UNFINISHED BUSINESS  

Bill No: SB 255

Author: Bradford (D)

Amended: 9/3/19

Vote: 21

SENATE ENERGY, U. & C. COMMITTEE: 12-0, 3/27/19

AYES: Hueso, Moorlach, Bradford, Dodd, Hertzberg, Hill, McGuire, Rubio, Skinner, Stern, Stone, Wiener

NO VOTE RECORDED: Chang

SENATE APPROPRIATIONS COMMITTEE: 6-0, 5/16/19

AYES: Portantino, Bates, Bradford, Hill, Jones, Wieckowski

SENATE FLOOR: 38-0, 5/21/19

AYES: Allen, Archuleta, Atkins, Bates, Beall, Borgeas, Bradford, Caballero, Chang, Dodd, Durazo, Galgiani, Glazer, Grove, Hertzberg, Hill, Hueso, Hurtado, Jackson, Jones, Leyva, McGuire, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Portantino, Roth, Rubio, Skinner, Stern, Stone, Umberg, Wieckowski, Wiener, Wilk

ASSEMBLY FLOOR: 70-0, 9/9/19 - See last page for vote

SUBJECT: Women, minority, disabled veteran, and LGBT business enterprise procurement: electric service providers: energy storage system companies: community choice aggregators

SOURCE: Author

DIGEST:

This bill expands the California Public Utilities Commission (CPUC) supplier diversity program by lowering the annual revenue threshold for participation from $25 million to $15 million, including electric service providers in the program, and requiring community choice aggregators (CCAs) to report specified information. This bill also encourages distributed energy resource companies, energy storage companies, and certain wholesale electric generators to participate in the program.

Assembly Amendments

require a CCA to include its supplier diversity plan in the CCA’s implementation plan adopted for CCA’s formation. The amendments also make participation in the supplier diversity program optional for wholesale generators, distributed energy resource providers, and energy storage system companies. The amendments lower reporting requirements for companies with California revenues between $15 million and $25 million.

ANALYSIS:

Existing law:

1. Establishes a supplier diversity program by requiring the CPUC to direct each electrical corporation, gas corporation, water corporation, telephone corporation, and wireless telecommunications service provider with gross annual revenues exceeding $25 million, to annually submit a plan for increasing procurement with women, minority, disabled veteran, and LGBT business enterprises (WMDVLGBTBEs). (Public Utilities Code §8283(a))
2. Requires supplier diversity program plans to include short-term and long-term goals and timetables and to include methods for encouraging contractors to engage WMDVLGBTBEs in all subcontracting categories, including, but not limited to, renewable energy, wireless telecommunications, broadband, smart grid, and rail projects. The CPUC must develop guidelines for programs implemented pursuant to the plans and each participating company must submit an annual report on the implementation of programs established under a supplier diversity plan. (Public Utilities Code § 8283(b-d))
3. Provides that each electrical, gas, water, mobile telephone service provider, telephone corporation, cable television corporation, and direct broadcast satellite provider that is not otherwise required to submit a plan is encouraged to voluntarily adopt a plan for increasing WMDVLGBTBEs procurement and to voluntarily report activity in this area to the Legislature on an annual basis. (Public Utilities Code §8283(e))
4. Requires the CPUC to adopt eligibility criteria for women, minority, and LGBT business enterprises for procurement contracts and requires participating utilities to develop outreach plans to recruit WMDVLGBTBEs to apply for procurement contracts. (Public Utilities Code §8284)
5. Requires each CCA that forms to develop an implementation plan detailing the process and consequences of its electrical load aggregation. The plan and any subsequent amendments must be considered and adopted at a public hearing and must contain specified information. (Public Utilities Code §366.2)

This bill:

1. Modifies the revenue threshold of companies subject to the supplier diversity program requirements from $25 million in total revenues to $15 million in California revenues. This bill requires the CPUC to direct participating companies with California revenues between $15 million and $25 million to annually file data in a simplified format regarding efforts to increase WMDVLGBTBEs procurement. Companies with California revenues exceeding $25 million must still submit detailed, verifiable plans.
2. Adds electric service providers to the list of companies that must file supplier diversity plans with the CPUC.
3. Encourages the following the following types of businesses to voluntarily adopt a plan for increasing WMDVLGBTBEs procurement and report activity in this area to the Legislature:
   1. Exempt wholesale generators contracting to sell electricity to a retail seller.
   2. Distributed energy resource contractors.
   3. Energy storage system companies.
4. Adds energy storage system and vegetation management to the categories of contracts and subcontracts for which participating companies must have goals to increase procurement from WMDVLGBTBEs.
5. Requires the CPUC to direct each CCA with gross annual revenues exceeding $15 million to annually submit a detailed and verifiable plan for increasing procurement from small, local, and diverse business enterprises in all contract categories, including, but not limited to, renewable energy, energy storage system, and smart grid projects.
6. Requires CCAs to include plans for increasing procurement from small, local, and diverse business enterprises in their implementation plans.
7. Encourages CCAs that are not otherwise required to develop a plan for increasing procurement from small, local, and diverse business enterprises.

Background

Utility Supplier Diversity Program and General Order (GO) 156. In 1988, the CPUC adopted GO 156 (D. 88-04-057) to implement AB 3678 (Moore, Chapter 1259, Statutes of 1986), which required the CPUC to direct certain utilities to submit plans for increasing diverse business procurement. Under GO 156, the CPUC monitors utilities’ procurement from WMDVLGBTBEs. The CPUC also administers a certification clearinghouse, which is a database that identifies firms that have voluntarily obtained certification as a WMDVLGBTBEs. The Supplier Diversity Program is a tool through which the state can leverage the economic power of the utility sector to address historic structural inequities for economic opportunity and ensure that WMDVLGBTBEs are included in contracting opportunities, including renewable energy contracts.

In September 2018, the CPUC completed its report to the Legislature on utilities’ 2017 participation in the Supplier Diversity Program. The CPUC’s report noted that the program encourages utilities to purchase at least 21 percent of their procurement from WMDVLGBTBEs (15 percent from minority business enterprises, five percent from women business enterprises, and 1.5 percent from disabled veteran business enterprises). According to the report, the participating utilities exceeded these goals and spent over $10 billion through WMDVLGBTBEs in 2017. At the time of the report, the program did not have a goal for LGBT business enterprise (LGBTBE) procurement; however, the CPUC encourages LGBTBE procurement and intends to make a determination on an LGBTBE program goal by 2021.

The Supplier Diversity Program has evolved with changes to California’s utility sector. Since its establishment in the 1980s, the CPUC has revised GO 156 to reflect new legislative requirements for the Supplier Diversity Program. These legislative requirements reflected changes in the utility sector and the scope of diverse businesses that can contract with utilities. For example, AB 1918 (Davis, Chapter 456, Statutes of 2010) added wireless telecommunications service providers to the program. In 2014, AB 1678 (Gordon, Chapter 633, Statutes of 2014) expanded the types of diverse contractors encouraged by the program to include LGBTBE.

California’s electric retail provider landscape has changed significantly since the adoption of GO 156. The expansion of distributed energy resources, direct access providers, and CCAs is decentralizing the electric retail sector and reducing the load of the state’s three largest investor-owned utilities (IOUs). In 2017, a CPUC white paper on electric consumer retail choice estimated that rooftop solar, CCAs, and direct access would unbundle approximately 25 percent of load in IOU service territory by 2018. In the same paper, the CPUC estimated that this trend would continue, and over 85 percent of retail load may be served by sources other than the IOUs by the mid 2020s.

The departure of load from the IOUs may decrease IOU contracting and impact the degree to which WMDVLGBTBEs can count on new IOU contracts through the Supplier Diversity Program. Currently, direct access providers, distributed energy resource contractors, and CCAs are not required to participate in the Supplier Diversity Program. This bill expands the supplier diversity program by lowering the program’s revenue thresholds and adding electric service providers. However, it simplifies reporting requirements for companies earning California revenues between $15 million and $25 million annually by enabling them to report data in simplified format instead of filing a detailed, verifiable plan with the CPUC. This bill requires CCAs with revenues above $15 million to report specified information on plans to contract with small, local and diverse businesses. This bill also expands the types of contracts expressly covered by supplier diversity initiatives, and it encourages exempt wholesale generators contracting to sell electricity to a retail seller, distributed energy resource contractors, and energy storage system companies to participate in the program. These revisions to the Supplier Diversity Program reflect the ongoing changes to the electric retail provider landscape and could help support efforts to ensure that WMDVLGBTBE electric sector contracting goals do not decline in the event that IOU contracting slows.

