A report published by Christopher Rufo in City Journal has ignited a fresh wave of scrutiny regarding a California utility contracting program that promotes the allocation of procurement funds to businesses certified as LGBT-owned. The program, overseen by the California Public Utilities Commission (CPUC), has drawn criticism from a high-ranking federal civil rights official and conservative commentators, who question its legal basis and alignment with existing non-discrimination statutes.
"I agree that it’s illegal. I don’t know how who somebody sleeps with is relevant to their provision of utility-related support services. It’s nonsense and it needs to stop." — Harmeet Dhillon, Assistant Attorney General of the Justice Department’s Civil Rights Division
The CPUC's Supplier Diversity Program establishes contracting goals for major utility companies across California, encouraging them to direct a portion of their annual procurement spending toward businesses designated by the state as underrepresented. These groups include firms owned by women, minorities, and, since 2014, LGBT individuals. The utility sector in California reportedly accounts for over $43 billion in annual procurement activity.
According to the City Journal report, if utilities were to fully meet the LGBT procurement targets established under the program, approximately $633 million in contracts would be directed to certified LGBT-owned firms. These targets have seen a progressive increase in recent years, rising from 0.5 percent in 2022 to 1 percent in 2023, and reaching 1.5 percent for the current year, 2024. At current spending levels, full compliance with these goals would represent a substantial financial commitment to certified businesses.
The initiative has become a focal point of debate, particularly concerning its potential conflict with California's Proposition 209. This voter-approved measure, enacted in 1996, explicitly prohibits preferential treatment based on race, sex, color, ethnicity, or national origin in public employment, education, and contracting within the state. Critics argue that the CPUC's supplier diversity framework, particularly the identity-based preferences, runs counter to the spirit and letter of Proposition 209. State regulators, however, maintain that the benchmarks are voluntary goals and not mandatory quotas.
Attention to the program escalated after Assistant Attorney General Harmeet Dhillon, head of the Justice Department’s Civil Rights Division, publicly addressed the program during an interview with Glenn Beck. Dhillon raised concerns about the program's compliance with federal law. "I agree that it’s illegal. I don’t know how who somebody sleeps with is relevant to their provision of utility-related support services," Dhillon stated. "It’s nonsense and it needs to stop." She further reiterated her concerns on social media, asserting that the CPUC’s Supplier Diversity Program had "gone off the rails" and indicating that the Civil Rights Division "will take any appropriate action" to address what she described as race and sex discrimination violating federal law.
Christopher Rufo, who authored the City Journal report, also highlighted the program during a Fox News appearance. He characterized the system as one that integrates demographic classifications into public contracting decisions, arguing that government-related contracts should be awarded based solely on merit, cost-effectiveness, and performance, rather than identity-based categories.
The origins of the supplier diversity framework trace back to 1986, when then-Governor George Deukmejian (R) signed legislation requiring utilities to develop procurement plans aimed at increasing contracts with minority- and women-owned businesses. The CPUC subsequently formalized these requirements under its Supplier Diversity Program. The program was expanded in 2014 under then-Governor Jerry Brown (D), who signed legislation mandating the commission to recognize LGBT-owned businesses as eligible participants. Further broadening occurred in 2019, when Governor Gavin Newsom (D) encouraged expanded participation within California’s energy procurement system.
Advocates for stronger implementation, including LGBT advocacy organizations and members of California’s legislative LGBT caucus, have previously urged regulators to strengthen procurement goals and enhance representation within utility contracting programs.
Businesses seeking certification under the program must apply through the Supplier Clearinghouse, an entity that reviews documentation to verify eligibility for various designations, including LGBT-owned. Applicants may be required to submit materials such as letters from LGBT organizations or other supporting records, depending on program guidelines. Mary Ann Horton, an internet pioneer whose company, Red Ace, secured both woman-owned and LGBT-owned certifications, told City Journal that the process necessitated extensive documentation. Horton noted that these designations assisted her company in obtaining contracting opportunities, stating, "If I was a straight, white male, I might be concerned I don’t have the same opportunity. It worked out great for me."
The CPUC did not provide a response to a request for comment regarding the report and the ongoing debate. The program continues to face scrutiny, with proponents asserting that it broadens access to contracting opportunities for business owners from underrepresented groups, while critics contend that procurement decisions should be based strictly on merit, cost, and performance, not identity.
