A recent report commissioned by the California Hispanic Chambers of Commerce (CHCC) has revealed that California’s Community Choice Aggregators (CCAs) are woefully behind in contracting with the state’s diverse small businesses. Community Choice Aggregators are a much newer set of energy agencies regulated by the California Public Utility Commission (CPUC). The report called “Failure to Diversify” found that CCAs contracted with diverse firms for less than 0.1% of purchases, cutting women, minority, disabled veteran and LGBT business enterprises out of $1.2 billion of economic opportunity when compared to investor-owned energy utilities.
“California is home to the nation’s largest and fastest growing segment of diverse small businesses,” said Julian Canete, president and CEO of CHCC. “We are extremely concerned at the lack of progress in procurement opportunities for those small businesses as set forth and required by General Order 156, adopted by the CPUC. Despite being a critical part of California’s economic post pandemic recovery, small and diverse-owned businesses have missed out on $1.2 billion in contracting opportunities, a situation that is unacceptable and must be remedied now.”
Passed and adopted in 2002, Assembly Bill 117 authorized cities and counties to form their own agencies to procure electricity for individual customers within their own jurisdiction. These agencies, called Community Choice Aggregators compensate regulated utilities for the cost of electricity transmission and distribution to CCA customers. California’s first CCA, Marin Clean Energy, launched in 2010 and today there are 14 different CCAs around the state that are registered with the California Public Utilities Commission (CPUC).
“For more than three decades, General Order 156 has proven that when women, minority, and other diverse businesses finally get the opportunity to compete, they often beat their competition,” said State Sen. Steven Bradford (D-Gardena), the author of several measures expanding supplier diversity requirements. “But it is clear that CCAs must step up on diverse procurement if they want the moral as well as economic leadership positions they want. Their lack of meaningful diverse spending shows they are not creating real jobs or contracting opportunities. The only diversity they seem to represent is in the communities that they claim to serve, but actually take advantage of. Much more must be done, and I appreciate that this report focuses attention on the need to increase GO 156 procurements across all providers, particularly from CCAs.”
In 1988, the California Public Utilities Commission (CPUC) adopted General Order 156 in response to calls from policy makers and the public to increase opportunities for diverse small businesses to contract with corporations regulated by the CPUC. General Order 156 requires energy utility, water and telecommunications companies overseen by the CPUC to provide an annual report of their percentages of contracts given to women, minority, disabled veteran and LGBT business enterprises, collectively referred to as “WMDVLGBTBE firms.”
Recognizing that promoting the interests of diverse businesses strengthens the overall state economy, GO 156 Section 8 set forth procurement goals for regulated utilities, requiring that companies establish plans to purchase at least 21.5% of each major category of products and services from diverse outside vendors, including 15% for minority-owned firms, 5% for women-owned firms, 1.5% for disabled veteran-owned firms, and goals to be established for LGBT-owned firms. In 2020, the state’s four large, regulated energy utilities contracted with WMDVLGBTE firms for 39% ($8 billion) of a total of $20.6 billion of products and services.
“CCA’s have been around for almost 20 years so it was shocking to see supplier diversity outcomes this low,” said José Atilio Hernández, Chairman of IdeateLABS, a statewide policy think tank issued the report commissioned by the Hispanic Chambers on the Failure to Diversify report. “As of 2020, California law requires CCA’s to take an initial step toward meeting CPUC requirements to contract with diverse businesses by requiring reporting of outcomes. Now that we see the numbers, it is clear that additional action is required for CCA’s to make meaningful progress toward meeting the state’s equity contracting goals.”
Following the 2019 expansion of G0 156 reporting requirements to CCAs through Senate Bill 255, CCAs filed their first Supplier Diversity Procurement Reports in 2021. The result was a dismal less than 0.1% of purchases, clearly cutting WMDVLGBTE businesses out of $1.2 billion of economic opportunity when compared to investor-owned energy utilities.
The CHCC is demanding the CCAs rectify this abysmal situation immediately and recommends the following steps for the consideration of regulators and policymakers if CCAs are to meet the CPUCs 21.5% diverse contracting goal or match the 40% average seen by CPUC-regulated investor-owned energy utilities:
Require GO 156 Contracting Goals for CCAs. The Legislature stopped short of requiring the same 21.5% diverse contracting goal contained in GO 156 for CCAs. As a result, CCAs stopped well short of that contracting goal, procuring less than 0.1% of total procurement through WMDVLGBTE firms. CCAs therefore must be included in GO 156.
Public Hearing on CCA Supplier Diversity. These findings regarding 2020 supplier diversity outcomes should be subject to a CPUC hearing to elicit feedback and guidance on how to help CCAs meet the diverse contracting goals of GO 156, especially as the Legislature and
Commission considers our recommendation to include CCAs in GO 156.
A Moratorium on New CCAs. Until CCAs are formally brought into the GO 156 Supplier Diversity Program, we recommend a moratorium on creating any new CCAs. These agencies have advanced policy conversations around the need to accelerate progress toward our renewable energy and climate change objectives. But these efforts cannot come at the expense of the state’s diverse small businesses, who we see losing out on billions of dollars as CCAs take on more procurement responsibilities in the energy supply chain.
