9. Ex Parte Communications

Pursuant to Rule 8.2(a) ex parte communications in this investigation are allowed without restriction or reporting requirement.

IT IS ORDERED that:

1. The Commission hereby institutes this Rulemaking to review the impact, success, target goals, and disparities within procurement areas of utility General Order 156 programs; the scope also includes consideration of the economic efficiencies of compliance, information sharing to improve performance, integration of new procurement areas such as "green" energy-related contracts, and examination of diversity and continuity in each utility's workforce.

2. The Executive Director shall serve all regulated utilities that are required to participate in the General Order 156 program pursuant to Public Utilities Code Section 8283 with this Order Instituting Rulemaking. Such entities will not automatically become parties to this proceeding and should follow the direction in Section VI to become parties. Attachment B lists such entities as reflected in the Commission records. Any error or omission in Attachment B shall not excuse any participating regulated utility from being bound by the outcome of this proceeding.

3. This proceeding is classified as quasi-legislative, as that term is defined in Rule 1.3(d). Parties shall file Responses and Opening Comments addressing the questions identified in this order and scope, schedule, and other procedural issues by September 30, 2009. Parties shall file Reply Comments by October 30, 2009.

4. The assigned Commissioner or Administrative Law Judge may adjust the schedule identified herein and refine the scope of this proceeding as needed.

5. The Executive Director shall cause this Order Instituting Rulemaking to be served on all regulated utilities required to participate in the General Order (GO) 156 program, and the service lists for Rulemaking (R.) 06-04-011 (most recent for GO 156), R.06-04-010 (Energy Efficiency Rulemaking), R.08-02-007 (Procurement Rulemaking), R.05-12-013 (Long Term Resource Adequacy Rulemaking), R.08-04-012 (Planning Reserve Margin Rulemaking), Application (A.) 08-07-021 et al. (Energy Efficiency Program Plans), R.08-03-008 (California Solar Initiative), R.08-08-009 (California Renewables Portfolio Standard), A.08-05-022 et al. (Low Income Energy program budgets), R.04-12-001 (Lifeline program changes), and I.07-01-022 (conservation objectives for Class A water companies).

6. Interested persons shall follow the direction in Section VI to become a party to this proceeding.

7. The temporary service list, which includes the entities referenced in Ordering Paragraph 5, is appended as Attachment C to this Order Instituting Rulemaking and shall be used for service of all pleadings until a service list for this proceeding is established. A service list for this proceeding shall be created by the Commission's Process Office and posted on the Commission's Website (www.cpuc.ca.gov) as soon as it is practicable after the first prehearing conference. Parties may also obtain the service list by contacting the Process Office at (415) 703-2021.

8. Parties serving documents in this proceeding shall comply with Rule 1.10 regarding electronic service. Any documents served on the assigned Commissioner and Administrative Law Judge shall be both by e-mail and by delivery or mailing a paper format copy of the document.

9. A party that expects to request intervenor compensation for its participation in this rulemaking shall file its notice of intent to claim intervenor compensation in accordance with Rule 17.1 of the Rules.

This order is effective today.

Dated July 30, 2009, at San Francisco, California.

I will file a concurrence.

/s/ JOHN A. BOHN

Commissioner

Concurrence of Commissioner Bohn on R.09-07-027

I support this Commission's opening of this Rulemaking. However, I have serious concerns about our forthcoming deliberations.

It goes without saying that "full and fair participation of women, minority, and disabled veteran owned businesses"37 in our work force is important. Broader participation of able, engaged, and skilled Californians is a critical element of our resurgence and our progress as a State, and, for that matter, as a nation. Such broad participation expands the number of suppliers, encourages competition, and promotes economic efficiencies. One can make a strong case, in addition, that it is also good business for the public utilities to draw from the State's diverse communities, both for employees and business skills and services. We cannot afford to waste talent, capacity, or labor for any reason, particularly with issues on the immediate horizon such as an aging workforce and demand for new skills.

Our State, like the rest of the country, however, draws a line between social norms and state sanctioned preferential treatment. Indeed, in 1996, for example, the voters of this state amended the Constitution of California by Proposition 209, which reads in part as follows:

In addition to Proposition 209, there are a number of federal and state constitutional provisions, statutes, and regulations that impose limitations on this Commission's ability to mandate preferential procurement or employment policies, and which require utilities to refrain from discriminating against, or providing preferences to, particular classes of women and minority business enterprises.

