Racial Preferences in Energy Bill Are Unconstitutional

Energy construction projects soon subject to racial hiring preferences

by Hans Bader

Virginia’s new Democratic legislature is passing an energy law that contains racial preferences. But to try to get around constitutional restrictions on racial discrimination, it is primarily targeting such preferences to “predominantly-minority areas,” rather than to minority individuals. This doesn’t immunize this legislation against a constitutional challenge, but it does complicate things for challengers.

Both houses of the Virginia legislature have passed passed the “Virginia Clean Economy Act” (VCEA). It will increase residents’ utility bills a lot in the years to come. It also provides jobs and job training reserved for areas that are predominantly minority or predominantly lower income (HB 1526 and SB 851).

The VCEA requires a utility, in constructing an offshore wind generation facility, to “give priority to the hiring of local workers, including workers” from “a community in which a majority of the population are people of color.” Such facilities are likely to cost billions to construct, paid for by higher utility bills.

The VCEA also requires that 50% of deficiency payment revenue from the RPS (Renewable Energy Portfolio Standard Program) be directed to “job training programs” and 30% of revenue be directed to “renewable energy programs” in “historically economically disadvantaged communities,” which include low-income communities or any “community in which a majority of the population are people of color.” This is expected to be a lot of revenue, because it is what utilities will pay if they fail to hit their renewable energy targets, and few expect them to meet their targets.

This large cost will be paid for by Virginians on their electric bills. As Steve Haner of the Thomas Jefferson Institute notes, the cost of these payments will be passed on to utility customers: “Will the deficiency payments (fines?) hurt utility bottom lines? Oh no, line 1518 [of the VCEA] makes it clear that ratepayers will cover for any utility failures, with money collected through – you guessed it – another rider charge on their monthly bills.”

These benefits for predominantly-minority areas constitute a racial preference in the eyes of the federal constitution, despite their geographic rather than person-specific racial application. For example, the Supreme Court ruled that redrawing a city’s boundaries to effectively disenfranchise black people was racially discriminatory and unconstitutional in Gomillion v. Lightfoot, 364 U.S. 339 (1960).

An appeals court ruled that a provision mandating that public housing be put in “predominantly white” areas was racially discriminatory and thus presumptively unconstitutional, in Walker v. City of Mesquite, 181 F.3d 98 (5th Cir. 1999).

Just as bombing a bus because most of its passengers are black would be racially discriminatory, giving an area benefits because of the race of most of its inhabitants is racially discriminatory. But when these racial preferences are challenged, defenders of the legislation will likely argue they aren’t racial preferences, because the jobs and job training they offer are also available to whites who live in predominantly-minority regions, not just minorities. Based on the court rulings, I have cited above, this argument should be rejected. But it is true that not all race-conscious actions are racial preferences forbidden by the Constitution, if they aren’t designed to allocate benefits or burdens in a racially-preferential way. For example, courts have said that at-large elections for a city council can be replaced with district elections if at-large elections disadvantaged minority candidates. But the Virginia Clean Energy Act is designed to provide benefits in a racially-preferential way, for predominantly-minority areas.

Racially preferential legislation is presumptively unconstitutional, even when it aims to help historically disadvantaged minorities. The Supreme Court made that clear in striking down the City of Richmond’s affirmative action plan for black people, who had historically been subjected to segregation in that City. (See Richmond v. J.A. Croson Co., 488 U.S. 469 (1989)).

But as the Supreme Court also recognized, racial preferences are not always unconstitutional. A government affirmative action program for minorities will be upheld when it is needed to remedy the present effects of recent past discrimination by the government itself.

But the fact that Virginia was once a segregated state was not, and is not, enough to justify a racial preference for minorities. The government has to have discriminated against minorities in the recent past, not twenty or more years ago, before it can legally adopt a race-based affirmative-action plan to remedy that discrimination. (See Hammon v. Barry, 812 F.3d 826 (D.C. Cir. 1997) (14-year-old discrimination was too long ago to justify affirmative action today)).

The government has to point to discrimination by the government itself, not societal discrimination, to justify such affirmative action — according to the Supreme Court’s Croson decision.

