3. The Scope of the Proceeding

The preliminary scope of the proceeding was broad by design to capture information to help the Commission decide what topics should be prioritized in support of implementing the goals and policies of §8281-8286 and GO 156 more than two decades after the program was justified and initiated. None of the comments filed objected to the categorization of the proceeding as quasi-legislative, however, there was a wide range of opinion on certain aspects of the preliminary scope of the proceeding and whether evidentiary hearings would be necessary.

On March 17, 2010, the assigned Commissioner and ALJ issued a Scoping Memo and Ruling (Scoping Memo) which somewhat narrowed the scope and set forth the schedule in this proceeding. Not all preliminary topics became the focus of additional activities in this OIR, but some are still included in the final decision because a sufficient record was developed for the Commission to make findings of fact, reach conclusions, and/or make recommendations. The Scoping Memo affirmed the category for the proceeding and that no hearings were necessary due to several other avenues for party input and dialogue. The Scoping Memo also included, as Attachment A,7 a detailed summary of the responses and comments filed by parties.

In the Scoping Memo, the scope of the OIR was modified to exclude issues related to workforce diversity and aging because they are better suited to different Commission proceedings. Two workshops and oral argument were scheduled, as discussed below.

The comments revealed a priority interest in facilitated workshops to provide real-world advice, experience, and information in several key areas intended to promote the development of competitive small businesses, particularly WMDVBEs. Therefore, the Scoping Memo directed that the Commission's Utility Supplier Diversity Program (USDP) staff organize and facilitate two workshops to provide information and advice, share experiences, inspire discussion, and promote networking between business and utility representatives.

The first workshop, held May 5, 2010 in Southern California, focused on "underutilized areas" of procurement, i.e., where there are few or no small businesses and WMDVBEs bidding or receiving utility supply contracts. It primarily addressed financial services, legal services, consultant services, insurance, and advertising. The workshop was an opportunity for utility procurement representatives and successful suppliers to share information and ideas about the challenges in each of these procurement areas, including the various types of service contracts put out to bid, useful development steps for small businesses and WMDVBEs to become more competitive, what actions utilities and community-based organizations (CBOs) can take to develop a broader pool of bidders, common deficiencies in bids for these types of contracts, and other obstacles to achieving a large pool of diverse applicants.

The second workshop, held June 7, 2010 in Northern California, focused on barriers small and diverse businesses face when trying to compete for utility supply contracts. It addressed certification and Clearinghouse issues, unbundling large contracts, the Request for Proposal (RFP) process, mentoring, and access to capital. The workshop was structured to stimulate dialogue between utility supplier diversity staff, CBOs, and business owners. The utility companies and non-utility parties (primarily CBOs) were each asked to respond to a set of questions tailored to their perspectives in the following areas:

· Certification Complaints/Not enough WMDVBEs;

· Limited Bid Opportunities/Limited Industry Knowledge & Experience;

· Bid Feedback/Lack of Bid Sophistication;

· Limited Capacity/Inability to Deal with Large Projects; and

· Bonding, Insurance and Other Business Requirements.

In summation of the dialogue between participating parties, the USDP staff prepared, filed, and served workshop reports after each all-day workshop.8 Numerous parties filed and served opening and reply comments about the substance of the workshop reports. Each workshop further developed the primary topics and parties' positions that are the subject of much of the discussion in this decision.

In Opening Comments, each participating utility stated its commitment to the target goals of GO 156 and §§8281-8285 largely because they are good for business, good for ratepayers, and good for our state's communities. Many identified internal company steps or aspirations for further improvement, while most asserted that merely increasing target goals equally imposed on all industries and companies would be less productive for a variety of reasons. This is due, in part, to the fact that each industry and the companies within them, have different business models, practices, and procurement needs. Nonetheless, CBOs generally believed that each company could improve and in some cases advocated for specific targeted goals, interim steps, or programs.

The Scoping Memo addressed the issue of whether to increase the voluntary initial minimum long-term goals of 15% of procurement spend9 for MBEs, 5% for WBEs, and 1.5% for DVBEs. The character of the issue was modified based on party comments. Instead of increasing parts of, or the aggregate 21.5% target goal for total WMDVBE spending, all covered utilities were asked to submit responses to specific questions about their own self-identified short-term steps towards achieving or exceeding the target goals of GO 156.

Responding companies were PG&E, SCE, Southwest Gas Corporation, SDB&E/SoCalGas, Wild Goose Storage, LLC (Wild Goose), Pacificorp, AT&T, Verizon, Nextel, TW Telecom of California LP, Cbeyond Communications, LLC, Qwest Communications Company, LLC, Cox California Telecom, LLC/Cox TMI Wireless LLC, and CWA (joined by its individual members California American Water Company, California Water Service Company, Golden State Water Company, San Gabriel Valley Water Company, San Jose Water Company, and Suburban Water Systems, and non-member Park Water Company). CBOs that submitted comments on the utility companies' responses were Greenlining, CAPCC, CHCC, AICC, and a joint response by BEC/The Latino Business Chamber of Greater Los Angeles (LBCGLA)/Mabuhay Alliance, Inc. (Mabuhay) (collectively, Joint Parties).

Oral argument regarding these responses was held on June 23, 2010 before the assigned Commissioner to provide the utilities an opportunity to explain their progress targets and for CBOs to comment. Another round of comments on the interim steps was permitted by the ALJ's July 22, 2010 ruling. A review of the self-proposed interim steps and aspirational goals follows in Section 5.1 below.

After issuance of the Scoping Memo, Mabuhay, LBCGLA, and Cadence Leasing, Inc., a minority-owned firm, all sought and obtained party status. Several parties filed a Notice of Intent to Claim Intervenor Compensation and have received a preliminary finding of eligibility in ALJ rulings. There were several rulings by the ALJ which reconfigured the timing and content of final comments, including a delay of the final workshop reply comments until August 6, 2010.10

On July 30, 2010, BEC, Mabuhay, and LBCGLA filed a motion requesting the opportunity to file additional comments after the Commission held its eighth public en banc hearing on October 12, 2010 regarding GO 156 and diversity in utility procurement practices. The Chief Executive Officers of California's six largest utilities were scheduled to appear before the Commission to discuss the progress, commitments, and initiatives made in setting and meeting diversity goals over the last year, and to look to new goals for the future. AT&T, PG&E, and Verizon opposed the motion primarily arguing that the record was complete and additional comments would be merely duplicative. In an August 26, 2010 ruling, the ALJ allowed one more round of comments limited to new information developed at the en banc hearing to be filed on October 29, 2010.

Several parties filed comments post en banc. The proceeding was then submitted based on 1) the initial OIR responses, opening and reply comments, 2) the workshop reports and opening and reply comments, 3) the oral argument responses, comments, rebuttal, and reply comments, and 4) the post-en banc comments.

7 In the Scoping Memo and Attachment A, there are individual references to woman-owned business enterprises (WMBE), minority-owned business enterprises (MBE), and disabled veteran-owned business enterprise (DVBE), as well as a simplified collective reference to these diverse business enterprises as DBEs. This was for the reader's convenience and did not incorporate any definitions used by other agencies.

8 The report prepared following the May 5, 2010 workshop on Underutilized Areas is Workshop Report #1 (WSR#1): The report prepared following the June 7, 2010 workshop on barriers to competition is Workshop Report #2 (WSR#2).

9 "Spend" refers to the portion of total procurement dollars a utility spent in a particular category of procurement or supplier.

10 ALJ Ruling on Motions for Reconsideration of Ruling Issued on July 15, 2010 and other Matters at 4.

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