A publicly funded, world-class research institute that would develop answers to the threat posed by climate-changing greenhouse gases is being crafted in the Legislature, and is among the last-minute proposals expected to come before the Legislature in the closing days of this year's legislative session.

The plan differs sharply from the original blueprint proposed by California's top utilities regulator, state Public Utilities Commission President Michael Peevey. Legislation encompassing the new, estimated $87 million-a-year plan is likely to be completed within a few days.

At time when public attention is focused on California's $15.2 billion budget shortage, the proposed California Institute for Climate Change has flown largely under the radar. But it has become the target of an intense lobbying campaign by a number of academic institutions who want to host the institute -- and its ability to attract top-flight scientific talent. Among those vying for the CICC is a Southern California consortium of UCLA, USC, CalTech and the Jet Propulsion Laboratory; the University of California at Berkeley, UC San Diego, Stanford University and others, Capitol sources say. Thus far, nobody has the inside track, although Peevey himself is believed to favor Berkeley, and it remains possible that the institute may be housed in multiple locations.

The institute is the latest example of Californians being asked to pay for reducing the state's greenhouse gas emissions. The California Air Resources Board is currently concluding economic modeling that would help determine the cost of implementing AB 32, the 2006 legislation that requires the state to cut greenhouse gas emissions to 1990 levels by the year 2020.

Proponents of the institute say it will lure scientific innovation to California and help stoke the growing industry of developing green technologies. Critics say it is a publicly subsidized power play led by Legislative Democrats and Peevey.

In April, the PUC unanimously approved creating the institute, a brainchild of Peevey, which would dispense research funds, about $60 million a year, collected from ratepayers of the state's three major investor-owned utilities, or IOUs-Pacific Gas & Electric, Southern California Edison and San Diego Gas & Electric. The money, about 12 cents to 20 cents extra per month on the average bill, would go to research into global warming, with grants approved by the CICC's governing board and staff.

Republican Gov. Arnold Schwarzenegger embraced the plan, saying it would "bring together the state's preeminent colleges, universities and laboratories to fight climate change."

But lawmakers were suspicious, at least in part because they saw in the CICC a power play engineered by Peevey and his top ally in the Capitol, the governor's chief of staff, Susan Kennedy, a former PUC member. The Legislature's legal counsel questioned the legality of the proposal - a contention rejected by Peevey, who said that issue had been raised largely by "dueling lawyers."

As envisioned by the PUC, the Institute would be co-chaired by Peevey, who would also serve as a key member of CICC's executive committee. Up to 10 percent of the $600 million collected over the next decade would go to administrative costs, under the original plan. "Sixty million dollars a year to deal with the greatest challenge of our times," Peevey, the former head of Southern California Edison, recently told a Senate hearing. To date, the PUC has not begun collecting the surcharge, pending the outcome of the political battle in the Legislature.

Peevey's chief of staff, Nancy Ryan, was not immediately available for comment. But in an earlier interview with Capitol Weekly, she said the legal issues had been examined closely.

"This is obviously an issue that was raised right from the very start of the proceeding. There is nothing new in there. Our attorneys examined the arguments that they (Legislative Counsel) raised and did not find them persuasive. We do indeed think we have the authority, to protect ratepayers in the short term and in the longer term."

But key lawmakers, including Sen. Christine Kehoe, D-San Diego, chairwoman of the Senate energy committee, were not convinced. A new plan, still a work in progress, is being drafted that differs markedly from the original PUC-approved proposal. The new plan is expected to be more expansive, and draw its funding from a variety of funding sources, including utility rates for both the investor-owned utilities like Edison and PG&E, a well as municipal utilities in Los Angeles, Sacramento and elsewhere.
Language to create the institute will be put into a bill, SB 1760 authored by Sen. Don Perata, D-Oakland, later this week.

The new plan would collect money from customers of the state's municipal utilities -- those owned and operated by the public -- which include the Department of Water and Power in Los Angeles and the Sacramento Municipal Utilities District. The governance of the Institute would be headed by a board that includes representatives of the Air Resources Board, the California Energy Commission, the governor's office and the Senate and Assembly.

Some of the money, perhaps as much as $30 million annually, would come from the Public Interest Energy Research program, or PIER, which was created 11 years ago to encourage energy development. With the additional funds from the municipal utilities, and other sources, the Institute would have an estimated $87 million annually, nearly 50 percent more than Peevey's original plan, although the final figure has not yet been ascertained.

The percentage of administrative costs would be cut in half to 5 percent, not 10 percent, and the top governing board would have broad authority over the Institute's direction, although it would not have day-to-day authority over staffing.

The changes in part reflect the desire by Senate Democrats to exercise greater public control over the Institute.

"The money would go to applied research and "green" workforce development, which is a new element," Kehoe said. "We want to try and make sure that these advanced ideas are manufactured here in California and that we are able to export that new, high technology around the world. Climate-change technology will be invaluable." A fundamental approach of the new plan, she added, is to develop a "broad-based funding source, so all Californians are chipping in."

Behind the discussion over then sources of funding is the basic issue of power. Who should rule the Institute? At a legislative hearing in May, Kehoe said the Legislature - or at least, the majority Democrats - had grown suspicious of the PUC in such things as broadband regulation and power customers' direct access to the energy market.

"And now the climate institute. We are getting a feeling on the legislative side that our only alternative is to exercise more vigorous oversight, because counting on you to communicate directly to this committee or the Senate on what your proposal is and your plans going doesn't seem to be happening," Kehoe said.

Peevey said Kehoe's comments were "an overstatement," although referring to communication with lawmakers, he said, "maybe it could be a lot better." He indicated that an academic-based, independent research entity operating apart from state regulators - such as those at the ARB - would be valuable.