If the government is knowingly complicit in discrimination by a government contractor, that may count as discrimination by the government itself, but otherwise, discrimination by private companies doesn’t count. And only intentional discrimination, not unintended racial disparities or “disparate impact,” counts, as federal appeals courts have noted. (See Builders Association v. Chicago, 256 F.3d 642, 644-45 (7th Cir. 2001)).

The City of Richmond was half black, but the Supreme Court’s Croson decision said it couldn’t guarantee blacks 30% of city contracts, much less 50%. It couldn’t require that the racial makeup of the city’s contractors reflect the racial composition of the city’s population, or anything like it.

The government has to point to systemic discrimination, not just a few individual instances of discrimination, to justify race-based affirmative action. (See Middleton v. City of Flint, 92 F.3d 396, 405 (6th Cir. 1996)).

The government cannot require that private corporations, regulated entities, or public utilities have racial preferences in employment in the name of “diversity” or to remedy “underrepresentation.” (See Lutheran Church–Missouri Synod v. FCC, 141 F.3d 344 (4th Cir. 1998)).

So the Virginia legislature does not appear to have any justification for including these racial preferences in its energy law. It’s not as if Virginia is an unusually racist state. Virginia has had black state officials for a long time, including the first black governor in America since Reconstruction (Douglas Wilder, elected in 1989).

Virginia utility customers may have legal standing to challenge these racial preferences, because they will drive up their utility bills. The state’s public utilities, such as Dominion Energy, are allowed to recover their costs plus a reasonable rate of return. This energy legislation not only allows this rate of return, but specifically blocks the State Corporation Commission from questioning the reasonableness of various costs or excluding them from Dominion’s rate base. So the increased costs of these benefits for predominantly-minority areas will be passed on to state residents in the form of higher electric bills. (The Virginia Clean Energy Act will increase Virginia residents’ electric bills substantially. The State Corporation Commission estimates that a single offshore wind project shielded from scrutiny by the legislation will add $11-13 per month to the typical customer’s electric bill).

In federal court, anyone who pays higher electric bills as a result of this racial preferences would have legal standing to challenge the preferences, because court rulings recognize such standing. (See, e.g., CEI v. NHTSA, 901 F.2d 107, 111-13 (D.C. Cir. 1990) (‘high prices” due to regulation gave consumers standing to challenge the regulation); Community Nutrition v. Block, 698 F.2d 1239, 1248 (D.C. Cir. 1983) (consumers could challenge exactions imposed on milk handlers, which allegedly would be passed on to consumers)).

People outside of predominantly-minority areas will also have legal standing to challenge the reservation of jobs and job training for people in predominantly-minority areas, if they apply for such jobs or job training and are rejected, or if they declare that they would have applied for a specific job or job training program if it were not limited to predominantly-minority areas. For example, the Supreme Court ruled that a college student had legal standing to challenge the University of Michigan’s use of race in college admissions, because he declared under penalty of perjury that he would apply for admission as a transfer student if that university were ordered to stop giving minority applicants an edge in admissions. (See Gratz v. Bollinger, 539 U.S. 244 (2003)).

Hans Bader, an attorney, lives in Northern Virginia.

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10 responses to “Racial Preferences in Energy Bill Are Unconstitutional

  1. Another name for these bills is race based theft by Virginia’s government in order to transfer vast amounts of other people’s money and jobs to “people of color” in order to buy their vote. The harm this government initiated theft will inflict on our society, and all peoples and groups involved, is beyond calculation.

  2. Jim. Ever hear of “set asides” that have been around for half a century? Why this obsession with race?

    • Even assuming a racial classification is proper, the classification is both over- and under-broad in violation of the Constitution.

      By using geographic areas as the basis of classifications and tying discriminatory treatment to residence in such areas: 1) non-people of color residing in those areas are treated differently than non-people of color who do not reside in those districts; and 2) people of color residing in those areas are treated differently than people of color who do not reside in those districts.

      The Democratic Party of Virginia, in its obsession with virtue signaling, has return to its racist roots.

  3. “Why this obsession with race?”

    Exactly!

    A good question for Hitler and the Old South too. Why this obsession with race?

    Why?

    • One, among many answers to Why here, also might be that:

      The Democrats of the old south in Virginia depended on people of color as slaves for free labor in old south version of Virginia.

