BILL ANALYSIS Ó SENATE COMMITTEE ON APPROPRIATIONS Senator Ricardo Lara, Chair 2015 - 2016 Regular Session AB 2271 (Quirk) - Electricity: research programs: peer review ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: June 13, 2016 |Policy Vote: E., U., & C. 6 - 2 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: August 8, 2016 |Consultant: Narisha Bonakdar | | | | ----------------------------------------------------------------- This bill meets the criteria for referral to the Suspense File. Bill Summary:1) AB 2271 requires the CPUC to establish a procedure for the independent peer review of a research program if the program will cost one million dollars or more, and requires that the independent peer review is conducted in accordance with the procedure. Fiscal Impact: Approximately $361,000 (Utilities Reimbursement Account) for staff positions to draft, release, and administer contracts with independent research entities to continually provide reviews of proposed research. Approximately $250,000 per year on average, varying year to year, for peer review contracts. Background:1) CPUC-regulated electrical corporations conduct and administer research. These research programs are often included in CPUC rate cases to recover costs through rates. The CPUC may allow AB 2271 (Quirk) Page 1 of ? electrical corporations to use ratepayer funds if it determines investments made with those funds will be in the public interest and are just and reasonable. Between 2009 and 2014, the CPUC approved about $400 million in ratepayer funds for research and development. The majority of these funds were approved without review by experts in the field of research being funded, because the CPUC does not have such a process in place. Some funds have been awarded to sole-source projects. The CPUC does not require peer review of ratepayer-funded research proposals. As evidence of the need for such review, the author relays the story of the CPUC decision, in 2012, to authorize ratepayer funding of research at Lawrence Livermore National Lab (LLNL). In 2012, the CPUC authorized the investor-owned electric utilities (IOUs - PG&E, SCE, SDG&E) to enter into a five-year research and development agreement with LLNL. The CPUC authorized ratepayer funding of the 21st Century Energy Systems (CES-21) program at costs of $30 million per year to be collected by the IOUs and transferred to LLNL. The Utility Reform Network and the then-named Division of Ratepayer Advocates (DRA) both opposed the decision. The CPUC identified that LLNL has expertise in supercomputing facilities and analysis, which will be central to conducting the research. In response to an inquiry from DRA, the utilities stated that even though they were aware of other supercomputing facilities within California, they had not contacted or evaluated those facilities to determine if they would be appropriate or cost-effective for the CES-21 program. However, they also stated that such an evaluation would be made for specific proposals to be funded by CES-21 by the CES-21 Board of Directors. Subsequent to the funding decision, the CPUC developed a set of criteria that each funded project must adhere to, called the Cooperative Research and Development Agreement. While the criteria do not include "peer review" of proposals explicitly, it is required that each proposal has the support of a majority of the Board of Directors. The Board of Directors consists of six members: three from academia or research institutions and AB 2271 (Quirk) Page 2 of ? three from the utilities. The author contends the LLNL research funding proposal would have benefitted from peer review and serves as justification for the need to require peer review of research proposals. In addition to the 2012 LLNL proposal, the CPUC approves tens of million in ratepayer-funded research annually. Proposed Law: This bill: 1)Defines "research programs" as a program for the development of novel and innovative processes that are proposed by electrical corporations for approval by the CPUC and that would be funded through the rates of ratepayers of the electrical corporations. 2)Specifies that Research programs do not include programs that are funded pursuant to the Public Interest Energy Research, Demonstration, and Development Program. 3)Requires the CPUC to establish a procedure for the independent peer review of a research program proposed by an electrical corporation that will cost one million dollars or more. 4)Requires the independent peer review to be conducted in accordance with the CPUC's procedures. 5)Specifies that eth bill does not apply to research program that is directly reviewed and approved by the CPUC. 6)Requires the CPUC to make the review available on its website. -- END -- AB 2271 (Quirk) Page 3 of ?