For example, the Equal Protection Clause of the 14th Amendment of the United States Constitution provides that "[n]o State shall . . . . deny to any person within its jurisdiction the equal protection of the laws."39 As Justice Harlan eloquently stated in his dissent from &_butType=3&_butStat=2&_butNum=81&_butInline=1&_butinfo=&_fmtstr=FULL&docnum=1&_startdoc=1&wchp=dGLbVzW-zSkAb&_md5=d70e32fb4c8cec0da43258412c0074f6" target="_top">Plessy v. Ferguson, "[o]ur Constitution is color-blind, and neither knows nor tolerates classes among citizens."40 We are all familiar with the discussions on the application of the Equal Protection Clause; I will not detail it further here. Suffice it to say, equal application of the law is a fundamental aspect of our society.

Title VII of the Civil Rights Act of 1964, amended in 199141 (Title VII), disallows discrimination in employment on the basis of race, ethnicity, national origin, or gender.42 "Congress intended that Title VII reflect Justice Harlan's understanding of the Constitution and `be 'colorblind' in its application."43 Title VII contains disparate treatment (i.e., intentional discrimination) and disparate impact (i.e., facially non-discriminatory practices that have a discriminatory impact) provisions. The Supreme Court recently narrowly interpreted the disparate impact provision of Title VII in Ricci v. DeStefano. In this case, the Court held that "[u]nder Title VII, before an employer can engage in intentional discrimination for the asserted purpose of avoiding or remedying an unintentional, disparate impact, the employer must have a strong basis in evidence to believe it will be subject to disparate-impact liability if it fails to take the race-conscious, discriminatory action."44

There are also several State laws and provisions that prohibit discrimination. The California Constitution contains a section that closely mirrors the Equal Protection Clause, though it does not explicitly include a state action requirement:45 "A person may not be . . . denied equal protection of the laws."46 California has adopted the Fair Employment and Housing Act (FEHA)47 which prohibits discrimination because of race, color, national origin, and sex among other things.48

The Public Utilities Code also contains a non-discrimination provision, Section 453, subdivision (a), which states, in relevant part:

(a) No public utility shall, as to rates, charges, service,

facilities, or in any other respect, make or grant any preference or advantage to any corporation or person or subject any corporation or person to any prejudice or disadvantage.49

The California Supreme Court has found that "the language of section 453, subdivision (a) is broad and unrestricted and the legislative history suggests that the Legislature intended to impose general restrictions on discrimination by public utilities."50 Indeed, this Commission has held that a utility may not discriminate against a vendor for a contract for a particular service on grounds unrelated their qualifications, i.e., race, under Section 453. In Muse Codero Chen, Inc. v. Pacific Bell, the Commission found Pacific Bell in violation of G.O. 156 and Public Utilities Code section 453 because it had disqualified a company from participating in Pacific Bell's selection process for an advertising contract targeted at an Asian audience solely because the company was not 51% Asian-owned and operated.51

This Commission has adopted a series of what it has denominated as numerical "goals" for our public utilities for procurement from minority and women owned business enterprises. Though there is no "penalty" specifically imposed for the failure to meet those goals, we have required the utilities to provide annual reports of their achievement toward those goals. We require the senior management of these utilities to appear at public meetings to be questioned about and to defend their actions when they fail to meet those goals. Indeed, it is not unusual for public criticism for failure to meet these goals to be offered at public meetings, and even during Commission meetings. Comparison of those "goals" and the achievement thereof occupies a prominent part of this proposal. Moreover, G.O. 156 on its face states, that "[e]ach utility shall make special efforts to increase utilization and encourage entry into the workplace of WMDVBE's in product or service categories where there has been low utilization of WMDVBE's, such as legal, financial services, etc."52 Additionally, this rulemaking also seeks to makes the employment plans and practices of each utility, with respect to as yet, unstated objectives, pursuant to as yet, unstated, authority.

