California’s Public Utilities Commission is pressuring the state’s regulated utilities — PG&E, Southern California Edison, SoCalGas, and others — to steer roughly $633 million in annual procurement toward businesses certified as “LGBT-owned.” Under General Order 156, as expanded by Assembly Bill 1678 in 2014 and given numerical targets in a 2022 CPUC decision, large utilities must pursue aspirational goals of 1.5 percent of their spending with firms at least 51 percent owned and controlled by lesbian, gay, bisexual, or transgender individuals. To qualify, owners must submit documentation through the Supplier Clearinghouse proving their sexual orientation or gender identity — letters from LGBT organizations, personal references attesting to orientation, certificates proving a same-sex partnership, or similar proofs. False certification can bring fines and up to a year in county jail.
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This state-mandated favoritism is not a neutral procurement policy. It is state-compelled identity preference in the contracting process for essential services. Such heavy-handedness by a state agency to favor one political group over another violates the Equal Protection Clause of the Fourteenth Amendment.
That clause commands that no state shall “deny to any person within its jurisdiction the equal protection of the laws.” When the government classifies citizens for differential treatment in economic opportunity, it must justify the line it draws. Here, California draws the line by sexual orientation and gender identity. Thus, business owners who happen to be straight, or who decline to certify their private lives, are placed at a systematic disadvantage in competing for hundreds of millions in utility work. That classification is arbitrary and unsupported by the kind of evidence the Constitution demands.
The Supreme Court has repeatedly rejected government efforts to allocate economic benefits or burdens on the basis of group identity without strong justification. In City of Richmond v. J.A. Croson Co. (1989), the Court struck down a 30-percent minority set-aside in municipal construction contracts as violating the Equal Protection Clause. The Court held that such programs trigger strict scrutiny: The government must show a compelling interest in remedying its own identified discrimination and must narrowly tailor the remedy. Statistical underrepresentation alone proved insufficient. The 30 percent figure was “chosen arbitrarily” and not tied to any measured injury. California’s 1.5 percent LGBT goal suffers from the same flaw. No rigorous disparity study demonstrates that LGBT-owned firms are systematically excluded from utility contracting because of their owners’ sexual orientation rather than firm size, location, expertise, or bid competitiveness. The CPUC simply imported the category by legislation and then set a target.
The logic of Students for Fair Admissions v. President and Fellows of Harvard College (2023) reinforces the point. The Court rejected race-based admissions because the programs stereotyped individuals, used race as a “determinative tip,” and pursued group balancing rather than treating applicants as individuals. The same principle applies when the government uses sexual orientation or gender identity to allocate economic benefits in regulated industries. Once the state begins sorting citizens into favored and disfavored identity groups for contracting access, it abandons the requirement that the government treat people as individuals rather than avatars of demographic categories.
Even under rational basis review — the most deferential standard — the program fails. A classification must be rationally related to a legitimate government interest. “Diversity in the supply chain” or “economic equality” for one identity group is not legitimate when it requires the state to police sexual orientation through intrusive certification and to pressure private utilities (subject to state regulation) to favor one class of owners over others. The Supreme Court has struck down classifications that rest on nothing more than political favoritism or irrational assumptions about groups (City of Cleburne v. Cleburne Living Center, 1985). The governmental promotion of sexual orientation for preferential treatment in utility procurement while ignoring every other voluntary characteristic is textbook arbitrary line-drawing.
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Bass fishermen do not receive procurement goals. Registered Republicans do not. Members of the local kite-flying association do not. These examples are not frivolous. They illustrate the constitutional problem creed by California’s foolishness. State governments may not pick private hobbies, political affiliations, or voluntary associations and hand their members an advantage in competing for state-influenced contracts. If sexual orientation qualifies for such favoritism, then any other self-identified group with a plausible narrative of “barriers” can demand the same. The categories multiply, the verification becomes more invasive, and equal protection collapses into a contest of political clout.
The program’s defenders will claim that it remedies “unique barriers.” Yet recent data show LGBT individuals starting new businesses at rates near or exceeding their share of the population. High-growth funding gaps exist for many groups; they are not unique to sexual orientation, nor have they been shown to stem primarily from discrimination in utility bidding. The certification process itself — demanding proof that one is “gay enough” — reveals the incoherence and deliberate intent to promote one group over others. Sexual orientation is not an immutable trait like race that can be verified by objective records. It is private conduct and self-identification. Forcing disclosure for economic advantage burdens liberty and invites fraud, exactly as the jail time penalty acknowledges.
California could pursue legitimate goals without violating equal protection. It could expand race-neutral small-business programs; reduce regulatory barriers for all bidders; focus on socioeconomic disadvantage; or simply award contracts on price, quality, and competence. Those approaches treat citizens as individuals rather than members of identity groups. The current regime does the opposite.
The Equal Protection Clause does not permit the state to divide its citizens into identity classes and then tilt the economic playing field accordingly. Bass fishermen, Republicans, kite flyers, and straight business owners are entitled to the same neutral rules as everyone else when competing for utility work. California’s LGBT procurement preference fails that test. It should be repealed or enjoined.
Don Brown is a former Navy Judge Advocate who served at the Pentagon. A graduate of the University of North Carolina at Chapel Hill and the international law program at the Naval War College, he is a nationally bestselling author of 16 books and commentator on national security, military justice and military affairs, and foreign policy. He previously served as a special assistant United States attorney and was a candidate for the United States Senate from North Carolina.
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