A bombshell report published this week by City Journal and authored by Manhattan Institute senior fellow Christopher Rufo and investigative reporter Austen Hufford has exposed the full scope of California’s so-called LGBT Supplier Diversity Program, a scheme administered through the California Public Utilities Commission that pressures the state’s largest utility companies to direct no less than 1.5 percent of their total procurement to businesses that have been officially certified by the state as gay-owned.
Based on 2024 utility spending across California’s roughly 43 billion dollar annual procurement system, fully meeting that target would funnel approximately 633 million dollars per year to firms selected in part because of the sexual orientation of their owners.
The program did not begin with Gavin Newsom, though he has enthusiastically expanded it.
Its roots trace back to 1986, when then-Governor George Deukmejian signed Assembly Bill 3678, requiring certain CPUC-regulated utilities to submit annual plans for buying goods and services from woman- and minority-owned businesses.
Two years later, the CPUC created its formal Supplier Diversity Program to enforce those requirements.
Under a procession of Democratic governors, the program metastasized.
In September 2014, Governor Jerry Brown signed legislation requiring CPUC to recognize LGBT-owned businesses as eligible for supplier diversity benefits.
Five years after that, Newsom expanded the program further, encouraging companies across the energy sector to steer contracts toward gay-owned firms.
LGBT advocacy organizations and California’s legislative LGBT caucus then lobbied the commission to strengthen the procurement goals further, with the caucus at one point suggesting in a letter that even considering lower targets was an insult to the LGBTQ community.
The result is what the Rufo report describes in detail: a formal state apparatus for determining and certifying the sexual orientation of business owners.
Supplier Clearinghouse, the body that certifies firms for the CPUC program, presents applicants with a 13-item checklist of accepted documents.
To establish that a business is LGBT-owned, an applicant can provide a letter from an LGBT organization attesting to the owner’s sexual preferences; proof that a newspaper has identified the owner as LGBT; three letters from personal contacts written on company letterhead attesting to the owner’s homosexual orientation; a copy of a same-sex marriage or domestic partnership certificate; evidence of family-building efforts with a same-sex partner, including in vitro fertilization or surrogacy arrangements; or, remarkably, human resources complaints or police records claiming LGBT discrimination.
The National LGBTQ+ and Allied Chamber of Commerce, which also accepts certifications for the program, offers its own guidance to applicants with the encouraging note that certification is a journey, not a destination.
One supposes it is a journey that terminates at a utility contract, provided the paperwork is sufficiently gay.
The criminal dimension of this arrangement is perhaps the most remarkable element of all.
Under Assembly Bill 1678, signed by Governor Brown in 2014, any business owner who misrepresents their sexual orientation to obtain certification faces up to a year in prison.
California, a state that has effectively decriminalized retail theft under 950 dollars, has concluded that the most serious fraud requiring potential jail time is lying about whether you are gay enough to qualify for a utility contract.
The report includes the case of a participant who illustrated with brutal clarity how the certification machinery actually functions in practice. The individual in question, identified in the report as someone who helps pioneer internet technology, is a white male who underwent a gender transition and is now legally classified as a woman married to a woman. The person’s company, Red Ace, is registered in California as both a woman-owned and LGBT-owned business. To obtain the certifications, the owner submitted a domestic partnership affidavit to prove lesbian ownership, a post-transition birth certificate from Washington State, and a therapist care letter certifying transgender identity. These designations then opened the door to a cybersecurity contract with San Diego Gas and Electric. During the hiring process, a company official reportedly told the owner that being on the diversity list made the contract much easier to secure. If I were a straight, white male, said the owner, I might be concerned I don’t have the same opportunity. It worked out great for me.
That is not a success story for California ratepayers.
It is an admission that the program is doing exactly what it was designed to do: bypass merit based competition in favor of awarding contracts based on the sexual preferences and identity paperwork of business owners rather than the quality, price, and reliability of the services those businesses provide.