Legal restrictions and a lack of uniformity in reporting complicate CCA supplier diversity efforts. Some CCAs are already seeking ways to participate in supplier diversity initiatives. For example, in 2018, Marin Clean Energy began requesting that contractors voluntarily report their GO 156 certification status for power purchase agreements, feed-in tariffs, and customer program contracts. Marin Clean Energy found that 23 percent of survey respondents self-identified as GO 156 certified or used subcontractors that are GO 156 certified. Despite these efforts, legal restrictions make obtaining information related to protected classes challenging. California’s Proposition 209 prohibits the State from discriminating against or granting preferential treatment to any individual or group on the basis of race, sex, color, ethnicity, or national origin in the operation of public employment, public education, or public contracting. The proposition limits the degree to which any governmental entity within California, including CCAs, can compel information about certain protected classes to support contract decision-making. However, the Proposition does not prohibit after-the-fact reporting on outcomes from contracting. This bill requires CCAs to develop plans for small, local, and diverse business contracting; however, it requires CCAs to report after-the-fact on contracting with WMDVLGBTBEs.

This bill also requires the CCAs to submit these reports in a format specified by the CPUC. This requirement conforms to requirements in existing law for utilities participating the supplier diversity program; however, its inclusion in this bill is important for measuring contracting progress across different types of electric retail providers. While Marin Clean Energy has conducted a survey enabling the CCA to determine the percentage of responding contractors that self-identify as GO 156 certified, this information does not include the percentage of total contract spending made through WMDVLGBTBEs or the level of detail reported by current GO 156 participants. To the degree that the Supplier Diversity Program is intended to monitor and encourage contracting with WMDVLGBTBEs as a mechanism for enhancing economic opportunities through the electric retail sector, the ability to measure economic benefits provided across different types of retailers is critical to CPUC’s efforts to measure relative progress towards contracting goals.

Related/Prior Legislation

AB 1678 (Gordon, Chapter 633, Statutes of 2014) added LGBTBEs to the supplier diversity program and required the CPUC to adopt LGBT status qualifiers created by the National Gay and Lesbian Chamber of commerce with initially adopting eligibility criteria for LGBTBEs.

AB 1386 (Bradford, Chapter 443, Statutes of 2011) encouraged cable television corporations and direct broadcast satellite providers to voluntarily adopt plans to increase diverse spending.

AB 1918 (Davis, Chapter 456, Statutes of 2010) clarified certain certification requirements for the supplier diversity program, added wireless telecommunications service providers to the program, and encouraged providers below the $25 million eligibility threshold to voluntarily report.

AB 3678 (Moore, Chapter 1259, Statutes of 1986) established the supplier diversity program by requiring each electrical, gas, and telephone corporation with gross annual revenues exceeding $25 million to annually submit a detailed, verifiable plan for increasing diverse business procurement in all categories.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

According to the Assembly Appropriations Committee:

• Significant ongoing costs (special fund) to the CPUC, likely in the hundreds of thousands of dollars annually, to extend the program to a substantially larger number of entities than are currently covered by the supplier diversity program.

(According to the CPUC, this bill entails approximately $1.2 million in new ongoing annual costs as, the CPUC contends, this bill expands the program from 30 participating firms to dozens of participating firms. The CPUC reports it currently dedicates three full-time staff to the administration and oversight of the program, which has an annual budget of $432,000. The CPUC contends the bill would require an additional seven full-time staff to disseminate information and provide education and training; manage proceedings; and conduct legal work related to litigation the CPUC presumes will occur.)

• Minor, absorbable costs to the Contractors State License Board to develop a list of contact info for persons who possess any the licenses that might be able to install the range of technologies described in this bill.

SUPPORT: (Verified 9/9/19)

American Wind Energy Association of California

California Asian Pacific Islander Chamber of Commerce

California Black Chamber of Commerce

California Solar and Storage Association

Equality California

Golden Gate Business Association

Independent Energy Producers

Large-scale Solar Association

Los Angeles Gay & Lesbian Chamber of Commerce

MCE Clean Energy

Pacific Gas and Electric Company

Peninsula Clean Energy Authority

San Diego Gas & Electric Company

Solar Energy Industries Association

Sonoma Clean Power

Southern California Edison

Southern California Gas Company

OPPOSITION: (Verified 9/9/19)

None received

ARGUMENTS IN SUPPORT: According to the author:

California’s utility supplier diversity law is one of the largest engines of socioeconomic mobility for historically-disadvantaged people in the State. In 1986, entities regulated by the California Public Utilities Commission (CPUC) spent less than $500,000 per year with women and minority business enterprises. In 2017, that figure exceeded $10 billion in direct spending with an additional $2 billion in subcontracting. Over the past three decades, this program has evolved. Now, Women, Minority, Disabled Veteran, and LGBT Business Enterprises are included — as well as industries that did not exist in 1986, such as wireless telecommunications service providers.

But California’s electric grid has evolved too and our supplier diversity statute must be updated to reflect new technologies and business models. New technologies now enable distributed energy resources like photovoltaic solar, as well as energy storage, to deliver more power each year. New business models — including the elevated use of wholesale generators, as well as Electric Service Providers and Community Choice Aggregators — serve more and more electric customers each year within CPUC jurisdiction. But because they are left out of the supplier diversity statute, opportunities for small businesses and disadvantaged communities will likely decline. If new entities are to take over jobs once played by electric corporations, they should not duck their responsibility to increase supplier diversity.

ASSEMBLY FLOOR: 70-0, 9/9/19

AYES: Aguiar-Curry, Arambula, Bauer-Kahan, Berman, Bigelow, Bloom, Boerner Horvath, Bonta, Brough, Burke, Calderon, Carrillo, Cervantes, Chau, Chen, Chiu, Choi, Chu, Cooley, Cooper, Cunningham, Daly, Diep, Eggman, Fong, Friedman, Gabriel, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Mullin, Muratsuchi, Nazarian, O'Donnell, Patterson, Quirk, Quirk-Silva, Ramos, Reyes, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Mark Stone, Ting, Voepel, Waldron, Weber, Wicks, Wood, Rendon

NO VOTE RECORDED: Flora, Frazier, Gallagher, Kiley, Melendez, Obernolte, Petrie-Norris, Luz Rivas, Smith

Prepared by: Sarah Smith / E., U., & C. / (916) 651-4107

9/9/19 23:01:43

**** END ****

SENATE THIRD READING

STR Bill Id:SB 255

Author:(Bradford)

As Amended Ver:September 3, 2019

Majority vote

SUMMARY:

This bill expands the scope of the mandatory requirements and reporting provisions of the supplier diversity program under the purview of the California Public Utilities Commission (CPUC).

Major Provisions

1. Extends to community choice aggregators (CCAs) and electric service providers (ESPs) the mandate in existing law that the CPUC currently requires of each electrical corporation, gas corporation and water corporation to submit to the commission a plan for increasing procurement from women, minority, disabled veteran, LGBT (WMDVLGBTBE) business enterprises and a report on such procurement.
2. Mandates that CCAs with $15 million or more in gross California annual revenues yearly report to the CPUC regarding its procurement from WMDVLGBTBE enterprises. CCAs that do not meet the threshold requirement are encouraged to voluntarily adopt a plan for increasing procurement from small, local, and diverse business enterprises in all categories.
3. Mandates that ESP with $25 million or more in gross California annual revenues, comply with the same requirements that currently apply to: electrical corporations, gas corporations, water corporations, wireless telecommunications service providers, electrical service providers and telecommunications service providers. Those entities and their CPUC regulated affiliates and subsidiaries must annually submit a detailed verifiable plan for increasing procurement from WMDVLGBTBE enterprises. Mandates that the CPUC shall require these entities with gross California revenues exceeding $15 million but not more than $25 million to annually submit data on a simplified form to the CPUC on its procurement from WMDVLGBTBE enterprises.
4. Adds energy storage and vegetation management to the categories of business enterprises for which covered entities are required to report, as described above.
5. Encourages exempt wholesale generators contracting to sell electricity to retail seller; distributed energy resource contractors; and energy storage system companies to voluntarily adopt a plan for increasing women, minority, disabled veteran and LGBT business enterprise procurement and to voluntarily report activity in this area to the Legislature annually.

COMMENTS:

Background. Pursuant to statute, (AB 3678 (Moore), Chapter 1259, Statutes of 1986), the CPUC established the supplier diversity program, which requires each electrical, gas and telephone corporation with gross annual revenues exceeding $25 million to annually submit a detailed, verifiable plan for increasing diverse business procurement from women, minority and disabled veteran-owned business enterprises. Subsequent legislation added wireless telecommunications service providers to the program, and encouraged providers with gross annual revenue less than $25 million to voluntarily report procurement to the CPUC and encouraged cable television corporations and direct broadcast satellite providers to do so. Today, the supplier diversity program requires each covered enterprise to report to the CPUC and the enterprise's plan to increase procurement from women, minority, disabled veteran, lesbian, gay, bisexual and transgender-owned business enterprises.

