabled Veteran businesses, a subcategory of what AB 865
requires. The Disabled Veteran Business Enterprise (DVBE)
program, administered by the Department of General Services,
directs state governmental entities to procure goods and
services from DVBE firms. The legislative intent of the DVBE
program is to target DVBE firms and have them benefit
financially from doing business with the State. However,
based on data compiled in the State Auditor's report, only a
relatively small subset of DVBE firms benefit from the program
and State contracting. For example, during the fiscal year
2012 to 2013, 83 percent of the DVBE contracting went to only
30 firms. A significant cause of this problem, among others,
can be attributed to weak reporting requirements. AB 865
addresses the discrepancies in the reporting process and is in
line with the Auditor's recommendations.
6)CEC Resolution : On April 8, 2015, the CEC adopted a
resolution to implement a policy to reflect the Energy
Commission's commitment to making sure the widest possible
range of Californians participate in existing and future
programs. The resolution specifically aims to maximize
opportunities for small businesses, women, disabled veteran,
minority and LGBT-owned businesses, as well as economically
disadvantaged and underserved communities, to participate in
and benefit from CEC programs. Regardless of how the CEC
implements this policy, it is clear that the lack of diversity
within the energy/utilities domain is a pervasive problem that
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needs to be addressed, in terms of the policy, culture, and
practices of the CEC. AB 865 further prompts this
conversation.
7)Suggested amendments to decrease costs: The author may wish
to consider making amendments to clarify a reasonable
threshold for businesses that are required to abide by AB 865.
A minimum revenue business threshold of $25,000,000, as at
the CPUC would be a good starting point, but amendments should
give the CEC authority to adjust and reduce the annual revenue
requirement when deemed necessary.
Additionally, the author may wish to soften the role of the
Diversity Task Force in the bill, and require the CEC to
consider establishing the Task Force further down the road,
after receiving the data and reports required by the bill.
When and if the CEC develops this Task Force, the CEC should
consider how it can address and promote local and targeted
hire.
The author may also wish to consider encouraging partnership
with the CPUC to aid in this bill's implementation, to share
resources, reduce costs, and encourage a more coordinated
effort between the two agencies.
In contrast to the CPUC's phased approach and timeline, this
bill requires the CEC to implement all aspects of the bill at
once. This can be attributed to today's heightened awareness
of minority issues, and the sense of urgency needed to address
them. At a later date, the author may wish to incorporate a
more tiered timeline for AB 865's requirements. Though the
costs of the bill are currently unknown, a tiered timeline
would potentially reduce costs and allow the CEC to tackle its
approach to diversity in a more thoughtful and deliberate
manner.
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Specific amendments are:
25230 (b) The commission shall require that each recipient of
a grant or loan administered by the commission , with gross
annual revenues exceeding twenty-five million dollars
($25,000,000) or a different threshold deemed appropriate by
the CEC, do both of the following as a condition for the
receipt of that grant or loan:
(1) Annually submit a detailed and verifiable plan for
increasing procurement from women, minority, disabled veteran,
and LGBT business enterprises in all categories, including,
but not limited to, renewable energy, advanced technologies,
and demonstration projects. These annual plans shall include
short- and long-term goals and timetables, but not quotas, and
shall include methods for encouraging both prime contractors
and grantees to engage women, minority, disabled veteran and
LGBT business enterprises in subcontracts in all categories
that provide subcontracting opportunities, including, but not
limited to, renewable energy, advanced technologies, and
demonstration projects.
(e) After receipt of the detailed plans and annual reports,
The commission shall establish consider establishing a
Diversity Task Force to consider and make recommendations
about diversity in the energy industry, including diversity of
corporate governing boards and procurement from diverse
businesses. When, and if, the commission develops this Task
Force, the commission shall consider how it can address and
promote local and targeted hire. The Diversity Task Force
shall do all the following:
(1) Identify and promote energy companies that are actively
engaged in diversity issues.
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(2) Explore the status of diverse representation on energy
company governing boards.
(3) Identify actions that the commission can take to encourage
insurance companies to increase procurement with diverse
suppliers.
(4) Provide recommendations regarding current legislation and
suggest changes to existing law.
8)Related Legislation
a) AB 2593 (Bradford) 2014: Vetoed by Governor Brown:
Required a business enterprise with gross annual revenues
exceeding $25,000,000 participating in a program
administered by the Air Resources Board to increase
procurement from women, minority, and disabled veteran
business enterprises.
b) AB 1678 (Gordon) 2014: Chapter 633: Extended
provisions of the CPUC utilities' Supplier Diversity
Program to Lesbian, Gay, Bisexual and/or Transgender (LGBT)
business enterprises.
c) AB 2758 (Bradford) 2010: Chapter 475: Required cable
corporations, with gross annual revenues exceeding $25
million, to annually submit a detailed and verifiable plan
for increasing procurement from diverse businesses. It
specifies that renewable energy, wireless
telecommunications, broadband, smart grid and rail projects
should be projects of focus for utility procurement with
diverse businesses.
d) AB 3678 (Moore) 1986: Chapter 1259: Codified the
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broader parameters of GO 156, and requires each electrical,
gas, and telephone corporations, with gross annual revenues
exceeding $25 million, to annually submit a detailed and
verifiable plan for increasing diverse business procurement
in all categories that includes short- and long-term goals
and timetables, and furnish an annual report.
1)Double referral. This bill is double referred to the
Committee on Jobs, Economic Development and the Economy.
REGISTERED SUPPORT / OPPOSITION:
Support
None on file
Opposition
None on file
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Analysis Prepared by:Allegra Roth / U. & C. / (916) 319-2083