4. Improvements to GO 156 Program and Beyond
Over the past twenty years of the GO 156 program, it seems that many utilities have achieved successes in opening procurement opportunities to WMDVBEs. However, the Commission does not want to rest on the gains made to date by the utilities in developing broadly diverse supplier pools. Instead, the Commission seeks to maintain its leadership in promoting diversity by closely monitoring the program, listening to the utilities and the public, and offering guidance and encouragement to assure that the legislative policies in §§8281-8286 are fully carried out for the benefit of ratepayers.
4.1. Economic Benefits of Diversity Procurement
The Commission embraces the statutory policy of bringing to the utilities and their ratepayers the benefits of expanding the number of suppliers, encouraging competition, and promoting economic efficiencies. Research has shown that having minority and women suppliers makes good business sense. In fact, nearly half of companies that rated themselves as having a good supplier diversity program say their company's rationale for doing business with women and minority-owned establishments is that these firms offer competitive prices and quality products and services.17
"The realities of the American marketplace are such that, if companies don't embrace supplier diversity, they are acting to the detriment of their bottom line," said Harriet R. Michel, president of Minority Supplier Development Council in 2006.18 Moreover, minority-owned companies are a fast growing segment of business and "by their very nature, are very competitive," said John W. Murray, Jr., chief executive of the Southern California Minority Business Development Council, Inc.19 In addition to more competitive pricing in procurement, such purchases from minority-owned firms "will come back into the corporate pocket."20
GO 156 does not currently require reporting or measurement of whether increased competition has resulted in lower procurement costs to participating California utilities. The Commission believes this benefit could be documented and will seek information from participating utilities about the issue, including whether such information should be included with their regular annual reports.
4.2. Sharing Information, Practices,
and New Ideas
The Commission observes that results of supplier diversity programs vary widely between individual utilities but it lacks clear evidence for the source of these disparities. It is possible that some utilities have more initiative, better executed and developed programs, stronger leadership, linked executive compensation to specific supplier diversity program results, and better outreach.
For example, the disparity in procurement categories exposed by the data in Tables 3 and 4 may indicate an emphasis by some utilities on an already saturated procurement area with a concentration of minority suppliers. At the same time, utilities have reported shortages of diverse suppliers in some areas where other utilities have been successful. There are, no doubt, numerous reasons for these circumstances and this rulemaking presents an opportunity for the utilities and others to inform the Commission of their ideas on the subject.
More than 1,000 corporations based in the United States have supplier diversity programs in place,21 and California utilities themselves have 20 years experience with the GO 156 program. The Commission believes that this rulemaking provides an opportunity for the utilities and the public to come forward and share experiences, both successful and not, that could help participating utilities expand their network of diverse suppliers rather than depend on past practices and suppliers. As one example, several major corporations, including IBM, Wal-Mart, Proctor & Gamble, and Home Depot, offer programs to mentor small companies, particularly businesses owned by women, minorities, and others.22
The Commission has previously hosted Small Business Expos throughout the state, launched an initiative to better understand the unique characteristics of the traditionally underrepresented DVBE community, and assisted utilities with outreach events to expand the available pool of diverse suppliers. For example, the Commission has helped to organize New Connections Events, which are financial services symposiums designed to bring together WMDVBE firms with the regulated utility representatives to share best practices, network, and begin building relationships that can lead to sustainable business partnerships. The Commission has also held full panel hearings on diversity issues. A continued and advanced open dialogue among the utilities, and between utilities and the public, for sharing in detail experiences and practices initiated to overcome market saturation in some categories and expansion into others with little or no penetration could greatly assist in improving supplier diversity. This rulemaking could provide an opportunity for such information sharing that could help the utilities and the public.
4.3. New Procurement Sources from
Clean Energy Programs
Many utilities have reported difficulty in finding new sources for more WMDVBE procurement opportunities. The Commission sees possibilities for leadership in this area by looking to the changing energy markets for new procurement areas, particularly related to clean energy, or "green" categories. President Michael Peevey has said that "global warming is the defining environmental challenge of our time" and numerous Commission initiatives and proceedings in recent years have targeted this specific challenge. The synergy between the Commission's dual responsibilities to address climate change and promote diversity creates new opportunities to unify actions in furtherance of both goals. By integrating new "green" utility programs, such as utility contracts for renewable energy, solar energy distributed generation projects, and energy efficiency, into the existing supplier diversity programs, utilities may fully embrace the Commission's broad vision of institutionalizing supplier diversity in all areas of procurement as they arise.
This rulemaking will consider comments on whether these green and clean markets are sufficiently developed to afford new opportunities for supplier diversity in procurement. Additionally, the Commission seeks input about other unrecognized areas for companies and utilities to expand diversity procurement.