Currently, the CPUC reports annually to the Legislature on WMDVLGBTBE procurement by covered entities. According to the CPUC's most-recent report (2017), the covered entities spent over $10 billion through WMDVLGBTBEs in 2017, exceeding goals established by the CPUC.

This measure expands the supplier diversity program by adding CCAs and ESPs. The reporting threshold for CCAs is at $15 million in gross revenues. All other designated entities are allowed to annually submit a simplified form if their gross revenues are between $15 million and $25 million. At the $25 million in gross revenue and above, all designated entities have the same mandatory reporting requirement. Energy storage system and vegetation management is added to the categories of contracts and subcontracts for which participating companies must have goals to increase procurement from WMDVLGBTBEs.

This measure also adds exempt wholesale generators, distributed energy resource contractors and energy storage system companies the list of entities called upon to voluntarily adopt a plan for increasing women, minority, disabled veteran and LGBT business enterprise procurement.

According to the Author:

"California's utility supplier diversity law is one of the largest engines of socioeconomic mobility for historically-disadvantaged people in the State. In 1986, entities regulated by the California Public Utilities Commission (CPUC) spent less than $500,000 per year with women and minority business enterprises. In 2017, that figure exceeded $10 billion in direct spending with an additional $2 billion in subcontracting. New technologies now enable distributed energy resources like photovoltaic solar, as well as energy storage, to deliver more power each year. New business models — including the elevated use of wholesale generators, as well as Electric Service Providers and Community Choice Aggregators — serve more and more electric customers each year within CPUC jurisdiction. But because they are left out of the supplier diversity statute, opportunities for small businesses and disadvantaged communities will likely decline. If new entities are to take over jobs once played by electric corporations, they should not duck their responsibility to increase supplier diversity."

Arguments in Support:

Since 1987, California's utility supplier diversity program has been an engine of economic and social mobility for many hardworking individuals who, historically, were denied the opportunity to fully participate in our economy. In 2014, that program was expanded to include LGBT certified firms when Governor Jerry Brown signed AB 1678. SB 255 is a timely update that will allow our supplier diversity program to evolve into the twenty-first center.

Arguments in Opposition:

None received.

FISCAL COMMENTS:

According to the Assembly Appropriations Committee, significant ongoing costs (special fund) to the CPUC, likely in the hundreds of thousands of dollars annually, to extend the program to a substantially larger number of entities than are currently covered by the supplier diversity program.

VOTES:

SENATE FLOOR: 38-0-0

YES: Allen, Archuleta, Atkins, Bates, Beall, Borgeas, Bradford, Caballero, Chang, Dodd, Durazo, Galgiani, Glazer, Grove, Hertzberg, Hill, Hueso, Hurtado, Jackson, Jones, Leyva, McGuire, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Portantino, Roth, Rubio, Skinner, Stern, Stone, Umberg, Wieckowski, Wiener, Wilk

ASM UTILITIES AND ENERGY: 13-0-2

YES: Holden, Burke, Carrillo, Chen, Cunningham, Eggman, Cristina Garcia, Mayes, Muratsuchi, Quirk, Reyes, Santiago, Ting

ABS, ABST OR NV: Patterson, Eduardo Garcia

ASM APPROPRIATIONS: 17-0-1

YES: Gonzalez, Bigelow, Bloom, Bonta, Brough, Calderon, Carrillo, Chau, Diep, Eggman, Fong, Gabriel, Eduardo Garcia, Maienschein, Petrie-Norris, Quirk, Robert Rivas

ABS, ABST OR NV: Obernolte

UPDATED:

VERSION: September 3, 2019

CONSULTANT: Mary McDonald / U. & E. / (916) 319-2083 FN: 0001765

Date of Hearing: August 14, 2019

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

SBPCA Bill Id:SB 255

Author:(Bradford) – As Amended Ver:July 5, 2019

Urgency: No State Mandated Local Program: Yes Reimbursable: No

SUMMARY:

This bill expands the scope of reporting requirements of the supplier diversity program in several ways.

Specifically, this bill:

1. Extends to community choice aggregators (CCAs) and electric service providers (ESPs) the requirement in existing law that the California Public Utilities Commission (CPUC) require each electrical corporation, gas corporation and water corporation to submit to the commission a plan for increasing procurement from women, minority, disabled veteran, LGBT business enterprises and a report on such procurement.
2. Lowers the revenue threshold, from $25 million in gross California annual revenues to $15 million in such revenues, for applying the reporting requirements described above and requires covered entities with revenue at or below the threshold to report on supplier diversity voluntarily.
3. Adds energy storage and vegetation management to the categories of business enterprises for which covered entities are required to report, as described above.
4. Encourages exempt a wholesale generator contracting to sell electricity to a retail seller, a distributed energy resource contractor and an energy storage system company to voluntarily adopt a plan for increasing women, minority, disabled veteran and LGBT business enterprise procurement and to voluntarily report activity in this area to the Legislature annually.
5. Requires the Contractors’ State License Board (CSLB) to assist the CPUC in identifying and developing contact information distributed energy resource contractors.

FISCAL EFFECT:

1. Significant ongoing costs (special fund) to the CPUC, likely in the hundreds of thousands of dollars annually, to extend the program to a substantially larger number of entities than are currently covered by the supplier diversity program.

(According to the CPUC, the bill would entail approximately $1.2 million in new ongoing annual costs as, the CPUC contends, the bill expands the program from 30 participating firms to dozens of participating firms. The CPUC reports it currently dedicates three full-time staff to the administration and oversight of the program, which has an annual budget of $432,000. The CPUC contends the bill would require an additional seven full-time staff to disseminate information and provide education and training; manage proceedings; and conduct legal work related to litigation the CPUC presumes will occur.)

1. Minor, absorbable costs to CSLB to develop a list of contact info for persons who possess any the licenses that might be able to install the range of technologies described in the bill.

COMMENTS:

Background. Pursuant to statute, (AB 3678 (Moore), Chapter 1259, Statutes of 1986), the CPUC long ago established the supplier diversity program, which requires each electrical, gas and telephone corporation with gross annual revenues exceeding $25 million to annually submit a detailed, verifiable plan for increasing diverse business procurement from women, minority and disabled veteran-owned business enterprises (WMDVBEs). Subsequent legislation added wireless telecommunications service providers to the program, and encouraged providers with gross annual revenue less than $25 million to voluntarily report procurement to the CPUC and encouraged cable television corporations and direct broadcast satellite providers to do so. Most recently, in 2014, legislation added lesbian, gay, bisexual and transgender-owned business enterprises to the supplier diversity program and required the CPUC to adopt LGBT status qualifiers created by the National Gay and Lesbian Chamber of commerce with initially adopting eligibility criteria for LGBTBEs. Today, the supplier diversity program requires each covered enterprise to report to the CPUC the enterprise’s plan to increase procurement from women, minority, disabled veteran, lesbian, gay, bisexual and transgender-owned business enterprises, giving us the unwieldy acronym WMDVLGBTBE.

Currently, the CPUC reports annually to the Legislature on WMDVLGBTBE procurement by covered entities. According to the CPUC’s most-recent report (2017), the covered entities spent over $10 billion through WMDVLGBTBEs in 2017, exceeding goals established by the CPUC.

The author contends the scope of the supplier diversity program should be expanded in at least two ways. First, the author seeks to lower the gross-annual-revenue program applicability threshold, to $15 million from $25 million. Second, the author seeks to apply the program to CCAs, electric service providers (ESPs), distributed energy resource contractors, energy storage system companies and exempt wholesale generators contracting to sell electricity to a retail seller. Finally, the author seeks to include energy storage system and vegetation management to the categories of contracts and subcontracts for which participating companies must have goals to increase procurement from WMDVLGBTBEs. According to the author:

California’s utility supplier diversity law is one of the largest engines of socioeconomic mobility for historically-disadvantaged people in the State. In 1986, entities regulated by the California Public Utilities Commission (CPUC) spent less than $500,000 per year with women and minority business enterprises. In 2017, that figure exceeded $10 billion in direct spending with an additional $2 billion in subcontracting. New technologies now enable distributed energy resources like photovoltaic solar, as well as energy storage, to deliver more power each year. New business models — including the elevated use of wholesale generators, as well as Electric Service Providers and Community Choice Aggregators — serve more and more electric customers each year within CPUC jurisdiction. But because they are left out of the supplier diversity statute, opportunities for small businesses and disadvantaged communities will likely decline. If new entities are to take over jobs once played by electric corporations, they should not duck their responsibility to increase supplier diversity.

Analysis Prepared by: Jay Dickenson / APPR. / (916) 319-2081

Date of Hearing: June 26, 2019

ASSEMBLY COMMITTEE ON UTILITIES AND ENERGY

Chris Holden, Chair

SBPCA Bill Id:SB 255

Author:(Bradford) – As Amended Ver:May 17, 2019

SENATE VOTE: 38-0

SUBJECT: Women, minority, disabled veteran, and LGBT business enterprise procurement: electric service providers, energy storage system companies, community choice aggregators, distributed energy resource contractor, exempt wholesale generator contracting to sell to a retail seller.

