A plan pushed by California’s top utilities regulator to set up a ratepayer-financed, $60 million-a-year institute at the University of California is running into opposition in the Capitol, where the legislators’ lawyer says the scheme is illegal and angry lawmakers sense a ploy to circumvent their authority. Michael Peevey, the president of the Public Utilities Commission, described the California Institute for Climate Solutions as a “groundbreaking path to find solutions to the most pressing problem of our time.” Republican Gov. Arnold Schwarzenegger, following the PUC’s unanimous vote in April to approve the institute, agreed, saying the new facility would “bring...