INTRODUCTION - California

?Decision 20-08-020August 6, 2020 ASK Initials "Enter your initials in all CAPS (e.g. ATTY)" [/d "ATTY"]Initials \* MERGEFORMAT ASK AgendaNo "Enter the agenda item number (e.g. CA-4)" [/d "Agenda Item No."] \* MERGEFORMAT Before The Public Utilities Commission Of The State Of CaliforniaPetition of Quad Knopf, Inc. dba QK to Adopt, Amend, or Repeal a Regulation Pursuant to Public Utilities Code § 1708.5.Petition 17-10-011 ASK CaseNo "Enter the case number for this decision. If there is more than one, separate by hard returns." [/d "Case Number"] \* MERGEFORMAT ASK FilingDate "Enter the filing date for this case (Month day, year). If there is more than one case, separate with hard returns and keep in the same order as the case numbers they refer to." \* MERGEFORMAT ORDER DENYING rehearing of Decision (D.) 18-03-021INTRODUCTIONIn this Order, we dispose of the Application for Rehearing of Decision (D.) 18-03-021 (Decision) filed by Quad Knopf, Inc. dba QK.In October 2017, QK filed a Petition to Adopt, Amend, or Repeal a Regulation pursuant to Public Utilities Code Section 1708.5. In its Petition, QF asked the Commission to repeal Commission General Order (GO) 156, and repeal or refuse to enforce Sections 8281-8286, alleging they violate Proposition (Prop.) 209 by granting preferential treatment on the basis of race and gender in public contracting.To provide some context to QK’s Petition and the Application for Rehearing at issue here, a brief summary of Sections 8281et seq., GO 156, and Prop. 209 is useful.Section 8281 et seq. was enacted in 1987 to address the fact that women and minority-owned business enterprises have traditionally received less than a proportionate share of regulated public utility procurement contracts. The statutes were subsequently amended in 1990 and 2014 to encompass disabled and LGBT-owned business enterprises, respectively. The statutes apply to electrical, gas, water, and telephone corporations, as well as wireless telecommunications service providers with gross annual revenues exceeding $25 million, and their Commission-regulated subsidiaries and affiliates. They require the utilities to submit annual plans with short and long-term goals, timetables, and methods for encouraging and increasing the participation of women, minority, disabled veteran, and LGBT business enterprises (WMLGBTBEs) in procurement contracting. The statutes also require the Commission to establish implementing guidelines and criteria. GO 156 contains the Commission’s implementing guidelines and criteria. Its purpose is to ensure that WMLGBTBEs have the maximum practicable opportunity to participate in the performance of utility contracts. Among other things, the GO requires each affected utility to set specified and verifiable short-term, mid-term, and long-term goals for the utilization of WMLGBTBEs in utility purchases and contracts.In 1996, California passed Prop. 209, now codified as Cal. Const., art. I, § 31. In relevant part, Section 31 states:The State shall not discriminate against, or grant preferential treatment to, any individual or group on the basis of race, sex, color, ethnicity, or national origin in the operation of public employment, public education, or public contracting.(Cal. Const., art. I, § 31(a).)In the Decision challenged here, we denied QK’s Petition to repeal GO 156 and repeal or refuse to enforce Section 8281 et seq. We found that Cal. Const., art. III, § 3.5 bars agencies such as the Commission from repealing or refusing to enforce statutes such as Sections 8281 et seq. We also found that GO 156 does not violate Prop. 209 and its constitutional ban against preferential treatment in public contracting. QK filed a timely Application for Rehearing challenging our Decision. QF does not take issue with the disabled veteran or LGBT aspects of GO 156. But as to women and minority-owned businesses, QK reiterates its claim that GO 156 requires preferential treatment in violation of Prop. 209 and Cal. Const., art. I, § 31. No responses were filed. DISCUSSIONThe Commission is bound by law to implement Section 8281 et seq. and by extension GO 156.QK states that it understands we cannot declare Section 8281 et seq. unconstitutional, thus it does not directly challenge those statutes. But it states that because the statutes were enacted prior to voter approval of Prop. 209, we should “reconsider” implementation of GO 156. (Rhg. App., p. 1.) QK does not specifically say what it means by “reconsider.” But presumably, QK means that we should simply not implement or enforce GO 156. That is not an option the Commission can lawfully choose. Sections 8283 and 8284 explicitly require this Commission to implement and enforce the WMLGBTBE statutes through our own program rules and guidelines. By not implementing or enforcing GO 156, we would effectively be refusing to enforce Section 8281 et seq. And that is prohibited by Cal. Const., art. III, § 3.5, which states:An administrative agency, including an administrative agency created by the Constitution or an initiative statute, has no power:(a) To declare a statute unenforceable, or refuse to enforce a statute, on the basis of it being unconstitutional unless an appellate court has made a determination that such statute is unconstitutional; (b) To declare a statute unconstitutional; (c) To