SUMMARY:

1. Specifically, this bill modifies the revenue threshold of companies subject to the supplier diversity program requirements from $25 million in total revenues to $15 million in California revenues.
2. Directs each community choice aggregator (CCA) with gross annual revenues exceeding $15 million to annually submit a detailed and verifiable plan for increasing procurement from small, local, and diverse business enterprises in all contract categories, including, but not limited to, renewable energy, energy storage system, and smart grid projects.
3. Encourages CCAs that are not otherwise required to develop a plan for increasing procurement from small, local, and diverse business enterprises.
4. Adds the following types of businesses and their regulated subsidiaries and affiliates to the list of entities that must annually submit a detailed and verifiable supplier diversity plan to the California Public Utilities Commission (CPUC). The plan shall demonstrate increasing procurement from women-owned, minority-owned, disabled-veteran-owned, and lesbian, gay, bisexual, and/or transgender (LGBT)-owned business enterprises (WMDVLGBTBE).:
   1. Electric service provider.
   2. Distributed energy resource contractor.
   3. Energy storage system company.
   4. Exempt wholesale generator contracting to sell electricity to a retail seller.

Adds energy storage system and vegetation management to the categories of contracts and subcontracts for which participating companies must have goals to increase procurement from WMDVLGBTBE.

1. Defines distributed energy resource contractors for the purpose of this bill and requires the Contractors State License Board to help the CPUC in identifying and developing contact information for distributed energy resource contractors.

EXISTING LAW:

1. Defines “public utility” subject to the jurisdiction of the CPUC to include every common carrier and the following corporations: toll bridge; pipeline; gas; electrical; telephone; telegraph; water; sewer; heat where the service is performed for or the commodity is delivered to, the public or any portion thereof. (PUC 216((a))
2. Defines “non-public utilities” to include ownership or operation of a facility that:

• Is an exempt wholesale generator, as defined in the Public Utility Holding Company Act of 2005 (42 United States Code Sec 16451 (6)) does not make a corporation or person a public utility within the meaning of this section, solely due to the ownership or operation of that facility.
• Employs cogeneration technology or produces power from other than a conventional power source or the ownership or operation of a facility which employs landfill gas technology does not make a corporation or person a public utility solely because of the ownership or operation the facility.
• Is a corporation or person engaged in developing, producing, transmitting, distributing, delivering, or selling any form of heat derived from geothermal or solar resources or from cogeneration technology to any privately owned or publicly owned public utility, or to the public or any portion thereof.
• Is an electric plan used for direct transactions or participation directly or indirection transactions, sales into a market established and operated by the Independent System Operator (PUC 216 (d)(e)(g)(h)

1. Establishes a supplier diversity program by requiring the CPUC to direct each electrical corporation, gas corporation, water corporation, telephone corporation, and wireless telecommunications service provider with gross annual revenues exceeding $25 million, to annually submit a plan for increasing procurement with women, minority, disabled veteran, and LGBT business enterprises (WMDVLGBTBEs). (Public Utilities Code §8283(a))
2. Requires supplier diversity program plans to include short-term and long-term goals and timetables and to include methods for encouraging contractors to engage WMDVLGBTBEs in all subcontracting categories, including, but not limited to, renewable energy, wireless telecommunications, broadband, smart grid, and rail projects. The CPUC must develop guidelines for programs implemented pursuant to the plans and each participating company must submit an annual report on the implementation of programs established under a supplier diversity plan. (Public Utilities Code § 8283(b-d))
3. Provides that each electrical, gas, water, mobile telephone service provider, telephone corporation, cable television corporation, and direct broadcast satellite provider that is not otherwise required to submit a plan is encouraged to voluntarily adopt a plan for increasing WMDVLGBTBEs procurement and to voluntarily report activity in this area to the Legislature on an annual basis. (Public Utilities Code §8283(e))
4. Requires the CPUC to adopt eligibility criteria for women, minority, and LGBT business enterprises for procurement contracts and requires participating utilities to develop outreach plans to recruit WMDVLGBTBEs to apply for procurement contracts. (Public Utilities Code §8284)

BACKGROUND:

Utility Supplier Diversity Program and General Order (GO) 156. In 1988, the CPUC adopted GO 156 (D. 88-04-057) to implement AB 3678 (Moore, Chapter 1259, Statutes of 1986), which required the CPUC to direct certain utilities to submit plans for increasing diverse business procurement. Under GO 156, the CPUC monitors utilities’ procurement from WMDVLGBTBEs. The CPUC also administers a certification clearinghouse, which is a database that identifies firms that have voluntarily obtained certification as a WMDVLGBTBEs. The Supplier Diversity Program is a tool through which the state can leverage the economic power of the utility sector to address historic structural inequities for economic opportunity and ensure that WMDVLGBTBEs are included in contracting opportunities, including renewable energy contracts.

CPUC’s Report. 2017 marked the CPUC’s 32^nd Annual Report to the Legislature on the progress reported by investor-owned utility companies (IOU) (utilities) in procuring goods, services, power, and fuel from WMDVLGBTBE for that year. Existing law mandates CPUC regulated electrical, gas, water wireless telecommunications service provider and telephone corporation and their regulated subsidiaries and affiliates, with gross annual revenues exceeding $25 million, to submit an annual report regarding the implementation of their diverse supplier program and annual verifiable plans for increasing procurement from WMDVLIGBTBEs. According to the report, the participating utilities exceeded these goals and spent over $10 billion through WMDVLGBTBEs in 2017. At the time of the report, the program did not have a goal for LGBT business enterprise (LGBTBE) procurement; however, the CPUC encourages LGBTBE procurement and intends to make a determination on an LGBTBE program goal by 2021.

The Energy Landscape in California is Quickly Changing. In April 2019 the CPUC, unanimously approved a new plan for achieving ambitious greenhouse gas emissions reduction targets within California’s electric sector, primarily relying on Community Choice Aggregators (CCAs) to procure the new clean energy resources the state needs over the next decade to meet its climate goals. CCA’s are tasked with and planning to make long-term investments in more than 10,000 megawatts (MW) of new clean resources, including solar, wind, geothermal and energy storage by 2030. This is a significant shift away from the previous responsibility of the IOU to procure generation on behalf of their customers load. In 2017, a CPUC white paper on electric consumer choice indicated that over 85 percent of retail load may be served by sources other than the IOUs by the mid 2020s.

The shift customers from the IOUs to CCAs and ESPs will likely decrease IOU contracting for procurement and impact the degree to which WMDVLGBTBEs can count on new IOU contracts through the Supplier Diversity Program. Currently, direct access providers, distributed energy resource contractors, and CCAs are not required to participate in the Supplier Diversity Program. This bill also requires CCAs with gross annual revenues exceeding $15 million to submit plans for increasing procurement from small, local, and diverse business enterprises in all categories, including renewable energy, energy storage system, and smart grid projects. The mandatory inclusion of CCAs and ESPs to the Supplier Diversity Program reflect the ongoing changes to the electric retail provider landscape and could help support efforts to ensure that WMDVLGBTBE electric sector contracting goals do not decline in the event that IOU contracting slows.

California’s Track Record. California has a history of enabling disadvantaged communities in various programs such as disabled veterans through the Veteran Business Enterprise (DVBE) Program, which is administered within the Department of Veterans Affairs. This program, which was established in 1989, has a goal of awarding 3% of all state contracts to certified DVBEs. Another program is the Disadvantaged Business Enterprises (DBE), which is administered under by the California Department of Transportation (DOT) finds its origins in the passage of the Title VI Civil Rights Act of 1964, which prohibits racial, ethnic and national origin discrimination. A DBE is a small business in which at least 51% of the business is owned by individuals who are socially and economically disadvantaged and certified to meet the eligibility criteria. DOT appropriates substantial state and federal funds to finance projects initiated by state and local governments, public transit authorities and airports. DOT is responsible for assuring that all business enterprises have a fair opportunity to compete for federally funded transportation contracts. The program began in 1980 as a minority and women business enterprise program. As a condition of receiving federal assistance, recipients of funds from the federal highway, aviation and federal transit administrations are required to follow the regulations, which established by the US Department of Civil Rights. The DBE is not a quota or set aside program. Instead, recipients must set an overall goal for DBE participation and monitor results.

FISCAL EFFECT:

• According to Senate Appropriations Committee: CPUC: Unknown personnel costs, likely in the low to mid-hundreds of thousands of dollars. (Special fund*)
• Contractors State Licensing Board: Minor and absorbable costs.

