The San Francisco Chronicle – Newsom, Democratic lawmakers reach deal on plan to combat California’s high gas prices


Gov. Gavin Newsom and Democratic leaders in the Legislature announced Monday that they have brokered a deal on his proposal to fight California’s high gas prices by taking oil companies to task over their record profits.

Under his updated proposal, the California Energy Commission would have rulemaking authority to create a cap on oil refiners’ profits — and to set the amount. They would also have the authority to fine companies that exceed the cap and set penalty amounts.

The deal was cheered by environmentalists and consumer advocates, who said it was a monumental step after numerous failed attempts to confront California’s high gas prices in the past.

“This is a landmark deal that will give California power to stop the price gouging at the pump that has plagued Californians for decades,” said Jamie Court, president of Consumer Watchdog, an advocacy group that has long pushed to clamp down on oil companies. “This governor forced the issue and created the solution in a matter of six months. In the course of things, that’s actually quick.”

Last fall, Newsom began calling for legislation to penalize oil companies for their record profits amid skyrocketing prices at the pump. He convened a special legislative session in December for lawmakers to consider his “price gouging” proposal.

The Democratic governor’s effort initially got off to a slow support and received a lukewarm receptionfrom some moderate Democrats in Sacramento. Monday’s announcement marks a shift in the fortunes of Newsom’s proposal and comes after months of closed-door negotiations.

Newsom also dramatically changed his proposal: He had earlier suggested that the Legislature would set the amount of the profit cap. Now, his plan would punt the decision to energy regulators.

Newsom had originally called the penalty a “tax” on the windfall profits of oil companies. Last fall, he pivoted to calling his proposal a “price gouging penalty,” a move with significant implications: creating a tax requires approval from two-thirds of lawmakers, while a penalty only requires a majority. 

Newsom’s plan, Senate Bill X1-2, would also give the Energy Commission more oversight authority to require oil refiners to share information about their transactions and business practices. Sen. Nancy Skinner, D-Berkeley, officially introduced an updated version of the bill Monday.

“Today’s agreement represents a major milestone in our efforts to drive the oil industry out of the shadows and ensure they play by the rules,” Newsom said in a statement. “This represents some of the strongest and most effective transparency and oversight measures in the country, and the penalty would root out price gouging.”

The top two Democrats in the Legislature, Assembly Speaker Anthony Rendon of Lakewood (Los Angeles County) and Senate President Pro Tem Toni Atkins of San Diego, also endorsed the plan in a joint statement with the governor.

“We know what the costs of maintaining our roads and meeting our climate goals are,” Atkins said, “and with this bill, the state will finally have the tools to get answers on oil profits and put a stop to price gouging.”

California’s average statewide price for a gallon of gas was $4.85 on Wednesday, about $1.41 more than the national average, according to AAA. Prices have fallen in recent months after spiking to a statewide average of about $6.42 in early fall, at least $2.61 more per gallon than drivers nationwide were paying at the time.

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