Governor Gavin Newsom is backing away from his high-profile call for the California Legislature to cap oil company profits and will instead ask lawmakers to increase transparency and oversight of the industry.
The governor’s amended proposal, announced Wednesday afternoon, would give the California Energy Commission more power to investigate gasoline price spikes and the ability, through a public hearing, to cap profits and to penalize oil companies, Newsom’s aides said.
“What we are asking for is simple: transparency and accountability to bring the oil industry out of the shadows,” Newsom said in a statement. “Now is the time to choose whether to stand with California families or with Big Oil in our fight to make them play by the rules.”
newsom called for the rapid adoption of a sanction against oil companies in October when he announced his intention to call state lawmakers into special session to rein in the excessive profits of the oil industry. He accused oil companies of gouging prices at the pump after gasoline prices soared above $6 a gallon.
But determining the level at which refinery profits should be penalized has become a political hot potato in Sacramento. Democrats feared the plan could backfire due to the complicated nature of oil markets, the industry’s lack of transparency and fears it could have unintended consequences for gasoline prices.
Newsom’s office in December gave lawmakers an outline of its plan to cap industry profits when it called the special session, but left it to lawmakers to determine the limits on those profits.
For more than three months, the legislature held only one hearing on the proposal. State senators appeared concerned about the plan, and experts encouraged the state to take more time to investigate and understand the problem before adopting a solution.
Newsom’s new proposal would shift that responsibility to the Energy Commission, but his aides acknowledged there will be no requirement for regulators to cap profits or penalize the industry. The five members of the committee were appointed or reappointed by Newsom.
Republican House Leader James Gallagher of Yuba City criticized Newsom’s choice to leave the decision to the commission.
“No matter how many bogus investigations he asks, no matter what kind of ‘penalty’ he offers, there’s one indisputable fact – California drivers are paying more than they should in taxes. , fees and regulations imposed by Governor Newsom and his extreme liberal allies,” Gallagher said in a statement. “If Democrats give unelected bureaucrats the power to impose this new tax, they will be responsible for shortages, rationing, gas lines and the price spikes that come with it.”
The governor’s office said that with increased regulatory authority, the commission will be empowered to prevent the kinds of gasoline price spikes that consumers have experienced in the past year.
The bill would create an independent watchdog within the commission with subpoena power to monitor gas prices and investigate spikes. Oil companies would also be required to provide more data to the state to help regulators understand prices.
Dana Williamson, Newsom’s chief of staff, said the governor’s office “has worked closely with experts and the legislature to get it right.”
“It’s the only one of its kind in the country, and it’s really going to put in place an oversight entity that’s going to watch the industry every day,” Williamson said. “The Energy Commission will then be able to act on the findings that emerge from the work of the division.”
Jamie Court, president of Consumer Watchdog, applauded the governor’s plan to increase state oversight of the industry.
Newsom’s deal with lawmakers includes a requirement for oil refiners to report maintenance to the state in hopes of preventing a rapid and unexpected drop in gasoline production in California.
California depends on only a handful of petroleum refiners, which are not required to report scheduled maintenance to the state. When multiple refineries end up cutting production at the same time due to routine equipment work or unforeseen problems, supply goes down and prices go up.
The oil industry has blamed maintenance issues for California’s historic gas price spikes in the summer and fall.
The court said moving the sanction to the Energy Commission to decide places more responsibility on the governor.
“It gives the governor and his commission the authority to do the right thing, and it will ripple through them whether it’s done or not,” Court said.