*Public Utilities Commission Utilities Reimbursement Account

COMMENTS:

1. Author’s Statement: “California’s utility supplier diversity law is one of the largest engines of socioeconomic mobility for historically-disadvantaged people in the State. In 1986, entities regulated by the California Public Utilities Commission (CPUC) spent less than $500,000 per year with women and minority business enterprises. In 2017, that figure exceeded $10 billion in direct spending with an additional $2 billion in subcontracting. New technologies now enable distributed energy resources like photovoltaic solar, as well as energy storage, to deliver more power each year. New business models — including the elevated use of wholesale generators, as well as Electric Service Providers and Community Choice Aggregators — serve more and more electric customers each year within CPUC jurisdiction. But because they are left out of the supplier diversity statute, opportunities for small businesses and disadvantaged communities will likely decline. If new entities are to take over jobs once played by electric corporations, they should not duck their responsibility to increase supplier diversity.”
2. Existing Reporting Requirements: It appears that that entities within the CPUC jurisdiction have among the most comprehensive reporting requirements of any sector in the State. Currently, electrical, gas, wireless telecommunications service provider and telephone corporations with annual revenues over $25,000,000 along with their subsidiaries and affiliates are mandated to annually submit a detailed and verifiable plan for increasing procurement from WMDVLGBTE enterprises. For example, the investor owned utilities (San Diego Gas and Electric, Southern California Edison and Pacific Gas and Electric) have for decades procured generation on behalf of the customers in their service territory and complied with the planning and procurement mandates. There is an ongoing paradigm shift occurring in California as Community Choice Aggregators are assuming the responsibility for a majority of the generation (and storage) procurement which historically was carried out by investor owned utilities.
3. Expanding Reporting Requirements: This measure reduces the reporting threshold gross income from $25,000,000 to $15,000,000 and expands the list of entities that are required to comply to include CCAs. It is apparent that Community Choice Aggregators are quickly becoming the primary procurer of generation resources to serve customer load. Additionally, last year the legislature passed SB 237 (Chapter 600), which provides for an increase in the annual maximum allowable limit of the direct access by 4,000 gigawatt hour (GWH) for non-residential customers which is provided by energy service providers (ESPs). Under the provisions of this measure the IOUs, CCAs and ESP’s are mandated to annually report all categories of procurement, including but not limited to renewable energy, energy storage system and smart grid projects. In fact, when storage or assets on the distribution side or wholesale side of the grid are purchased by a CCA, they would be subject to the reporting requirements of the measure. The bulk of the procurement taking place to serve California’s needs are being met by the IOUs, CCAs and ESPs, which are regulated by the CPUC. As such, this measure provides uniformity in its application to IOUs, ESPs and CCAs who are responsible for generation (and storage) procurement. It is curious that publicly owned utilities which comprise a significant responsibility for procurement, are under no such state reporting obligation and are not subject to the provisions of this measure.
4. Parity With Other Non-Regulated Entities: This measure maintains the cable television corporation and direct broadcast satellite provider provisions that encourages adoption of a plan for increasing women, minority, disabled veteran and LGBT business enterprise procurement. Distribution energy resource contractors, energy storage system companies and exempt wholesale generator contracting to sell electricity to a retail sells are neither regulated utilities nor load serving entities. The California Solar and Storage Association, the Large-scale Solar Association (LSA), the American Wind Energy Association of California, and the Solar Energy Industries Association rightfully point to the fact that their reporting requirement should align with other similarly situated, non-regulated entities like cable television and broadcast satellite providers rather than fitting them into the mold of a utility. Additionally, wholesale generators which are exempt as regulated utilities under California and federal law and are not under the general jurisdiction of the CPUC.

The committee may wish to consider amendments which align energy storage system companies, distribution energy resource contractors and exempt wholesale generators contracting to sell electricity to a retail seller, with the same voluntary reporting requirement required of other non-regulated entities which include cable television and broadcast satellite.

. Related/Prior Legislation

AB 1678 (Gordon, Chapter 633, Statutes of 2014) added LGBTBEs to the supplier diversity program and required the CPUC to adopt LGBT status qualifiers created by the National Gay and Lesbian Chamber of commerce with initially adopting eligibility criteria for LGBTBEs.

AB 1386 (Bradford, Chapter 443, Statutes of 2011) encouraged cable television corporations and direct broadcast satellite providers to voluntarily adopt plans to increase diverse spending.

AB 1918 (Davis, Chapter 456, Statutes of 2010) clarified certain certification requirements for the supplier diversity program, added wireless telecommunications service providers to the program, and encouraged providers below the $25 million eligibility threshold to voluntarily report.

AB 3678 (Moore, Chapter 1259, Statutes of 1986) established the supplier diversity program by requiring each electrical, gas, and telephone corporation with gross annual revenues exceeding $25 million to annually submit a detailed, verifiable plan for increasing diverse business procurement in all categories.

REGISTERED SUPPORT / OPPOSITION:

Support

California Asian Pacific Chamber of Commerce 
California Black Chamber of Commerce
Equality California
Golden Gate Business Association
Marin Clean Energy
Peninsula Clean Energy
Sonoma Clean Power
Southern California Edison

Opposition

Independent Energy Producers Association

Oppose Unless Amended

American Wind Energy Association
California Solar Energy Industries Association
Large-Scale Solar Association
Solar Energy Industry Association

Analysis Prepared by: Mary McDonald / U. & E. /

 THIRD READING  

Bill No: SB 255

Author: Bradford (D)

Amended: 5/17/19

Vote: 21

SENATE ENERGY, U. & C. COMMITTEE: 12-0, 3/27/19

AYES: Hueso, Moorlach, Bradford, Dodd, Hertzberg, Hill, McGuire, Rubio, Skinner, Stern, Stone, Wiener

NO VOTE RECORDED: Chang

SENATE APPROPRIATIONS COMMITTEE: 6-0, 5/16/19

AYES: Portantino, Bates, Bradford, Hill, Jones, Wieckowski

SUBJECT: Women, minority, disabled veteran, and LGBT business enterprise procurement: electric service providers: energy storage system companies: community choice aggregators

SOURCE: Author

DIGEST:

This bill expands the California Public Utilities Commission (CPUC) supplier diversity program by lowering the revenue threshold for participation from $25 million to $15 million in California and including community choice aggregators, electric service providers, distributed energy resource companies, and certain wholesale electric generators as entities included in the program.

ANALYSIS:

Existing law:

1. Establishes a supplier diversity program by requiring the CPUC to direct each electrical corporation, gas corporation, water corporation, telephone corporation, and wireless telecommunications service provider with gross annual revenues exceeding $25 million, to annually submit a plan for increasing procurement with women, minority, disabled veteran, and LGBT business enterprises (WMDVLGBTBEs). (Public Utilities Code §8283(a))
2. Requires supplier diversity program plans to include short-term and long-term goals and timetables and to include methods for encouraging contractors to engage WMDVLGBTBEs in all subcontracting categories, including, but not limited to, renewable energy, wireless telecommunications, broadband, smart grid, and rail projects. The CPUC must develop guidelines for programs implemented pursuant to the plans and each participating company must submit an annual report on the implementation of programs established under a supplier diversity plan. (Public Utilities Code § 8283(b-d))
3. Provides that each electrical, gas, water, mobile telephone service provider, telephone corporation, cable television corporation, and direct broadcast satellite provider that is not otherwise required to submit a plan is encouraged to voluntarily adopt a plan for increasing WMDVLGBTBEs procurement and to voluntarily report activity in this area to the Legislature on an annual basis. (Public Utilities Code §8283(e))
4. Requires the CPUC to adopt eligibility criteria for women, minority, and LGBT business enterprises for procurement contracts and requires participating utilities to develop outreach plans to recruit WMDVLGBTBEs to apply for procurement contracts. (Public Utilities Code §8284)

This bill:

1. Modifies the revenue threshold of companies subject to the supplier diversity program requirements from $25 million in total revenues to $15 million in California revenues.
2. Adds the following types of businesses to the list of those that must annually submit a supplier diversity plan to the CPUC:
   1. Electric service provider.
   2. Exempt wholesale generator contracting to sell electricity to a retail seller.
   3. Distributed energy resource contractor.
   4. Energy storage system company.
3. Adds energy storage system and vegetation management to the categories of contracts and subcontracts for which participating companies must have goals to increase procurement from WMDVLGBTBEs.
4. Requires the CPUC to direct each community choice aggregator (CCA) with gross annual revenues exceeding $15 million to annually submit a detailed and verifiable plan for increasing procurement from small, local, and diverse business enterprises in all contract categories, including, but not limited to, renewable energy, energy storage system, and smart grid projects.
5. Requires participating CCAs to submit a report to the CPUC regarding its procurement from WMDVLGBTBEs in all contract categories, including, but not limited to, renewable energy, energy storage system, and smart grid projects. The report must be in a format designated by the CPUC.
6. Encourages CCAs that are not otherwise required to develop a plan for increasing procurement from small, local, and diverse business enterprises.
7. Defines distributed energy resource contractors for the purpose of this bill and requires the Contractors State License Board to help the CPUC in identifying and developing contact information for distributed energy resource contractors.