Some may take comfort in the fact that G.O. 156 only contains "goals" and not "quotas" for utility procurement with WMBEs. However, the concept that establishing "goals" versus "quotas" somehow gets one around equal protection arguments can be misleading. For example, the Ninth Circuit stated in Bras v. California Public Utilities Commission that, "[Public Utilities Code sections 8281-8286 and G.O. 156] are not immunized from scrutiny because they purport to establish `goals' rather than `quotas.' We look to the economic realities of the program rather than the label attached to it."53

Other courts have rejected the idea that regulations that stop short of establishing preferences, quotas, or set-a-sides do not violate the Equal Protection Clause, Title VII, and/or Proposition 209. The California Supreme Court stated in Hi-Voltage Wire Works, Inc. v. City of San Jose that "[a] participation goal differs from a quota or set-aside only in degree; by whatever label, it remains `a line drawn on the basis of race and ethnic status' as well as sex."54 The Court further reasoned, "[t]hus understood, such a goal plainly runs counter to the express intent of the historic Civil Rights Act and, concomitantly, the intent of Proposition 209."55 Also, in Lutheran Church-Missouri Synod v. FCC, the D.C. Circuit held: "we do not think it matters whether a government hiring program imposes hard quotas, soft quotas, or goals. Any one of these techniques induces an employer to hire with an eye toward meeting the numerical target. As such, they can and surely will result in individuals being granted a preference because of their race."56

Lest we undo the important work that this Commission has done in broadening procurement to small business and to all Californians, I caution my fellow Commissioners that as we proceed in our inquiry, we be mindful of the fact that as a State Public Utilities Commission we have a direct, controlling influence over the operations of these utilities, over their profits, expansion, service quality and relationship with ratepayers. These utilities occupy a privileged monopoly place, granted by the State and administered by this Commission. It is hard to imagine that any comment by this Commission, let alone a public hearing on progress toward Commission established goals and to which senior management is summoned by this Commission, can be ignored by these entities "voluntarily."

Indeed, the California Supreme Court has found that "a public utility is in many respects more akin to a governmental entity than to a purely private employer."57 The Court has further reasoned:

In this state, the breadth and depth of governmental regulation of a public utility's business practices inextricably ties the state to a public utility's conduct, both in the public's perception and in the utility's day-to-day activities. (See generally &_butType=4&_butStat=0&_butNum=163&_butInline=1&_butinfo=CAL. CONST. XII 1&_fmtstr=FULL&docnum=1&_startdoc=1&wchp=dGLzVzz-zSkAl&_md5=94bc1590c4dff6029669d213efe986f1" target="_top">Cal. Const., art. XII, §§ 1-9; Pub. Util. Code, passim.) Moreover, the nature of the California regulatory scheme demonstrates that the state generally expects a public utility to conduct its affairs more like a governmental entity than like a private corporation. . . . Finally, the state had endowed many public utilities, like PT&T, with considerable powers generally enjoyed only by governmental entities, most notably the power of eminent domain. (Id., §§ 610-624.) Under these circumstances, we believe that the state cannot avoid responsibility for a utility's systematic business practices and that a public utility may not properly claim prerogatives of "private autonomy" that may possibly attach to a purely private business enterprise.58

Given the utilities' unique quasi-governmental status, I believe we must take great care in our exploration of these issues in this rulemaking.

However much we believe as individuals, and I definitely do, that expanding the workforce be inclusive, broadening the procurement policies of the utilities to include small business of all kinds and reaching out into our diverse communities for the best and brightest to bring into utility service, to be good business judgment and sound public policy, we as a Commission act as an arm of the State. We must be cognizant of the limitations such a role imposes on our decisions and the impact that those decisions have on the subjects of our jurisdiction and the captive ratepayers whose funds we are directing. However much we recognize that the new green economy holds great opportunity for job growth going forward, we must be careful to recognize that those opportunities are to be open for all Californians equally.

Just as we must assure that no part of the California workforce or business community is left out, so too it is our obligation to assure that no part of either is unfairly privileged by an action of the State.

Dated August 6, 2009, at San Francisco, California.

Attachments A - C to R0907027

37 I recognize the special nature of disabled veterans business enterprises (DVBE) in General Order (G.O.) 156. I fully support federal and state veterans' preference programs, including the U.S. Veterans' Preference Act, California's DVBE Participation Program and this Commission's DVBE program under G.O. 156, which were established to recognize the great sacrifices made by the men and women who serve in the United States military, particularly with regard to disabled veterans. Indeed, courts across this country, including the U.S. Supreme Court, have repeatedly found Veteran's hiring preference programs to be constitutional and consistent with the Equal Protection Clause. (See, e.g., Personnel Administration of Massachusetts v. Feeney (1979) 442 U.S. 256; White v. Gates, Secretary of the Navy (D.C. Cir. 1958) 253 F.2d 868; Colemere v. Hampton, Chairman, U.S. Civil Service Commission (UT 1973) 1973 U.S. Dist. LEXIS 11547; Koelfgen v. Jackson (Minn. 1972) 355 F.Supp. 243; August v. Bronstein (SDNY 1974) 369 F. Supp. 190; Mitchell v. Cohen (1948) 333 U.S. 411.) These programs have "traditionally been justified as a measure designed to reward veterans for the sacrifice of military service, to ease the transition from military to civilian life, to encourage patriotic service, and to attract loyal and well-disciplined people to civil service occupations." (Personnel Administration of Massachusetts, 442 U.S. 256, 265.)