California consumers, who pay some of the highest utility rates in the nation, are footing the bill for this social engineering exercise every time they open a monthly electricity statement.
Harmeet Dhillon, the United States Assistant Attorney General for Civil Rights, wasted no time after the report dropped. She announced a federal inquiry into the CPUC program on June 17, posting directly on social media: Did they really think no one would notice? Affirmative action for Eskimos and LGBT people? The California Public Utility Commission’s Supplier Diversity Program has gone off the rails. This may be news to California, but race and sex discrimination violate federal law. Dhillon added pointedly in a separate interview that she did not know how who somebody sleeps with is relevant to their provision of utilities-related support services and described the program as straightforwardly inflationary, arguing that when sexual status becomes a commodity that can be sold, consumers pay for it in higher rates.
The program also runs directly into Proposition 209, passed by California voters in 1996 by a solid majority. Prop 209 explicitly prohibits the state from granting preferential treatment based on race, sex, or ethnicity in public employment, contracting, and education. California Democrats have spent the three decades since Prop 209 passed finding creative ways to work around it, and the CPUC’s LGBT contracting goals represent one of the more inventive attempts, since sexual orientation is not technically covered by Prop 209’s language even though the practical effect of the program is identical to the racial and gender contracting preferences the voters rejected.
It is worth dwelling on the practical results of the program because they are not even achieving the political goals used to justify its existence. In 2024, contracting between California’s large utilities and LGBT-certified businesses declined by five percent. Despite the state’s elaborate certification machinery and the political pressure applied on utilities to meet procurement targets, the program has been unable to generate even its own intended level of LGBT contracting activity. Of the more than 3,750 firms certified as minority-owned businesses in the Supplier Clearinghouse registry, only 451 are certified as LGBT-owned. The market for officially gay contractors in California is smaller than Sacramento Democrats imagined and declining.
The CPUC did not respond to requests for comment from the City Journal team before publication, which may say more about the commission’s defensiveness than any statement could. The program’s defenders within state government have offered the familiar argument that supplier diversity programs encourage utilities to reach new markets, increase shareholder value, and control costs, an argument that would be more persuasive if utility costs in California were not already among the highest in the country by a considerable margin.
Christopher Rufo, who has become one of the most effective investigative reporters exposing the practical machinery of progressive ideology inside American institutions, noted that the question the program’s architects never adequately answered is this: what precisely does the sexual orientation of a utility contractor have to do with the delivery of electricity, gas, water, or internet service? California can answer that question with a 13-point certification checklist and the threat of a year in prison. It cannot answer it with any coherent argument about why ratepayers should care.
Babylon Bee editor Kyle Mann offered a reaction that captured the absurdity with appropriate precision. If my writers had pitched this as a joke, he said, I would have rejected it for being too outlandish. That a sitting senior federal civil rights official now has to open a formal inquiry into whether California’s gay certification program violates federal civil rights law is not a punchline. It is the natural endpoint of an ideology that, when given sufficient institutional power and insufficient accountability, eventually loses all sense of the line between governance and political performance art.
The federal inquiry is in its early stages. Whether Dhillon’s Civil Rights Division ultimately moves to a formal enforcement action against the CPUC, pursues litigation, or limits itself to issuing a warning will depend on the legal analysis of whether the program’s structure constitutes actionable discrimination under federal civil rights statutes. Given that the program explicitly awards preferential contracting benefits on the basis of sexual orientation, a characteristic that is increasingly well established as a protected class under federal employment and civil rights law, the legal foundation for a challenge is not thin.
What is certain is that the exposure of this program is a reminder of what happens when a single party controls a state government without meaningful opposition for long enough. California’s utilities are not run for the benefit of California ratepayers. They are run, at least in part, as an instrument of progressive social policy, a framework in which buying a hammer from a firm owned by a gay business owner is treated as more socially valuable than buying the same hammer at a better price from a firm whose owner has the wrong demographic characteristics.