Background

Utility Supplier Diversity Program and General Order (GO) 156. In 1988, the CPUC adopted GO 156 (D. 88-04-057) to implement AB 3678 (Moore, Chapter 1259, Statutes of 1986), which required the CPUC to direct certain utilities to submit plans for increasing diverse business procurement. Under GO 156, the CPUC monitors utilities’ procurement from WMDVLGBTBEs. The CPUC also administers a certification clearinghouse, which is a database that identifies firms that have voluntarily obtained certification as a WMDVLGBTBEs. The Supplier Diversity Program is a tool through which the state can leverage the economic power of the utility sector to address historic structural inequities for economic opportunity and ensure that WMDVLGBTBEs are included in contracting opportunities, including renewable energy contracts.

In September 2018, the CPUC completed its report to the Legislature on utilities’ 2017 participation in the Supplier Diversity Program. The CPUC’s report noted that the program encourages utilities to purchase at least 21 percent of their procurement from WMDVLGBTBEs (15 percent from minority business enterprises, five percent from women business enterprises, and 1.5 percent from disabled veteran business enterprises). According to the report, the participating utilities exceeded these goals and spent over $10 billion through WMDVLGBTBEs in 2017. At the time of the report, the program did not have a goal for LGBT business enterprise (LGBTBE) procurement; however, the CPUC encourages LGBTBE procurement and intends to make a determination on an LGBTBE program goal by 2021.

The Supplier Diversity Program has evolved with changes to California’s utility sector. Since its establishment in the 1980s, the CPUC has revised GO 156 to reflect new legislative requirements for the Supplier Diversity Program. These legislative requirements reflected changes in the utility sector and the scope of diverse businesses that can contract with utilities. For example, AB 1918 (Davis, Chapter 456, Statutes of 2010) added wireless telecommunications service providers to the program. In 2014, AB 1678 (Gordon, Chapter 633, Statutes of 2014) expanded the types of diverse contractors encouraged by the program to include LGBTBE.

California’s electric retail provider landscape has changed significantly since the adoption of GO 156. The expansion of distributed energy resources, direct access providers, and CCAs is decentralizing the electric retail sector and reducing the load of the state’s three largest investor-owned utilities (IOUs). In 2017, a CPUC white paper on electric consumer retail choice estimated that rooftop solar, CCAs, and direct access would unbundle approximately 25 percent of load in IOU service territory by 2018. In the same paper, the CPUC estimated that this trend would continue, and over 85 percent of retail load may be served by sources other than the IOUs by the mid 2020s.

The departure of load from the IOUs may decrease IOU contracting and impact the degree to which WMDVLGBTBEs can count on new IOU contracts through the Supplier Diversity Program. Currently, direct access providers, distributed energy resource contractors, and CCAs are not required to participate in the Supplier Diversity Program. This bill expands the program to include electric service providers, exempt wholesale generators contracting to sell electricity to a retail seller, distributed energy resource contractors, and energy storage system companies. This bill also requires CCAs with gross annual revenues exceeding $15 million to submit plans for increasing procurement from small, local, and diverse business enterprises in all categories, including renewable energy, energy storage system, and smart grid projects. These revisions to the Supplier Diversity Program reflect the ongoing changes to the electric retail provider landscape and could help support efforts to ensure that WMDVLGBTBE electric sector contracting goals do not decline in the event that IOU contracting slows.

Legal restrictions and a lack of uniformity in reporting complicate CCA supplier diversity efforts. Some CCAs are already seeking ways to participate in supplier diversity initiatives. For example, in 2018, Marin Clean Energy began requesting that contractors voluntarily report their GO 156 certification status for power purchase agreements, feed-in tariffs, and customer program contracts. Marin Clean Energy found that 23 percent of survey respondents self-identified as GO 156 certified or used subcontractors that are GO 156 certified. Despite these efforts, legal restrictions make obtaining information related to protected classes challenging. California’s Proposition 209 prohibits the State from discriminating against or granting preferential treatment to any individual or group on the basis of race, sex, color, ethnicity, or national origin in the operation of public employment, public education, or public contracting. The proposition limits the degree to which any governmental entity within California, including CCAs, can compel information about certain protected classes to support contract decision-making. However, the Proposition does not prohibit after-the-fact reporting on outcomes from contracting. This bill requires CCAs to develop plans for small, local, and diverse business contracting but requires CCAs to report after-the-fact on contracting with WMDVLGBTBEs.

This bill also requires the CCAs to submit these reports in a format specified by the CPUC. This requirement conforms to requirements in existing law for utilities participating the supplier diversity program; however, its inclusion in this bill is important for measuring contracting progress across different types of electric retail providers. While Marin Clean Energy has conducted a survey enabling the CCA to determine the percentage of responding contractors that self-identify as GO 156 certified, this information does not include the percentage of total contract spending made through WMDVLGBTBEs or the level of detail reported by current GO 156 participants. To the degree that the Supplier Diversity Program is intended to monitor and encourage contracting with WMDVLGBTBEs as a mechanism for enhancing economic opportunities through the electric retail sector, the ability to measure economic benefits provided across different types of retailers is critical to CPUC’s efforts to measure relative progress towards contracting goals.

Related/Prior Legislation

AB 1678 (Gordon, Chapter 633, Statutes of 2014) added LGBTBEs to the supplier diversity program and required the CPUC to adopt LGBT status qualifiers created by the National Gay and Lesbian Chamber of commerce with initially adopting eligibility criteria for LGBTBEs.

AB 1386 (Bradford, Chapter 443, Statutes of 2011) encouraged cable television corporations and direct broadcast satellite providers to voluntarily adopt plans to increase diverse spending.

AB 1918 (Davis, Chapter 456, Statutes of 2010) clarified certain certification requirements for the supplier diversity program, added wireless telecommunications service providers to the program, and encouraged providers below the $25 million eligibility threshold to voluntarily report.

AB 3678 (Moore, Chapter 1259, Statutes of 1986) established the supplier diversity program by requiring each electrical, gas, and telephone corporation with gross annual revenues exceeding $25 million to annually submit a detailed, verifiable plan for increasing diverse business procurement in all categories.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

According to the Senate Appropriations Committee:

• CPUC: Unknown personnel costs, likely in the low to mid-hundreds of thousands of dollars from the Public Utilities Commission Utilities Reimbursement Account (Special fund).
• Contractors State License Board: Minor and absorbable costs.

SUPPORT: (Verified 5/16/19)

California Asian Pacific Islander Chamber of Commerce

California Black Chamber of Commerce

Equality California

Golden Gate Business Association

MCE Clean Energy

Pacific Gas and Electric Company

Peninsula Clean Energy Authority

Sonoma Clean Power

Southern California Edison

OPPOSITION: (Verified 5/16/19)

California Water Association

Independent Energy Producers

ARGUMENTS IN SUPPORT: According to the author:

California’s utility supplier diversity law is one of the largest engines of socioeconomic mobility for historically-disadvantaged people in the State. In 1986, entities regulated by the California Public Utilities Commission (CPUC) spent less than $500,000 per year with women and minority business enterprises. In 2017, that figure exceeded $10 billion in direct spending with an additional $2 billion in subcontracting. Over the past three decades, this program has evolved. Now, Women, Minority, Disabled Veteran, and LGBT Business Enterprises are included — as well as industries that did not exist in 1986, such as wireless telecommunications service providers.

But California’s electric grid has evolved too and our supplier diversity statute must be updated to reflect new technologies and business models. New technologies now enable distributed energy resources like photovoltaic solar, as well as energy storage, to deliver more power each year. New business models — including the elevated use of wholesale generators, as well as Electric Service Providers and Community Choice Aggregators — serve more and more electric customers each year within CPUC jurisdiction. But because they are left out of the supplier diversity statute, opportunities for small businesses and disadvantaged communities will likely decline. If new entities are to take over jobs once played by electric corporations, they should not duck their responsibility to increase supplier diversity.

ARGUMENTS IN OPPOSITION: Opponents oppose this bill unless it is amended to maintain the existing $25 million threshold for program eligibility and exempt entities that are not regulated under the CPUC’s jurisdiction. In opposition, CWA states:

CWA respectfully requests that SB 255 be amended to maintain the $25 million threshold for Commission-regulated water utilities. This threshold captures 95 percent of all customers served and probably more of the potential procurement dollars. Considering that the intent of the bill is to bring electric industry participants into the USDP, and that the imposition of the lower threshold will be unduly burdensome and impractical for smaller water utilities, CWA believes this amendment is a reasonable request. If this amendment is made, CWA will remove its opposition.

