BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          AB 2271 (Quirk) - Electricity:  research programs:  peer review
          
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          |Version: June 13, 2016          |Policy Vote: E., U., & C. 6 - 2 |
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          |Urgency: No                     |Mandate: No                     |
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          |Hearing Date: August 8, 2016    |Consultant: Narisha Bonakdar    |
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          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  







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          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  








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          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.


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