38 Cal. Const., Art. I, § 31 (emphasis added). http://www.lexis.com/research/retrieve?y=&dom1=&dom2=&dom3=&dom4=&dom5=&crnPrh=&crnSah=&crnSch=&crnLgh=&crnSumm=&crnCt=&cc=&crnCh=&crnGc=&shepSummary=&crnFmt=&shepStateKey=&pushme=1&tmpFBSel=all&totaldocs=&taggedDocs=&toggleValue=&numDocsChked=0&prefFBSel=0&delformat=XCITE&fpDocs=&fpNodeId=&fpCiteReq=&fpSetup=0&brand=&_m=0059a850a5ddf4de98b72eff2228574f&docnum=1&_fmtstr=FULL&_startdoc=1&wchp=dGLbVzW-zSkAb&_md5=dfa1bbd041ae76c680963cdc196ea00d&focBudTerms=ATLEAST10%28%22Proposition+209%22%29&focBudSel=all - fnote5#fnote5

39 U.S. Const., 14th Amendment, § 1.

40 Plessy v. Ferguson &_butType=3&_butStat=2&_butNum=83&_butInline=1&_butinfo=&_fmtstr=FULL&docnum=1&_startdoc=1&wchp=dGLbVzW-zSkAb&_md5=32d5d7070b56fd55f1ba87094da0998c" target="_top">(1896) 163 U.S. 537 (dis. opn. of Harlan, J).

41 42 U.S.C., §§ 2000, et seq.

42 Title VII provides, in relevant part:

It shall be an unlawful employment practice for an employer -

(1) to fail or refuse to hire or to discharge any individual or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's race, color, religion, sex, or national origin; or

(2) to limit, segregate, or classify his employees or applicants for employment in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual's race, color, religion, sex, or national origin.

(42 U.S.C., § 2000e-2(a).)

43 Hi-Voltage Wire Works, Inc. v. City of San Jose (2000) 24 Cal. 4th 537, 549.

44 Ricci v. DeStefano (2009) 557 U.S. _, slip. op., p. 2.

45 See Gay Law Students Association v. PacificTelephone and Telegraph (1979) 24 Cal. 3d 458, 468.

46 Cal. Const., Art I, § 7, subd. (a).

47 Cal. Govt. Code, §§ 12900, et seq.

48 The FEHA states, in relevant part: "It is hereby declared as the public policy of this state that it is necessary to protect and safeguard the right and opportunity of all persons to seek, obtain, and hold employment without discrimination or abridgment on account of race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, marital status, sex, age, or sexual orientation." (Cal. Govt. Code, § 12920.)

49 Cal. Pub. Util. Code, § 453(a).

50 Gay Law Students Assoc. v. Pacific Tel. and Telegraph (1979) 24 Cal. 3d 458, 485.

51 Muse Cordero Chen, Inc. v. Pacific Bell, D.90-10-032, 1990 Cal PUC LEXIS 958, *1-*2, *14-*16.

52 G.O. 156, § 8.11 (emphasis added).

53 Bras v. California Public Utilities Commission (9th Cir. 1995) 59 F.3d 869, 874.

54 Hi-Voltage Wire Works, Inc. v. City of San Jose (2000) 24 Cal. 4th, 537, 563 (quoting Regents of the University of California v. Bakke (1978) 438 U.S. 289.)

55 Id.; see also Connerly v. State Personnel Board (2001) 92 Cal. App. 4th 16, 55 (holding that "when the government chooses to rely upon racial and gender distinctions, the scheme is presumptively invalid; we cannot defer to legislative pronouncements, and the burden is on the government to justify the use of the distinction" (quoting City of Richmond v. J.A. Croson Co. (1989) 488 U.S. 469, 499, 501-503).)

56 Lutheran Church-Missouri Synod (D.C. Cir. 1998) 141 F.3d 344, 354.

57 Gay Law Students Assoc., 24 Cal. 3d 458, 469.

58 Id., 469-470.

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