California Democrats continue to be beyond parody. As a new City Journal report highlights, the Golden State is now giving preferential treatment to “LGBT businesses” that complete an official state-sanctioned “gay certification program.”
The program has its roots in a 1986 bill signed by Republican Governor George Deukmejian, which required certain utility companies to submit annual plans for buying goods from women- and minority-owned companies to the California Public Utilities Commission (CPUC), the state agency charged with regulating utility companies.
Power distributors, like any other major industry, must find suppliers for everything from fuel to surveyors and engineers. The 1986 law created a “Supplier Diversity Program” and set goals for what percentage of utility companies’ purchases should come from women- and minority-owned businesses.
The definition of what counted as a “minority”-owned business inevitably expanded over time. In 2014, Democrat Governor Jerry Brown signed legislation bringing “LGBT-owned businesses” under the umbrella of companies eligible for “diversity” benefits. Governor Gavin Newsom expanded it further in 2019, bringing more of California’s energy sector into the program.
And just how did California Democrats go about determining which businesses were gay enough to be counted as an LGBT-owned business? With mountains of paperwork, of course.
The state published a list of ways that businesses could become eligible for the Supplier Diversity Program. One is to provide a letter from an “LGBT organization.” Another option is to submit three letters from “personal contacts” written “on company letterhead” attesting to the homosexual orientation of the business owner. As City Journal also reports, “Corporate officials who ‘falsely represent’ their business as gay face up to a year in county jail.”
By 2024, CPUC was pressuring California utilities to allocate 1.5 percent of their total contracting volume to LGBT-owned firms. While that may not sound like a lot, California utilities spent more than $43 billion on contractors that year. Had the biggest utilities met the 1.5 percent target, that would’ve translated to $633 million in contracting fees.
City Journal highlighted one certified contractor, Mary Ann Horton, who identifies as transgender, whose firm is registered in California as both woman- and LGBT-owned. Horton told the outlet that San Diego Gas & Electric hired the company as a cybersecurity contractor and that the diversity listing made the deal easier to land.
But while some individuals like Horton benefit from the program, there simply are not enough certified LGBT-owned businesses to meet the needs of the utility companies. The state clearinghouse lists only 451 LGBT-certified firms. Procurement from LGBT-owned businesses actually decreased by five percent in 2024.
That shortage creates its own incentive problem. Once regulators demand identity-based contracting, utilities have reason to search for certified vendors wherever they can find them, including for work far removed from the basic task of delivering power, gas, water and communications services.
Many utility companies are government-protected monopolies, and their customers cannot take their money elsewhere. Whatever costs regulators allow can eventually land on captive ratepayers.
Californians already pay some of the highest power rates in the country. In March 2026, the state’s residential average hit 33.35 cents per kilowatt-hour — roughly double the national rate.
At this point, readers are likely asking, “How can any of this be legal?” The answer: it’s not – on multiple fronts.
As City Journal again reports, in 1996, California voters approved Proposition 209, barring the state from discriminating against or granting preferential treatment to individuals or groups on the basis of race, sex, color, ethnicity or national origin in public employment, education and contracting. In 2020, voters rejected Proposition 16, an effort to repeal that ban.
California’s gay-certification program appears to violate that law. While CPUC claims that its “goals” for contracting with LGBT businesses are not “quotas,” CPUC “cajoles utilities into compliance by requiring them to collect extensive demographic data, submit detailed annual reports, list their plans for increasing procurement from favored groups, and explain ‘any circumstances that may have resulted in not meeting’ their procurement ‘goals.’”
The Department of Justice has also weighed in and said that the program violates federal civil rights law. U.S. Assistant Attorney General Harmeet Dhillon announced last week that she was opening an inquiry into the program.
“I don’t know how who somebody sleeps with is relevant to their provision of utilities-related support services. That’s rhetorical. I think we know it isn’t,” Dhillon told podcast host Glenn Beck. “It’s nonsense, it needs to stop, and it’s illegal.”
There is something deeply unsettling about a society that sorts businesses into categories like “black-owned,” “woman-owned,” or “LGBT-owned” before asking whether they can actually do the job well. In Democrat locales, merit, competence, and value for the customer are now secondary concerns to identity politics and “equity” interests.
Californians do not need utility companies hunting for the right “diversity” box to check. They need reliable service at the lowest possible cost from whoever can deliver it best – no matter their racial background or sexual orientation. Democrats’ failure to deliver on even this basic responsibility should be a warning for the rest of the country.
Sarah Katherine Sisk is a proud Hillsdale College alumna and a master’s student in economics at George Mason University. You can follow her on X @SKSisk76.
