SACRAMENTO— The California Assembly handed Gov. Gavin Newsom a long-awaited win on Monday, approving his revised proposal to punish alleged price gouging by oil companies and sending the measure to his desk for a signature, nearly six months after he first called on state lawmakers to take action on record gas prices.
The floor vote was an overwhelming 52 to 19 — far more than the simple majority needed to pass in the 80-member house. But unlike in the state Senate last week, where Democrats supported the bill in near-lockstep, about one-eighth of the Assembly Democratic caucus laid off in the initial vote. Assemblymember Jasmeet Bains, who represents part of oil-producing Bakersfield, was the lone Democrat who voted no, tweeting later that she “will never throw my constituents under the bus.”
The bill, Senate Bill X1-2, which would authorize the California Energy Commission to investigate and potentially cap oil industry profits, always faced a tougher road in the Assembly, where business-friendly moderate Democrats hold greater sway.
Monday’s vote, however, reflects enduring apprehensions among many lawmakers about what the ultimate effect could be on gas prices in California.
Though the measure does not directly penalize the industry — it would take new regulations and an inquiry by the energy commission before any fines would be imposed, something that is years away, if it ever happens at all — opponents, including some independent economists, object that a profit cap creates a disincentive for refineries to operate at maximum capacity. They argue that the industry will reduce production to remain below whatever level is set, creating an artificial constraint on supply that could instead drive up prices further.
Republicans, who uniformly voted against the bill in the Assembly, amplified those anxieties during the floor debate, dismissing Democratic complaints about high gas prices as the result of overregulation by the state and their attempt to fix the problem as effectively another tax on drivers.
Those concerns already forced Newsom to pivot away from his initial plan to define a profit threshold and penalties in the bill. The revised version, unveiled less than two weeks ago, had more input from legislators through months of discussions between the administration and working groups of Democratic representatives, including Assemblymember Jacqui Irwin.
The Thousand Oaks Democrat was a skeptic of Newsom’s original bill, telling CalMatters on the first day of the special session in December that she was unsure the governor could come up with a plan that she could get behind. But on Monday, Irwin was the Assemblymember who brought SBX1-2 up on the floor, touting how it incorporated feedback from lawmakers.
Irwin told CalMatters last week that the primary concern she had expressed to the governor was that the Legislature lacked the data and the expertise to set an appropriate fine itself. That’s addressed by new requirements for oil companies to report additional information to the state about their operations and also by moving the penalty to a regulatory process, which Irwin said offered a “longer-term solution.”
- Irwin: “As the Legislature, I don’t believe that we really had the expertise to determine what the unintended consequences could be…. This is a much more holistic approach.”
Newsom planned on signing the bill Tuesday. Leaving the state Capitol on Monday, he told reporters assembled in the hallway that the vote had sent “a big and very powerful message” to the oil industry and others who may be watching California.
- Newsom: “I hope this is a signal to other states and leaders across this country and around the globe that we can see the future, and I’m looking forward to this being a hinge moment.”
“We’re sick of seeing exorbitant profits by big oil companies like Chevron and Exxon while many Californians are struggling to make ends meet. I stand with the Governor in sponsoring this legislation to defend hardworking California families and to provide greater transparency and oversight in the marketplace. Price gouging of California consumers is unacceptable. It’s time for big oil to play by the rules, or pay the price,” said Attorney General Rob-Bonta, who co-sponsored the bill.
Senator Mike McGuire (D-North Coast) at the Senate Energy, Utilities and Communications Committee Hearing, Mar. 22 said: “If we’re being honest, California consumers have been fleeced, they’ve been fleeced, and those who have padded their pockets have been some of the biggest corporations in the world. And those, as Senator Durazo eloquently stated, those who are the most vulnerable in our communities have paid the price.”
Senator Nancy Skinner, author (D-Berkeley) said: “In 2022, while oil companies were hauling in more than $200 billion in profits, Californians were being hit at the pump with record high gas prices — $2.61 per gallon higher than the national average. Those sky-high prices came at a time when the cost of crude oil was down and there were no changes to our state taxes, fees, or regulations. By passing SBX 1-2, my Senate colleagues and I made sure every Californian knows that we have your back. SBX 1-2 contains the strongest transparency and oversight measures in the nation so we can hold oil companies accountable if they manipulate prices and pad their profits at the expense of hard-working Californians. I want to thank Gov. Newsom for bringing forward this groundbreaking proposal, my legislative colleagues for their hard work on it, and the Senate for passing SBX 1-2.”
