BILL ANALYSIS                                                                                                                                                                                                    



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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