LYNN LA • MARCH 28, 2023
From CalMatters’ politics reporter Alexei Koseff:
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 is expected to sign the bill today. 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.”
TELL YOUR FRIENDS ABOUT CITIZENS JOURNAL Help keep us publishing –PLEASE DONATE