4.4. Diversity in Utility Workforce
The Commission has long believed in the benefits of a diverse and prepared utility workforce for the utilities and for the ratepaying public. It has previously gathered data and held public hearings on the issue.23 This rulemaking will consider workforce composition and succession planning by the participating utilities.
President Peevey has long recognized the importance of this issue. "We live and work in the largest, most diverse state in the nation and our employment and procurement practices should reflect this. I am committed to ensuring that this Commission and the utilities it regulates promote diversity in their hiring practices."24 California's estimated population in March 2007 was 36.2 million.25 Hispanics accounted for about 36% of this total while Asians comprised 11.7% and Blacks 6.1%, yet business ownership lags behind these numbers.26 A 2002 report by the U.S. Census Bureau reported that in California only 3.9% of businesses were Black-owned, 12.8% were Asian-owned, and just 14.7% were Hispanic-owned.27 While the state is projected to grow by about 22% over the next twenty years, the Hispanic portion of the population is expected to grow at a faster rate resulting in about 41.4% of the total by 2030.28 Although the Black population is projected to decline slightly over this period, Asians are expected to advance to 12.5% of the 2030 total.29 If the utilities do not actively join the statewide push for development of a diverse workforce, and minority-owned businesses through the supplier diversity programs, we could see a state in twenty years where ratepayer dollars are not fairly spent among the diverse populations which provide those dollars.
The Commission has previously received testimony from utilities regarding diversity in the workforce, but the information is outdated. For example, in PG&E's 2003 general rate case (GRC), Application (A.) 02-11-017, PG&E submitted testimony regarding its workforce diversity.30 In its 2003 GRC, A.02-05-004, SCE submitted testimony regarding the diversity of its workforce over the prior 10 years, as well as its present and future plans regarding workforce diversity. 31 SoCal Gas and SDG&E reached an agreement with Greenlining Institute in their 2003 GRC addressing work force diversity, supplier diversity, and other issues.32 In A.04-12-014, SCE's 2006 GRC, the company provided information to show that its nuclear workforce was aging and expressed its concerns that in several job classifications replacements would require a lengthy period of training and qualification.33
The Commission is concerned about the demographic composition of the workforce in each covered utility, particularly regarding issues of diversity and continuity. In this rulemaking, the Commission will seek information about the composition of each utility's workforce and comments about each utility's internal diversity programs for recruitment, training and advancement and how it is facing issues of an aging workforce, if applicable.
17 Whitfield, Gwendolyn and Landeros, Robert, Journal of Supply Chain Management, "Supplier Diversity Effectiveness: Does Organizational Culture really Matter?," Fall 2006, at 16.
18 Deutsch, Claudia H., The New York Times, "Bedrock of Law on Workplace Should Remain as Justice exits," at C1, July 4, 2005; See also, Jones, Steven D., The Wall Street Journal, "Moving the Market - Tracking the Numbers / Outside Audit: Benefits to Supplier Diversity May Go Beyond Social Good," p. C3, August 21, 2006. ("companies that focus heavily on supplier diversity generate a 133% greater return on procurement investments than the typical business... Such companies spend on average 20 percent less on their buying operations and have procurement staffs half the size of their peers whose supplier programs aren't as diverse.")
19 Zwahlen, Cyndia, The Los Angeles Times, "Helping Minority-owned Suppliers Win Bids," at C5, June 23, 2008.
20 Meyer, Ann, The Chicago Tribune, "Chipping Away for a Chance," at C3, March 10, 2008.
21 Meyer, Ann, The Chicago Tribune, "Chipping Away for a Chance," at C3, March 10, 2008.
22 Olson, Elizabeth, The New York Times, "A Guiding Hand From Big to Small," at B9, July 2, 2009.
23 "California's Workforce in 2015 - Will We Be Ready?" October 2005.
24 California Public Utilities Commission News Release, "PUC to Hold Hearing on Diversity" at 1, July 3, 2003.
25 State of California, Department of Finance, California Current Population Survey Report:
March 2007. Sacramento, California. January 2009 at 1.
26 Id.
27 U.S. Census Bureau, Quick Facts at http://quickfacts.census.gov/qfd/states/06000.html
28 State of California, Department of Finance, Population Projections for California and its Counties 2000-2050, by Age, Gender and Race/Ethnicity, Sacramento, California, July 2007.
29 Id.
30 PG&E Exhibit 14, Chapter 2, dated March 17, 2003.
31 Assigned Commissioner's Supplemental Ruling Regarding Testimony on Workforce Diversity, issued May 5, 2003.
32 D.04-12-015 at 40-41, issued December 2, 2004 in A.02-12-027.
33 D.06-05-016 at 29-30 issued May 11, 2006 in A.04-12-014.
