Electric and gas utilities regulated by the state commission are to fund the program by collecting $60 million a year for 10 years. Peevey said the surcharge would add 25 to 30 cents per month to bills of the customers of private utilities such as Pacific Gas & Electric.
The commission doesn't have the authority to assess the surcharge on customers of government-owned utilities, he said.
Gov. Arnold Schwarzenegger and environmental groups supported the project, while some lawmakers and consumer groups had lined up against it, calling it an unfair tax.
The plan does not require approval of the governor or Legislature.
Under the plan, the institute must raise matching funds.
Board member John Bohn was among those wary of the plan, saying it pushes the boundaries of the board's legal jurisdiction "almost to the breaking point." But he wound up voting for it, saying it could make positive contributions.