V. Exclusions

For the last 14 years, pursuant to GO 156, the utilities have been able to exclude certain products and services from the base of WMDVBE procurement dollars where the utilities can demonstrate the unavailability of WMDVBE suppliers. In the first decision implementing Pub. Util. Code §§ 8281-8285, we explained the utilities' burden if they created certain excluded categories.

"We will allow utilities to create `excluded categories' of products or services where they can demonstrate the unavailability of WMBE [currently WMDVBE] suppliers. Utilities can note such categories in their annual reports to the Commission. In order to ensure that such excluded categories meet real needs and do not continue to exist after WMBE suppliers in such categories become available, we will require utilities to report any efforts made to recruit WMBE suppliers in these categories and to note in their annual plans any plans they have to recruit such suppliers in the future." (D.88-04-057, 28 CPUC2d 36, 60.)

The Commission has emphasized that GO 156 exclusions are not carved in stone and should continue only as long as they are truly needed. Significantly, utilities must justify exclusions on an annual basis. "If it were otherwise, the exclusion program could act as a barrier to [WMDVBE] progress. (D.90-12-027, 38 CPUC2d 384, 390.)

To date, the utilities are mixed in their ability to eliminate all WMDVBE exclusions. For instance SBC does not currently utilize exclusions in its WMDVBE report to the Commission. However, some utilities have increased, rather than decreased their exclusions. Greenlining/LIF report that from 2000 to 2001, Edison's exclusions have gone up from 27.5% to 31.4%. (See Petition at p. 4.)

Our review of recent utility reports pursuant to GO 156 demonstrates that many utilities do not present sufficient justification on an annual basis for continuing the exclusions. For example, GO 156 requires that if a utility uses an exclusion, it must justify such use and provide "a description of any efforts made to find and or recruit WMDVBE suppliers of products and services in the excluded category." (GO 156, § 9.1.9.) However, a review of Edison, PG&E, and Verizon's annual WMDVBE reports for 1999, 2000, and 2001 demonstrates that the justification and description of the excluded categories is insufficient. In these three reports, Edison has offered substantially the same conclusory paragraph to justify its exclusions:

"The above table summarizes the purchasing categories where Edison has not been able to identify technically-qualified WMDVBEs. Most of the excluded categories are in areas of capital-intensive utility equipment manufacturing, nuclear fuel and nuclear energy-related products, and generation station overhaul and maintenance services." (2001 Annual Report, p. 9-d. See also Edison's 2000 and 1999 Annual Reports at p. 9-d respectively.)

Similarly, PG&E's justification for its excluded categories is nearly identical each year. PG&E does not offer a comprehensive discussion of efforts to identify WMDVBEs in excluded categories other than a general reiteration of its prior year's statement. (See 2001 Annual Report at p. 28, 2000; Annual Report at p. 34; and 1999 Annual Report at p. 31. See also Verizon's 2001, 2000, and 1999 Annual Reports at pp. 17, 15, and 16 respectively.)

In order to ensure that the utilities will make more concerted efforts to implement GO 156, this rulemaking proposes amending § 8.5 of this general order as set forth in Appendix A to this order to eliminate a utility's ability to create an "excluded category" of products and services. Eliminating the excluded categories will not limit a utility's ability to explain why its WMDVBE numbers are not as high as they might like. Under the proposed amendment, the utility may explain in detail how its ability to meet its WMDVBE goals are affected because WMDVBE suppliers do not offer a particular product or service, or because sole source procurement is the only available procurement method. The utility may also include a description of the utility's efforts to find and recruit such suppliers.

This proposal will permit all utilities' efforts in the WMDVBE area to be more easily compared against each other, whereas now this type of comparison is problematic because some utilize the exclusions and some do not. Moreover, under the proposal, we are optimistic that we will obtain more detailed explanations, as opposed to conclusory statements, from the utilities regarding the difficulties they encounter in finding or recruiting WMDVBE suppliers for certain products and services.

The proposal does not eliminate § 8.10, which permits each utility to establish a separate fuel procurement base for reporting progress and establishing goals for procurement of fuels from WMDVBEs. To the extent that it is more difficult to obtain WMDVBE providers for the fuel procurement covered by § 8.10, the utilities continue to have the ability to separately report this item under the proposal.

This rulemaking does not incorporate Greenlining/LIF's alternative proposal (i.e., to retain the utility's ability to create excluded categories but to raise their burden of proof in complying with § 8.5). Currently, under § 8.5, the utilities may create an excluded category where it is "clearly evident" that WMDVBEs do not provide a specified product or service. We do not believe Greenlining/LIF's suggested language, which would allow a utility to utilize exclusions if it can "overwhelmingly demonstrate" that there are no WMDVBE companies available and that it has engaged in best practices and very substantial efforts to encourage the development of such companies, will remedy the problem of conclusory justification to the Commission. Moreover, it may encourage litigation and argument as to what proof is necessary to "overwhelmingly demonstrate" the need for the exclusion.⁵

Finally, in order to provide the Commission with a useful summary of data surrounding the utilities' utilization of § 8.5 in the past, we require each respondent utility subject to GO 156 (as set forth in Section VIII of this order) to file and serve in this rulemaking a report containing the following information.

· Report each "excluded category" the utility has invoked in its annual WMDVBE report to the Commission each year since the initiation of GO 156 through 2002. The utility should report this information by category and by year.

· Report how much in dollars, as well as in percentage of dollars, are attributable to a utility's exclusions under § 8.5 (or its predecessor) each year since the initiation of GO 156. In years a utility has utilized a separate fuel procurement base pursuant to Rule 8.10, it should report this data both (a) separately; and (b) combined with the dollars attributable to § 8.5 exclusions.