The Justice Department's civil rights chief is investigating California's state-run program that steers $633 million in utility contracts annually to businesses certified as gay-owned, calling the scheme illegal.
Harmeet Dhillon did not mince words. "I don't know how who somebody sleeps with is relevant to their provision of utilities-related support services," the Assistant Attorney General for Civil Rights told Glenn Beck this week. "That's rhetorical. I think we know it isn't." She added plainly: "I think this is illegal."
The target is the California Public Utilities Commission's Supplier Diversity Program, which sets a goal of directing 1.5 percent of utility procurement toward businesses certified as LGBT-owned. At the scale California's regulated utilities operate, that works out to roughly $633 million a year. Dhillon's Civil Rights Division announced Wednesday it is opening a formal inquiry.
The program has operated largely out of public view since the CPUC expanded it in 2014 under then-Governor Jerry Brown. It drew wider attention this month after the Manhattan Institute's City Journal published a detailed account of how the certification process actually works. To obtain LGBT-owned status, an applicant can submit a letter from any LGBT organization attesting to their sexual orientation, evidence that a newspaper identified them as LGBT, or three letters from personal contacts written on company letterhead making the same attestation. Any corporate official who "falsely represents" their business as gay-owned faces up to a year in county jail.
The legal theory here is straightforward, and Dhillon has spelled it out in writing: "race and sex discrimination violate federal law." A program that funnels contracts based on whom a business owner sleeps with is, in her framing, discrimination on the basis of sex, the same category the Civil Rights Act was written to prohibit. She has encouraged companies that believe they lost utility contracts because they were not certified as LGBT-owned to consider their own legal options.
The CPUC pushed back, with a spokesperson describing the program as voluntary and noting it has roots going back almost 40 years. That framing is doing some heavy lifting. "Voluntary" in this context means utilities are not legally required to hit the 1.5 percent target, but the state commission publicly tracks and reports compliance, and the implicit pressure on regulated entities to cooperate with their regulator is not subtle. The City Journal reporting that sparked the current scrutiny noted utilities have moved to meet those targets in practice.
This is not the first time Dhillon has drawn a straight line between DEI contracting programs and federal anti-discrimination law. Since taking the Civil Rights Division role, she has made clear the division will treat identity-based set-asides the same way it treats other forms of prohibited discrimination, regardless of which identity is being favored. The California probe fits that pattern directly.
The Broader Confrontation
Governor Gavin Newsom's California has been a consistent target of the Trump administration's second-term enforcement agenda, from immigration to environmental regulations to education funding. The CPUC investigation adds another front. Unlike some of those fights, this one does not pit the federal government against a California statute on policy grounds; it puts the federal anti-discrimination law Dhillon oversees squarely against a state-run procurement program whose certification mechanism is, on its face, based entirely on sexual identity.
That creates a cleaner legal target than some DEI programs, which can shelter behind race-neutral justifications or aspirational language. The CPUC program is explicit: a business qualifies because of the sexual orientation of its owner, certified by attestation. There is no other criterion. Dhillon has said publicly that she thinks that is enough to make it illegal.
The investigation is in its early stages. What Dhillon's office does next, whether it moves toward a formal complaint against the CPUC or presses the utilities directly, will be the test of how far the administration intends to push the theory. Any litigation would likely reach federal court well before California's next gubernatorial cycle, giving Newsom a fresh battleground heading into whatever political ambitions he is nursing for 2028.
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