Prepared by: Sarah Smith / E., U., & C. / (916) 651-4107

5/20/19 12:47:35

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2019 - 2020 Regular Session

SB 255 (Bradford) - Women, minority, disabled veteran, and LGBT business enterprise procurement: electric service providers: energy storage system companies: community choice aggregators

*********** ANALYSIS ADDENDUM – SUSPENSE FILE ***********

The following information is revised to reflect amendments

adopted by the committee on May 16, 2019

Bill Summary:

SB 255 would expand the California Public Utilities Commission (CPUC) utility supplier diversity program by lowering the revenue threshold for participation from $25 million to $15 million in California and would include community choice aggregators, electric service providers, distributed energy resource companies, and certain wholesale electric generators as entities included in the program.

Fiscal Impact:

• CPUC: Unknown personnel costs, likely in the low to mid-hundreds of thousands of dollars. (Special fund*)
• Contractors State Licensing Board: Minor and absorbable costs.

*Public Utilities Commission Utilities Reimbursement Account

Author Amendments:

Increase the threshold amount to $15 million.

-- END --

SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2019 - 2020 Regular Session

SB 255 (Bradford) - Women, minority, disabled veteran, and LGBT business enterprise procurement: electric service providers: energy storage system companies: community choice aggregators

Bill Summary:

SB 255 would expand the California Public Utilities Commission (CPUC) utility supplier diversity program by lowering the revenue threshold for participation from $25 million to $1 million in California and would include community choice aggregators, electric service providers, distributed energy resource companies, and certain wholesale electric generators as entities included in the program.

Fiscal Impact:

• CPUC: Total one-time personnel costs of $972,000 annually for two years, consisting of 1.0 limited-term Public Utilities Counsel III and 5.0 permanent Public Utilities Regulatory Analysts III (PURAs), and total ongoing personnel costs of $764,000, consisting of the PURAs mentioned above. These costs are inclusive of equipment and operating expenses associated with the new personnel required to perform the duties required by this measure. (Special fund*)
• Contractors State Licensing Board (CSLB): Unknown costs to assist the commission in identifying and developing contact information for distributed energy resource contractors.

*Public Utilities Commission Utilities Reimbursement Account

Background:

In 1986, the Legislature passed legislation to establish the utility supplier diversity program. From the onset, the program required each electrical, gas, and telephone corporation with gross annual revenues exceeding $25 million to submit a detailed, verifiable plan annually for increasing diverse business procurement in all categories. Throughout the years, additional utility corporations, such as water corporations, and targeted populations, such as lesbian, gay, bisexual, and transgender (LGBT) business enterprises were added to the program. Currently, the program requires the CPUC to direct each electrical corporation, gas corporation, water corporation, telephone corporation, and wireless telecommunications service provider with gross annual revenues exceeding $25 million, to annually submit a plan for increasing procurement with women, minority, disabled veteran, and LGBT business enterprises (WMDVLGBTBEs). Each program plan must include short-term and long-term goals and timetables and methods for encouraging contractors to engage WMDVLGBTBEs in all subcontracting categories, including, but not limited to renewable energy, wireless telecommunications, broadband, smart grid, and rail projects. The commission must develop guidelines for programs implemented pursuant to the plans and each participating company must submit an annual report on the implementation of programs established under a supplier diversity plan.

Proposed Law:

This bill would:

• Change the $25 million annual gross revenue threshold that triggers the program requirements to $1 million in gross annual California revenues.
• Extend the program requirements to electric service providers, certain wholesale generators selling electricity to retail sellers, distributed energy resource contractors, and energy storage system companies, as specified.
• Include energy storage system and vegetation management projects within the enumerated projects to which the program requirements apply.
• Require the CSLB to assist the CPUC in identifying and developing contact information for distributed energy resource contractors.
• Require each community choice aggregator with gross annual revenues over $1 million to submit annually a detailed and verifiable plan to the CPUC for increasing procurement from small, local, and diverse business enterprises in all categories, including, renewable energy, energy storage system, and smart grid projects.
• Require each community choice aggregator with gross annual revenues over $1 million to submit annually a report to the CPUC regarding its procurement from WMDVLGBTBEs in all categories, including, but not limited to, renewable energy, energy storage system, and smart grid projects.

Related Legislation:

AB 1678 (Gordon, Ch. 633, Stats. 2014) added LGBT business enterprises to the utility supplier diversity program and required the CPUC to adopt LGBT status qualifiers created by the National Gay and Lesbian Chamber of Commerce with initially adopting eligibility criteria for LGBT business enterprises.

AB 1386 (Bradford, Ch. 443, Stats. 2011) encouraged cable television corporations and direct broadcast satellite providers to voluntarily adopt plans to increase diverse spending.

AB 1918 (Davis, Ch. 456, Stats. 2010) clarified certain certification requirements for the program, added wireless telecommunications service providers to the program, and encouraged providers below the $25 million eligibility threshold to report voluntarily.

AB 3678 (Moore, Ch. 1259, Stats. 1986) established the utility supplier diversity program by requiring each electrical, gas, and telephone corporation with gross annual revenues exceeding $25 million to annually submit a detailed, verifiable plan for increasing diverse business procurement in all categories.

Staff Comments:

According to the CPUC, this measure would increase the number of entities required to participate in the utility supplier diversity program from 30 firms to hundreds. Currently, there are three commission staff assigned to the program. To meet the increased program workload associated with SB 255, the commission would need additional permanent staff to disseminate information, provide education and training regarding commission policies, GO 156 program, and related decisions under this measure. Additionally, the CPUC anticipates requiring 1.0 limited-term Public Utilities Counsel to handle increased legal workload, as extending the voluntary WMDVLGBTBE procurement to community choice aggregators will increase legal risks to the program by introducing a governmental contracting entity for the first time.

-- END --

SENATE COMMITTEE ON ENERGY, UTILITIES AND COMMUNICATIONS

Senator Ben Hueso, Chair

2019 - 2020 Regular

Bill No: SB 255 Hearing Date: 3/27/2019

SUBJECT: Women, minority, disabled veteran, and LGBT business enterprise procurement: electric service providers: energy storage system companies: community choice aggregators

DIGEST: This bill expands the California Public Utilities Commission (CPUC) supplier diversity program by lowering the revenue threshold for participation from $25 million to $1 million in California and including community choice aggregators, electric service providers, distributed energy resource companies, and certain wholesale electric generators as entities included in the program.

ANALYSIS:

Existing law:

1. Establishes a supplier diversity program by requiring the CPUC to direct each electrical corporation, gas corporation, water corporation, telephone corporation, and wireless telecommunications service provider with gross annual revenues exceeding $25 million, to annually submit a plan for increasing procurement with women, minority, disabled veteran, and LGBT business enterprises (WMDVLGBTBEs). (Public Utilities Code §8283(a))
2. Supplier diversity program plans must include short-term and long-term goals and timetables and must include methods for encouraging contractors to engage WMDVLGBTBEs in all subcontracting categories, including, but not limited to renewable energy, wireless telecommunications, broadband, smart grid, and rail projects. The CPUC must develop guidelines for programs implemented pursuant to the plans and each participating company must submit an annual report on the implementation of programs established under a supplier diversity plan. (Public Utilities Code § 8283(b-d))
3. Each electrical, gas, water, mobile telephone service provider, telephone corporation, cable television corporation, and direct broadcast satellite provider that is not otherwise required to submit a plan is encouraged to voluntarily adopt a plan for increasing WMDVLGBTBEs procurement and to voluntarily report activity in this area to the Legislature on an annual basis. (Public Utilities Code §8283(e))
4. Requires the CPUC to adopt eligibility criteria for women, minority, and LGBT business enterprises for procurement contracts and requires participating utilities to develop outreach plans to recruit WMDVLGBTBEs to apply for procurement contracts. (Public Utilities Code §8284)

This bill:

1. Modifies the revenue threshold of companies subject to the supplier diversity program requirements from $25 million in total revenues to $1 million in California revenues.
2. Adds the following types of businesses to the list of those that must annually submit a supplier diversity plan to the CPUC:
   1. Electric service provider
   2. Exempt wholesale generator contracting to sell electricity to a retail seller
   3. Distributed energy resource contractor
   4. Energy storage system company
3. Adds energy storage system and vegetation management to the categories of contracts and subcontracts for which participating companies must have goals to increase procurement from WMDVLGBTBEs.
4. Requires the CPUC to direct each community choice aggregator (CCA) with gross annual revenues exceeding $1 million to annually submit a detailed and verifiable plan for increasing procurement from small, local, and diverse business enterprises in all contract categories, including, but not limited to, renewable energy, energy storage system, and smart grid projects.
5. Requires participating CCAs to submit a report to the CPUC regarding its procurement from WMDVLGBTBEs in all contract categories, including, but not limited to, renewable energy, energy storage system, and smart grid projects. The report must be in a format designated by the CPUC.
6. Encourages CCAs that are not otherwise required to develop a plan for increasing procurement from small, local, and diverse business enterprises.
7. Defines distributed energy resource contractors for the purpose of this bill and requires the Contractors’ State License Board to help the CPUC in identifying and developing contact information for distributed energy resource contractors.

