Newsom gets big win: California Senate approves first-of-its-kind ‘price gouging’ bill

California lawmakers voted on Thursday to advance a bill that would penalize oil companies for “price gouging” — a first-of-its-kind legislation pushed forward in recent months by Gov. Gavin Newsom (D).

The SBX1-2 bill, sponsored by state Sen. Nancy Skinner (D), received the approval of the California State Senate in an Extraordinary Session convened to fast-track the legislation on Thursday morning.

The bill could head to the State Assembly as early as Monday and receive the governor’s signature shortly after that, a source familiar with the matter told The Hill.

Newsom commended the state Senate’s “quick action” following the vote, stressing that “for decades, oil companies have gotten away with ripping off California families while making record profits.”

“With this proposal, California leaders are ending the era of oil’s outsized influence and holding them accountable,” the California governor said in a statement. 

The bill would authorize the State Energy Resources Conservation and Development Commission to set a maximum gross gasoline refining margin — and then establish a penalty for any California-based refineries that exceed that margin. The Commission would be required, however, to consider a refiner’s request for an exemption from that maximum margin.

In addition to setting these restrictions, the legislation would require that all penalties collected be deposited into a “Price Gouging Penalty Fund” in the State Treasury.

The bill would also establish the Division of Petroleum Market Oversight within the Commission — operating independently of the Commission authority and providing guidance to the governor on issues related to transportation fuel pricing and decarbonization.

Existing law already requires California refineries to submit an activity report to the State Energy Resources Conservation and Development Commission within 30 days of the end of each calendar month — subject to a civil penalty if they fail to comply.

Overall costs for the bill beginning in fiscal 2023-2024 would be around $7 million, a Department of Finance representative told state Senate Appropriation Committee members at a Thursday morning hearing that preceded the Senate floor vote.

“We are working to with the administration to try to use existing resources where possible and bring those costs down,” Skinner said during the hearing.

“It seems to me a very wise expenditure of these funds to potentially save our consumers those billions,” she added.

SBX1-2 passed in the Senate during an “Extraordinary Session” requested by Newsom — an expedited process that has generated ire among the bill’s opponents.

Just a few hours earlier, the Appropriations Committee had voted in favor of the legislation, following a similar outcome in the Energy, Utilities and Communications Committee on Wednesday.

Per California’s Constitution, the governor can call by proclamation for such a special legislative session to address a specific matter. Any measure passed by the legislature and signed by the governor following such an extraordinary session takes effect after 90 days — rather than on Jan. 1 of the next year as occurs during regular sessions.

During the Appropriations Committee meeting on Thursday morning, state Sen. Brian Jones (R) had suggested suspending the bill because the committee had yet to adopt new rules this year.

He stressed that “this bill does not have an urgency clause” and that he didn’t see a reason to be “pushing it though so quickly,” particularly due to the state’s growing budget deficit.

“I’m opposing this bill not because I’m standing up here protecting the companies,” Jones later said during the Extraordinary Session, accusing the bill’s supporters of engaging in internal deliberations with the governor. “I’m opposing this bill from my constituents because they were cut out of the conversation,” he added.

Zachary Leary, senior director for California policy at the Western States Petroleum Association, voiced his group’s opposition to what he described as an “unprecedented and untested experiment in the California fuel market.”

The proposal, he told the Senate Appropriations Committee, would lead to “less investment, less supply and higher costs for consumers.”

A representative of the Kern County Board of Supervisors echoed these sentiments on behalf of “the energy capital of California,” stressing that his agency is “adamantly opposed to this bill.”

But environmental advocacy groups, that have for months been pushing for the legislation’s passage, applauded the state Senate’s action on Thursday.

“This important legislation should be part of an all-out push to move the state to clean, renewable energy and off oil and gas,” Kassie Siegel, director of the Center for Biological Diversity’s Climate Law Institute, said in a statement.

Bill Allayaud, director of California government affairs for Environmental Working Group, urged the State Assembly to “take bold and swift action to put the governor’s plan into law.”

“That is the best and most responsible course to take right now as the oil companies continue to manipulate the price at the pump,” Allayaud said in a statement. 

Defending the speedy nature of the process, state Sen. Steven Bradford (D) acknowledged during the Extraordinary Session that this “has been faster than many of us would like.”

“But this is the nature of Extraordinary Session,” Bradford said, noting that many weekends have been dedicated to pouring through the bill.

“We’re using this expedited process because we have a duty to act on issues that [have] had tremendous impact on the lives of our constituents,” he added.

Skinner, meanwhile, emphasized how Californians last summer were filling up their tanks at $6-$8 per gallon — prices that she said “cannot be explained by the expected charges that California levies.”

“We know what that cost is, we can calculate it, and it does not equate to the average $2.61 higher price that was charged at our gas pumps compared to any other state in the nation,” Skinner said.

Stressing that her bill does not require the Commission to automatically charge a penalty, Skinner said that it instead increases transparency measures and helps determine whether price gouging is occurring.

“If that transparency causes our oil companies if they might otherwise have been manipulating prices, to refrain from doing so, then that is an incredible benefit to our California consumers,” Skinner said.

“And if that occurs, then we will not need a penalty,” she added.