      While:

      The Democrats today in Virginia depend on people of color for free votes, bought with other people’s money, so as to keep today’s people of color captive and dependent on Democrats as they were in old Virginia.

      Hence, we get the Democrat’s endless obsessions over race, creating ever more imaginary versions of color and ever more minute versions of racial discrimination and grievances. Not to mention the ever more ridiculous ways for Democrats to signal their own virtue and everyone else’s alleged racism.

  4. I think, Peter, Bader is telling you that the racial set asides you think are commonplace have already been struck down by the courts….you are right, these are no different, and thus they are also constitutionally suspect. The same point was made by one of the other lawyers who commented on my piece. So not just Hans on this one…..

    In this case, I do think the “obsession with race” is on display in the bill, not in Bader’s or my concerns that we are going down the wrong road here. Great politics, of course, but very bad regulatory policy. It’s a fair question, if there are going to be preferences on electricity, where will it stop? Why for offshore wind but not for solar or onshore wind? It seems nobody really wants a racially neutral approach after all….

    There is no similar prohibition on using poverty (but not race) to means test rates, but that’s still a bad precedent to start.

  5. Another one to consider is:
    HB 432 Public utilities; contracting with small, women-owned, or minority-owned businesses.
    “Provides that in any proceeding in which the State Corporation Commission is required to determine whether costs incurred by a public utility in its delivery or provision of any goods or service are reasonable or prudent, the incremental portion of the costs incurred as a result of its contracting with a small, women-owned, or minority-owned business to deliver or provide the goods or service will not be found to be unreasonable or imprudently incurred if the costs of contracting with the small, women-owned, or minority-owned business do not exceed, by more than three percent, the costs that would have been incurred had it used the lowest-cost qualified business. The measure applies to businesses that are certified as small, women-owned, or minority-owned by the Department of Small Business and Supplier Diversity.”

    Delegate Davis, whom I generally can’t stand, called out Delegate Carroll Foy on the House floor with a grammar question regarding he construction of the bill. Due to the comma placement it was his interpretation (and mine) that the provisions apply to “small, women-owned” and/or “minority-owned” business, regardless of size in the case of the latter. Carrol Foy’s snippy response, the bills means what the bill says.

    Having had more than my fair share of dealing with 8A set asides given to “Native American” entities, ie a shell company with an Inuit tribe acting as the figurehead, that provide subpar products/services at the Federal level and then forming a new shell company with the same principals and a different name to bid on the follow on contract, I’m not a fan. Since I now leave in a minority majority county, does that mean I am eligible to bid on the contract, or in the alternative, if I decide to self-identify as a female am I eligible to bid on the contract?

  6. Steve. I believe set asides are a little more complicated than that.

  7. They are more complicated. Bader misses one vulnerability of the set asides in the bill, which is (as James Bacon points out) that they cover Asians and Hispanics, not just African-Americans, who have a long history of being discriminated against in Virginia. The Supreme Court’s Croson decision faulted Richmond for including non-blacks like Eskimos and Aleuts in its set-asides even though it was blacks who had experienced government-sponsored racism in the city. That was an additional reason for striking the city’s set-aside ordinance down. Some courts have struck down racial preferences based solely on the fact that they included non-black people like Asians in set-asides that might have been warranted for black people. For example, the New Jersey courts’ 2001 decision in the L. Feriozzi Concrete decision.

    On the other hand, Bader omits court rulings that upheld racial set-asides, especially for African-Americans, selectively citing the decisions that applied “strict scrutiny” most stringently against such set-asides, by requiring proof of very purposeful, systematic discrimination against minorities. So Bader overstates the vulnerability of the bill insofar as it aims to help African-Americans.

    The racial provisions of the bill could very well be struck down, but that is not certain. Also, establishing standing to sue over these provisions may be more complicated than Bader suggests. There are reasons why racial set-asides continue to exist in Virginia, such as obstacles to establishing standing. Many people lack standing to sue over a set-aside, or their claim becomes moot. Contractors associations are deemed to have a conflict of interest that vitiates their standing, according to federal judges in Virginia.

  8. Government choosing winners and losers….
    Will this ever come to an end????
    Is that in the State Constitution???

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