By Staff and Wire Reporters, THE DESERT SUN
California lawmakers briefly returned to the Capitol on Monday to swear in new members and elect leaders for the 2023 legislative session. But this year, Gov. Gavin Newsom also has called lawmakers into a special session to consider a penalty on oil companies when their profits pass a certain threshold.
Furious about oil companies’ supersized profits after a summer of record-high gas prices, Newsom formally started his campaign to punish big producers by asking the Legislature to fine them and give the money back to drivers.
The proposal, which Newsom’s administration crafted in cooperation with state Sen. Nancy Skinner (D-Berkeley), would make “excessive” refiner margins punishable by a civil penalty from the California Energy Commission (CEC). It was not immediately clear what the trigger profit margin would be, nor the amount of the penalty; Newsom said in a press release that “would be determined through the legislative process.”
The governor said he envisioned any money collected would go to a “Price Gouging Penalty Fund” and then given back to Californians.
The proposed legislation would also expand the ability of the CEC and the California Department of Tax and Fee Administration to investigate and obtain information on costs, profits and pricing so that the state can better address “the causes of pricing irregularities” and minimize the likelihood of future supply or price shocks.
“We just announced America’s first price gouging penalty on big oil,” said Newsom on Twitter. “We will not be gaslit by oil companies that are keeping gas prices high while they rake in record profits. Time for them to answer for ripping you off.”
It may be a popular proposal with voters, who have been paying more than $6 per gallon of gasoline for much of the year. But the big question is how the measure will be received by California lawmakers, especially since the oil industry is one of the state’s top lobbyists and campaign donors.
This marks the first time a California governor has proclaimed a special session in six years, according to veteran Sacramento lobbyist Chris Micheli. Legislation approved in a special session can take effect faster, 90 days after adjournment, than laws passed in a regular session.
Adding to the uncertainty is an unusually high number of new members: About a quarter of the Legislature’s 120 seats will be filled by first-time lawmakers.
Two seats in the Legislature are still up in the air. Democrat Christy Holstege and Republican Greg Wallis each had 50% of the vote for the 47th Assembly District seat straddling Riverside and San Bernardino counties. (Either will be a newcomer.) And in a state Senate contest near Bakersfield, Democratic incumbent Melissa Hurtado and Republican David Shepard each had 50% of the vote.
“It’s kind of like the first day of school and you get this big ethics test about a job that you’ve never had,” said Jamie Court, president of Consumer Watchdog, an advocacy group that has partnered with the Newsom administration to back the gas proposal.
Among the Senate’s new members is Angelique Ashby, a Democrat who narrowly won her seat following an intense campaign. The oil industry spent hundreds of thousands of dollars on radio and TV ads supporting Ashby’s campaign, a trend noticed by critics who tried to use it against her.
In an interview, Ashby said she hasn’t been approached by lobbyists or others from the oil industry asking how she would vote on a potential penalty for oil companies. She noted the oil industry spent the money as “independent expenditures,” meaning she had no control over that spending during the campaign.
“Campaigns are not legislation, and the campaign slogans and strategies of my opponent are a thing of the past,” said Ashby, whose district includes Sacramento. “I’m fixated on the people of Senate District 8 and I will make my decision based on what is in their best interest.”
But the battle has already begun. Last week, the California Energy Commission held a public hearing about why the state’s gas prices are so high. California prices spiked over the summer, but so did the rest of the country – mostly in response to a crude oil price surge after Russia’s invasion of Ukraine.
California’s prices spiked again in October, even while the price of crude oil dropped. In the first week of October, the average price of a gallon of gas in California was $2.61 higher than the national average – the biggest gap ever.
Since then, oil companies reported billions of dollars in profits.
Regulators had hoped to question the state’s five big oil refineries: Marathon, Valero, Phillips 66, PBF Energy and Chevron. But no company officials attended the hearing, with most saying that sharing information could violate anti-trust laws.
Newsom sought to shame those companies publicly, posting a video to his Twitter account of their empty seats during Thursday’s hearing.
“Big oil is ripping Californians off, and the deafening silence from the industry (at the public hearing) is the latest proof that a price gouging penalty is needed to hold them accountable for profiteering at the expense of California families,” Newsom said in a news release announcing the special session.
The Associated Press and CalMatters contributed to this report.