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Probe Into PUC Contracts Sought

Utilities: Minority- and veteran-owned firms claim they were excluded from $100 million worth of energy conservation outreach work.


SACRAMENTO — Four small-business organizations have called for a state investigation into how utility regulators awarded more than $100 million in contracts for local outreach programs to encourage energy conservation.

Statewide groups representing disabled veterans and minority-owned companies alleged last week that the California Public Utilities Commission had engaged in "disturbing and potentially illegal" contracting practices that had prevented their members from vying for the contracts. They said their organizations had never been notified and that the bidding procedures had been flawed.

This summer the PUC awarded almost 100 contracts to promote use of fluorescent lightbulbs, energy-efficient appliances and better insulation in homes and businesses. The program, along with others, is funded though a public service charge on each customer's utility bill.

The PUC took the contract awards out of the hands of the utilities in an effort to foster more innovative and effective methods of encouraging conservation as the state seeks to avert another energy crisis.

The program funds everything from education to energy-efficiency installations. But it has stirred controversy--first over the selection of an Oregon subsidiary of Enron for a $3.3-million contract in Bakersfield, then over whether any contracts should go to out-of-state companies.

Now, some small-business groups are saying that they did not get a fair shot at the money.

In a July 22 letter to Clothilde Hewlett, interim director of the Department of General Services, they alleged that the PUC did not follow state contracting law in the bid process, did not reach out to small businesses and did not engage in competitive bidding.

PUC officials defended the bidding as fair and said state contracting rules did not apply to the contracts because the money came from ratepayers, not the state treasury. They also noted that the contracts are between the utilities and the companies and that the PUC merely selects the contractors.

Aubry Stone, president of the California Black Chamber of Commerce, said, "I am sure they are trying to find a technicality somewhere.... Is the PUC a state agency, or are they accountable to no one?"

Paul Clanon, head of the PUC's energy division, said that about 10% of the money had gone to businesses owned by women or members of minority groups and that the bidding had been so well publicized that about 250 people had applied.

The Black Chamber of Commerce, California Disabled Veterans Alliance, California American Hispanic Chamber of Commerce and Council on Asian Business Assn. voiced the protest to General Services, which oversees most state contracting.

Stone said the groups expect the agency to serve aggressively as a watchdog in the contracting dispute, especially since the recent legislative hearings into the Davis administration's award of a much-criticized computer contract to Oracle Corp.

"They will be sensitive to how the PUC went out with this, whether or not it is public money or private money," he said.

General Services officials said they were studying whether the energy conservation contracts approved by the PUC fall under the state contracting code. "These complaints are under review," said spokesman Ken Hunt. "Whether they are valid or not, we will have to see."

After a San Francisco Chronicle columnist reported that a subsidiary of Enron's Portland General Electric had won a $3.3-million contract, the commission voted in June to eliminate the award on grounds that Enron was in bankruptcy and was under investigation for alleged misconduct during the energy crisis.

Over the dissent of PUC President Loretta M. Lynch, the panel decided not to strip the contract awards from other out-of-state companies.

Some commissioners argued it would be unfair and illegal to discriminate against non-California companies.

Clanon of the PUC said that the out-of-state awards represented about $11 million. "That gives the lie to the notion that we are not reaching out," he said. "We're reaching out so much, we got in trouble for it."

Kevin O'Connor, president of the California Disabled Veterans Alliance, said he believes the PUC awards violated a section of the state contracts code that requires outreach efforts to attain a 3% goal for participation by businesses owned by disabled veterans.

"Things like this go on all the time, but this $100 million is a nice big amount," he said.

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