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.