A Senate budget subcommittee threatened to slash the California Public Utilities Commission\u2019s budget for voting to create a $600 million University of California climate change institute without legislative approval. \u201cWe applaud your innovation and creativity, but it is illegal,\u201d Senator Alan Lowenthal (D-Long Beach), Senate Budget & Fiscal Review Subcommittee chair, told commission representatives during a May 5 hearing. On a 3-0 vote, the budget subcommittee recommended cutting $60 million in the agency\u2019s annual budget if regulators refuse to negotiate a deal acceptable to lawmakers. It agreed, on a 2-1 vote, to examine the portion of the CPUC budget not funded by the state\u2019s general fund. Those are known as \u201coff budget\u201d special-funded programs. The CPUC is an independent body under the California Constitution. However, while it has regulatory independence the Legislature has power over the purse strings for the commission and all other state agencies. That authority includes bringing off budget commission programs on budget. Last month, the CPUC unanimously approved spending $60 million of ratepayer money annually for the next decade to create a University of California climate change research institute. In spite of the 5-0 vote cast April 11, the proposal by CPUC president Mike Peevey troubled some of the other commissioners because of its high price tag, particularly given the costs ratepayers already bear for energy efficiency, solar, other renewable programs, and greenhouse gas reduction measures. To address their concerns, Peevey modified the institute blueprint to require increased oversight, tighter conflict-of-interest rules, and mandate that the institute line up matching funds. This week, Nancy Ryan, Peevey\u2019s advisor, told the budget panel that the global warming institute was another ratepayer-funded measure \u201cto push the outside of the envelope to have the next generation of technology be deployed.\u201d It aims to lower the cost of energy technologies with a lighter or carbon-free footprint, and ultimately ratepayers\u2019 utility bills, she said. The budget subcommittee is concerned that ratepayers are being saddled with the cost of an institute that focuses on a global problem, not one limited to investor-owed utility customers. It may reconsider the matter at a May 20 hearing if an agreement is reached on the institute funding \u201cWe want negotiations to begin immediately,\u201d Lowenthal said. Lawmakers and the governor are in the midst of their annual state budget tug-of-war. The governor\u2019s May state budget revise is expected next week. The constitutional division between the CPUC and lawmakers took an additional beating this week in the Senate Energy, Utilities & Communications Committee. Republican senators said during a May 6 energy committee hearing that the ever-increasing price of energy is exacerbating the state\u2019s economic problems. \u201cThere are certain limits to power,\u201d said Senator Bob Dutton (R-Rancho Cucamonga). He and others grilled Peevey over regulators\u2019 move to spend ratepayer money on the development of new R&D and other programs to lighten the electricity sector\u2019s carbon footprint. Peevey, defending the state\u2019s investment in alternative energy, said that the price of negating greenhouse gases is negligible in the face of \u201cthe biggest challenge of our time.\u201d He invoked the brain trust of the state\u2019s university system. \u201cWe want to pull them together. That\u2019s the motivation,\u201d he told senators. Democratic senators zeroed in on regulators\u2019 legal right to set up what they expect to become a $600 million research and development institute at a yet-to-be-determined University of California campus--the same concern as the budget committee. Senate committee chair Christine Kehoe (D-San Diego) echoed Lowenthal\u2019s warning that the CPUC needs statutory authority to set up a university institute. Kehoe also appeared vexed by the amount of funds involved in the agency\u2019s process to comply with the state\u2019s climate protection law, AB 32. \u201cAB 32 doesn\u2019t make it a free-for-all,\u201d Kehoe said. She told Peevey that the Legislature is considering \u201cvigorous oversight\u201d of the commission due to the university project.