2. Background

On September 20, 2007, the Commission issued an OIR as part of its continuing effort to aggressively pursue creative and cost effective ways to reduce GHG emissions in the energy sector within California. The OIR included a proposal from UC to establish the CICS, hosted at UC, funded by ratepayers at a proposed level of $60 million per year for 10 years, dedicated to supporting California's research institutions in initiating applied and directed research with an emphasis on the development and rapid transfer of the knowledge gained to the electric and gas sectors for implementation. The OIR established that the proceeding would focus on the appropriate governance structure for the institute, on priorities for research and technology development that would benefit utility ratepayers by reducing GHG emissions, and on establishing a funding mechanism for the Institute.

The OIR invited parties to comment on UC's proposal. The California Council on Science and Technology (CCST), California Farm Bureau Federation (CFBF), CSU, CalTech, the Community Environmental Council (CE Council), Consumer Federation of California (CFC), DRA, the Energy Producers and Users Coalition (EPUC), the Indicated Producers (IP) and the Western States Petroleum Association (WSPA), Environmental Defense, Greenlining Institute (Greenlining), Independent Energy Producers (IEP), Morrison and Foerster, LLP (Morrison and Foerster), Natural Resources Defense Council (NRDC), PacifiCorp, Pacific Gas and Electric Company (PG&E), Southern California Edison Company (SCE), San Diego Gas & Electric Company and Southern California Gas Company (SDG&E/SoCalGas) Southern California Generation Coalition (SCGC), Stanford, USC, The Utility Reform Network (TURN), and UC filed comments on the proposal in the OIR. UC's comments included a refined proposal that incorporated many changes in response to questions and concerns that parties raised in response to the initial UC proposal. Alliance for Retail Energy Markets (AReM), CCST, CalTech, DRA, Greenlining, IEP, Merced Irrigation District and Modesto Irrigation District (MID/MID), Morrison and Foerster, NRDC, PacifiCorp, PG&E, SCE, SDG&E/SoCalGas, Stanford, USC, and UC filed response comments.

A workshop was held on December 12, 2007 and presentations were made by numerous stakeholders, including UC, Stanford, USC, CSU/CC, the California Institute for Energy and the Environment, the Commission's Energy Division (ED), PG&E and SCE, other state agency programs, including the Public Interest Energy Research (PIER) Program under the California Energy Commission (CEC) and the California Air Resources Board (CARB), environmental groups, including NRDC, and ratepayer and consumer groups. Post-workshop comments were received from SDG&E/SoCalGas, MID/MID, NRDC, DRA, Greenlining, and the CE Council.

We greatly value the input and comments received by all parties. Opening, reply, and workshop comments are summarized and attached in Attachment D.

On February 11, 2008, the proposed decision (PD) was issued. Comments were received by March 3, 2008 from CCST, CFC, CE Environmental Council, DRA, EPUC/IP/WSPA, Greenling, IEP, NRDC, PG&E, SCE, SDG&E/SoCalGas, SCGC, Utility Consumers' Action Network (UCAN), California Manufacturers and Technology Association (CMTA), and California Hydropower Reform Coalition (CHRC).⁵ Replies were received from CFC, DRA, SCE, TURN, and UC.

Overall, parties were generally supportive in their comments on the Institute and its mission and recognized the efforts that the PD made to incorporate many of the suggestions posited during the comment process. We appreciate, however, parties continued attempts to suggest ways we could clarify issues, correct errors, and make the Institute a reflection of the Commission's leadership in addressing global warming and climate change, while being mindful of our obligations to ratepayers. We acknowledge that not all comments were supportive and we seriously considered the arguments raised against the establishment of the Institute, either in toto, or because it is funded by a surcharge on ratepayers.

In response to both the supporting and opposing comments, we made many minor corrections and changes, and we incorporated suggested modifications in the following areas:

¬ We amend the Charter to function as a stand-alone document without reference to the decision. We clarify that the Charter cannot be changed without approval of the Commission;


¬ We specify steps and procedures that ensure more oversight, governance and involvement by the Commission with the Institute and in particular with the approval of the selection of the non-ex officio appointments to the Governing Board and appointments to the Executive Committee, approval of the Strategic Plan, proposed annual budget, annual reports and IP policies and protocols specific to the Institute.


¬ We state that customers whose rates are capped under AB 1X and customers eligible for California's Alternative Rates for Energy (CARE) program will be exempt from paying for the electric and gas surcharge to fund the Institute. Consistent with D.04-02-057, total (commodity plus non-commodity) residential electric rates for usage up to 130% of baseline remain unchanged.


¬ We now require more of an on-going consultation and collaborative process between the Institute Executive Director and the Commission on the preparation of the annual report, budget and Strategic Plan. Once these reports are submitted to the Commission, the Executive Director shall be available for a question and answer session at a public meeting of the Commission;


¬ We clarify that the Institute, its funding and its functions, are to work in concert with, but not duplicate, the programs implemented pursuant to AB 32, as well as the Commission's ongoing efforts in the areas of EE and clean energy;


¬ We added a requirement that 100% of the $600 million ratepayer investment will be matched with non-ratepayer funds over the 10-year life of the Institute;


¬ A ratepayer benefit index is to be a key component of the Strategic Plan that will then inform the grant selection process from solicitation through selection. Grant applications are to include a discussion of the ratepayer benefits the specific research project is expected to produce and the grant selection process must rank proposals based upon a ratepayer benefit index. Proposals with no discernable ratepayer benefit will not be chosen for CICS grant funding;


¬ Ratepayer funding is to be used as a catalyst for matching funds from other sources, and the Annual Report submitted by the Institute Executive Director will describe efforts each year to secure non-ratepayer funding, with a 100% match expected annually beginning in Year 5; and each year the Institute Executive Director will report, in the Annual Report, on efforts to secure non-ratepayer funding; and


¬ The Intellectual Property (IP) discussion now reflects changes so that the Technology Transfer Subcommittee (TTS) will establish IP policies and protocols specific to the Institute and submit them to the Commission for approval. We direct the TTS to return at least 10% of net revenues to ratepayers unless violative of any laws.

¬ Instead of the Commission making a determination in this decision about what kind of workforce development and education may be needed, the Workforce Transition Subcommittee (WTS) will study whether there is a need to support the energy sector's transition to a carbon-constrained future through anticipating and preparing for the resultant changes through workforce development and report back to the Commission on the study within six months of the Institute's inception. If the study supports having the Institute fund grants for the emerging workforce development, the Commission can allocate an appropriate percentage of Institute funds for that purpose. The Commission must act on the WTS report within three months.

⁵ Concurrently with the filing of comments, UCAN, CMTA and CHRC filed Motions for Party Status, which are hereby granted.