Supporting Economic Vitality Through Supplier Diversity Initiatives

As a major purchaser of goods and services, PG&E has a significant potential to help diverse businesses grow and to strengthen the state and local economies in the communities we serve. PG&E is committed to providing women-, minority-, and service-disabled-veteran-owned business enterprises (WMDVBE or diverse enterprises) with the economic opportunities to supply products and services required by the Utility. In an effort to achieve these goals, PG&E enacted a Supplier Diversity Program in 1980.

Creating Successful Partnerships with Diverse Suppliers to Better Serve Our Customers

In 2006, PG&E achieved its highest level of diversity spending in the 26-year history of the program—$491.9 million, a $133.4 million (or 37 percent) increase over 2005. PG&E's WMDVBE purchases in 2006, as a percentage of overall purchases, were 21.7 percent, compared to 19.4 percent in 2005. And, in 2006, PG&E met the target established by the California Public Utilities Commission (CPUC) for procurement from diverse firms for the first time since 2002.

Most notably, significant improvement was achieved in spending with minority-owned business enterprises (MBEs). The 2006 total of $333.8 million, or 14.8 percent of our overall spending, represented a $97.9 million (or 42 percent) increase over 2005. The largest increase in MBE spending went to business enterprises run by minority men. Spending with this group in 2006 totaled $259.9 million, a $98.8 million (or 61 percent) increase over 2005. Spending with business enterprises run by women in 2006 also expanded, totaling $137.2 million, or 6 percent of our overall expenditures. This represents a $35.7 million (or 35 percent) increase over 2005.

Diverse Supplier Spending Targets

Category	CPUC Target (%)	PG&E’s 2006 Results (%)
Minority Men	12.0	11.4
Minority Women	3.0	3.3
Minority Business Enterprise (MBE)	15.0	14.8
Women Business Enterprise (WBE)	5	6
Subtotal Women, Minority Business Enterprise (WMBE)	20	20.8
Service-Disabled-Veteran Business Enterprise (DVBE)	1.5	0.9
Total WMDVBE	21.5	21.7

PG&E's success in meeting our diverse supplier spending targets was the result of an outreach strategy, the foundation of which rests on targeted partnerships with our communities. For example, we work collaboratively with community organizations to increase training, certification and contracting opportunities for diverse suppliers. To facilitate this, PG&E added six members to the supplier diversity department in 2006. And, while we initiated new efforts, we continued our work with key organizations that foster and support the growth of WMDVBE suppliers, such as the California Hispanic Chamber of Commerce, the United States Pan Asian Chamber of Commerce, the California Black Chamber of Commerce, the American Indian Chamber of Commerce, the Women Business Enterprise National Council, and California Disabled Veteran Business Enterprise Alliance.

Overall, in 2006, PG&E participated in 103 outreach events and partnered with 25 organizations to promote opportunities for diverse suppliers and increase the pool of qualified diverse suppliers available to PG&E and other businesses in California. These events and partnerships resulted in PG&E awarding a multi-year contract to Twining Laboratories, a disabled-veteran business enterprise located in Fresno. PG&E also awarded a multi-year contract to Stillwater Sciences, a woman-owned business that provides environmental studies, licensing of hydroelectric projects and biological consulting for endangered species.

Looking ahead, PG&E has worked with a woman/minority-owned firm with extensive supplier diversity program development, education, implementation and outreach experience to develop a revitalization strategy for 2007 and beyond, focused on the economic development benefits of supplier diversity. Key components of the strategy include: executive leadership and commitment, employee engagement, an effective communication plan and targeted outreach in areas where diverse procurement performance is underutilized.

PG&E will hold internal training for directors and managers in 2007 to ensure that all decision-makers understand the business case for supplier diversity. In addition, Supplier Diversity will launch focused legal and financial efforts to increase procurement opportunities for diverse suppliers.

Through these efforts and initiatives, we hope to increase our supplier diversity to 25 percent of total procurement by the end of 2007 and 30 percent by 2010.