declare a statute unenforceable, or refuse to enforce a statute on the basis that federal law or federal regulation prohibit the enforcement of such statute unless an appellate court has made a determination that the enforcement of such statute is prohibited by federal law or federal regulations. QK neither claims nor establishes that any appellate court has determined Section 8281 et seq. to be unconstitutional or prohibited by federal law or federal regulations. Unless and until that happens, the statutes remain good law and must be enforced. In this case, they are enforced through GO 156. Thus, we cannot “reconsider,” i.e., refuse to implement and enforce, GO 156.GO 156 does not require or result in preferential treatment of women and minority-owned businesses in violation of Prop. 209 and Cal. Const., art. I, § 31. QK acknowledges that GO 156 is not unconstitutional in the sense of requiring quotas in utility contracting. But it argues that GO 156 does require utilities to give preferential treatment to women and minority-owned businesses - a preference that other people, specifically white males, do not enjoy. (Rhg. App., pp. 1-2, citing e.g., Hi-Voltage Wire Works, Inc. v. City of San Jose (Hi-Voltage) (2000) 24 Cal.4th 537; C&C Construction, Inc. v. Sacramento Municipal Utility District (C&C Constr.) (2004) 122 Cal.App.4th 284.)QK’s reliance on Hi-Voltage and C&C Constr. to suggest that GO 156 results in preferential treatment is misplaced. In Hi-Voltage, the Court found that a City’s affirmative action program was unconstitutional because it did more than just require contractors to conduct outreach and encourage bids by women and minority business subcontractors. By contrast, GO 156 is limited to outreach efforts that only seek to encourage program participation. The GO directs utilities to use their best efforts to satisfy the guidelines. But the program goals are merely targets. They are not requirements or quotas. And the GO expressly prohibits the utilities from using set-asides, preferences, or quotas in administering their WMLGBTBE programs. C&C Constr. also fails to show that GO 156 is unconstitutional. In that case, a municipal utility’s affirmative action program admittedly granted preferential treatment. The issue was whether such treatment was necessary to maintain federal funding within the exception allowed under the State Constitution. (C&C Constr., supra,122 Cal.App.4th p. 291.) That was not the situation here, thus C&C Constr. is not relevant. Nevertheless, QK contends that by requiring the utilities to submit detailed plans and reports regarding their efforts to comply with GO 156, the Commission sends a clear message that utilities must apply preferences, rendering racially neutral outreach insufficient. (Rhg. App., p. 3, citing Bras v. California Public Utilities Commission (Bras) (1995) 59 F.3d 869.) We disagree.We are aware of no legal authority that suggests requiring plans and reports such as those required by Section 8281 et seq. and GO 156 results in preferential treatment, or is otherwise unlawful. And Bras fails to support any such claim. The only issue there was whether the plaintiff (Bras) had legal standing to bring a claim under Sections 8281 et. seq. The Court found that Bras did, but it did not express any opinion as to whether Section 8281 et seq. or GO 156 effectuated any discriminatory treatment. (Id. pp. 873-876.) Finally, QK ignores that as recently as 2015, the California Court of Appeal considered the constitutionality of GO 156 and found it to be lawful. In distinguishing certain conduct of Pacific Gas and Electric Company from the Commission’s GO 156 program, the Court stated: PG&E’s conduct, as alleged, could not have been necessary to comply with GO 156 because both GO 156 and PUC decisions make clear that the utilities are not authorized or permitted to give preferential treatment to minority enterprises….the PUC stated…in prior decisions…our [minority enterprise diversity] program is an equal opportunity program, aimed at maximizing participation of [minority enterprises] in utility procurement contracting. It is not a set-aside program….utilities are not authorized or permitted to design their [minority enterprise diversity] programs utilizing set-asides, quotas, preferences, or preferential treatment….The utility retains its authority to use its legitimate business judgement to select the supplier for a particular contract….The PUC could not have stated more explicitly that utilities are not permitted to achieve theirGO 156 goals by use of preferences.(PegaStaff v. Pacific Gas & Electric Company (PegaStaff) (2015) 239 Cal.App.4th 1303, 1326-1327.) Accordingly, we find that QK fails to establish that GO 156 is unconstitutional or that the challenged Decision is unlawful.CONCLUSIONFor the reasons stated above, we deny the Application for Rehearing of D.18-03-021 because no legal error was established. THEREFORE, IT IS ORDERED that: 1.The Application for Rehearing of D.18-03-021 is denied.2.This proceeding, Petition (P.) 17-10-011 is closed.This order is effective today.Dated August 6, 2020, at San Francisco, California.MARYBEL BATJER PresidentLIANE M. RANDOLPHMARTHA GUZMAN ACEVESCLIFFORD RECHTSCHAFFENGENEVIEVE SHIROMA Commissioners ................
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