Background

Utility Supplier Diversity Program and General Order (GO) 156. In 1988, the CPUC adopted GO 156 (D. 88-04-057) to implement AB 3678 (Moore, Chapter 1259, Statutes of 1986), which required the CPUC to direct certain utilities to submit plans for increasing diverse business procurement. Under GO 156, the CPUC monitors utilities’ procurement from WMDVLGBTBEs. The CPUC also administers a certification clearinghouse, which is a database that identifies firms that have voluntarily obtained certification as a WMDVLGBTBEs. The Supplier Diversity Program is a tool through which the state can leverage the economic power of the utility sector to address historic structural inequities for economic opportunity and ensure that WMDVLGBTBEs are included in contracting opportunities, including renewable energy contracts.

In September 2018, the CPUC completed its report to the Legislature on utilities’ 2017 participation in the Supplier Diversity Program. The CPUC’s report noted that the program encourages utilities to purchase at least 21 percent of their procurement from WMDVLGBTBEs (15 percent from minority business enterprises, five percent from women business enterprises, and 1.5 percent from disabled veteran business enterprises). According to the report, the participating utilities exceeded these goals and spent over $10 billion through WMDVLGBTBEs in 2017. At the time of the report, the program did not have a goal for LGBT business enterprise (LGBTBE) procurement; however, the CPUC encourages LGBTBE procurement and intends to make a determination on an LGBTBE program goal by 2021.

The Supplier Diversity Program has evolved with changes to California’s utility sector. Since its establishment in the 1980s, the CPUC has revised GO 156 to reflect new legislative requirements for the Supplier Diversity Program. These legislative requirements reflected changes in the utility sector and the scope of diverse businesses that can contract with utilities. For example, 2010 legislation (AB 1918, Davis, Chapter 456, Statutes of 2010) added wireless telecommunications service providers to the program. In 2014, legislation (AB 1678, Gordon, Chapter 633, Statutes of 2014) expanded the types of diverse contractors encouraged by the program to include LGBTBE.

California’s electric retail provider landscape has changed significantly since the adoption of GO 156. The expansion of distributed energy resources, direct access providers, and CCAs is decentralizing the electric retail sector and reducing the load of the state’s three largest investor-owned utilities (IOUs). In 2017, a CPUC white paper on electric consumer retail choice estimated that rooftop solar, CCAs, and direct access would unbundle approximately 25 percent of load in IOU service territory by 2018. In the same paper, the CPUC estimated that this trend would continue, and over 85 percent of retail load may be served by sources other than the IOUs by the mid 2020s.

The departure of load from the IOUs may decrease IOU contracting and impact the degree to which WMDVLGBTBEs can count on new IOU contracts through the Supplier Diversity Program. Currently, direct access providers, distributed energy resource contractors, and CCAs are not required to participate in the Supplier Diversity Program. This bill would expand the program to include electric service providers, exempt wholesale generators contracting to sell electricity to a retail seller, distributed energy resource contractors, and energy storage system companies. This bill would also require CCAs with gross annual revenues exceeding $1 million to submit plans for increasing procurement from small, local, and diverse business enterprises in all categories, including renewable energy, energy storage system, and smart grid projects. These revisions to the Supplier Diversity Program reflect the ongoing changes to the electric retail provider landscape and could help support efforts to ensure that WMDVLGBTBE electric sector contracting goals do not decline in the event that IOU contracting slows.

Legal restrictions and a lack of uniformity in reporting complicate CCA supplier diversity efforts. Some CCAs are already seeking ways to participate in supplier diversity initiatives. For example, in 2018, Marin Clean Energy began requesting that contractors voluntarily report their GO 156 certification status for power purchase agreements, feed-in tariffs, and customer program contracts. Marin Clean Energy found that 23 percent of survey respondents self-identified as GO 156 certified or used subcontractors that are GO 156 certified. Despite these efforts, legal restrictions make obtaining information related to protected classes challenging. California’s Proposition 209 prohibits the State from discriminating against or granting preferential treatment to any individual or group on the basis of race, sex, color, ethnicity, or national origin in the operation of public employment, public education, or public contracting. The proposition limits the degree to which any governmental entity within California, including CCAs, can compel information about certain protected classes to support contract decision-making. However, the Proposition does not prohibit after-the-fact reporting on outcomes from contracting. This bill requires CCAs to develop plans for small, local, and diverse business contracting but requires CCAs to report after-the-fact on contracting with WMDVLGBTBEs.

This bill also requires the CCAs to submit these reports in a format specified by the CPUC. While this requirement conforms to requirements in existing law for utilities participating the supplier diversity program, its inclusion in this bill is important for measuring contracting progress across different types of electric retail providers. While Marin Clean Energy has conducted a survey enabling the CCA to determine the percentage of responding contractors that self-identify as GO 156 certified, this information does not include the percentage of total contract spending made through WMDVLGBTBEs or the level of detail reported by current GO 156 participants. To the degree that the Supplier Diversity Program is intended to monitor and encourage contracting with WMDVLGBTBEs as a mechanism for enhancing economic opportunities through the electric retail sector, the ability to measure economic benefits provided across different types of retailers is critical to CPUC’s efforts to measure relative progress towards contracting goals.

Need for amendments. As currently drafted, this bill defines a “distributed energy resource contractor as “…any person or corporation that installs or operates a distributed energy resource, as defined in Section 8370, and that is licensed by the Contractors’ State License Board.” This definition would require every individual licensed to install distributed energy resources and earning over $1,000,000 to submit a supplier diversity plan and report to the CPUC. The author and the committee may wish to clarify the definitions in this bill ensure that the planning and reporting requirements apply to the businesses that employ licensed contractors and not the individual contractors. Developing a supplier diversity plan may not be a significant burden for companies with gross California revenues over $1,000,000, and GO 156 has historically contained mechanisms for addressing concerns with utilities where the reporting presents an undue burden; however, it is unclear how many businesses will meet both this bill’s revenue threshold and the definitions of businesses required to report. To the extent that these thresholds and definitions result in a multitude of companies submitting plans and reporting to the CPUC, the CPUC may not have sufficient resources to meaningfully monitor these companies’ supplier diversity efforts.

Prior/Related Legislation

AB 1678 (Gordon, Chapter 633, Statutes of 2014) added LGBT business enterprises to the supplier diversity program and required the CPUC to adopt LGBT status qualifiers created by the National Gay and Lesbian Chamber of commerce with initially adopting eligibility criteria for LGBT business enterprises.

AB 1386 (Bradford, Chapter 443, Statutes of 2011) encouraged cable television corporations and direct broadcast satellite providers to voluntarily adopt plans to increase diverse spending.

AB 1918 (Davis, Chapter 456, Statutes of 2010) clarified certain certification requirements for the supplier diversity program, added wireless telecommunications service providers to the program, and encouraged providers below the $25 million eligibility threshold to voluntarily report.

AB 3678 (Moore, Chapter 1259, Statutes of 1986) established the supplier diversity program by requiring each electrical, gas, and telephone corporation with gross annual revenues exceeding $25 million to annually submit a detailed, verifiable plan for increasing diverse business procurement in all categories.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes

SUPPORT:

California Asian Pacific Islander Chamber of Commerce

California Black Chamber of Commerce

Equality California

Golden Gate Business Association

MCE Clean Energy

Peninsula Clean Energy Authority

OPPOSITION:

None received

ARGUMENTS IN SUPPORT: According to the author:

“California’s utility supplier diversity law is one of the largest engines of socioeconomic mobility for historically-disadvantaged people in the State. In 1986, entities regulated by the California Public Utilities Commission (CPUC) spent less than $500,000 per year with women and minority business enterprises. In 2017, that figure exceeded $10 billion in direct spending with an additional $2 billion in subcontracting. Over the past three decades, this program has evolved. Now, Women, Minority, Disabled Veteran, and LGBT Business Enterprises are included — as well as industries that did not exist in 1986, such as wireless telecommunications service providers.

But California’s electric grid has evolved too and our supplier diversity statute must be updated to reflect new technologies and business models. New technologies now enable distributed energy resources like photovoltaic solar, as well as energy storage, to deliver more power each year. New business models — including the elevated use of wholesale generators, as well as Electric Service Providers and Community Choice Aggregators — serve more and more electric customers each year within CPUC jurisdiction. But because they are left out of the supplier diversity statute, opportunities for small businesses and disadvantaged communities will likely decline. If new entities are to take over jobs once played by electric corporations, they should not duck their responsibility to increase supplier diversity.”

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