Gov. Gavin Newsom is abandoning his high-profile call for the California legislature to put a cap on oil company profits and will instead ask lawmakers to increase transparency and oversight of the industry.
The governor’s amended proposal, announced Wednesday afternoon, would give the California Energy Commission greater powers to investigate gasoline price hikes and the ability to cap profits and fine oil companies through a public hearing, Newsom said, his aides said.
“What we are asking for is simple: transparency and accountability to take the oil industry out of the shadows,” Newsom said in a statement. “Now is the time to decide whether we stand with California families or Big Oil in our fight to get them to play by the rules.”
Newsom called for the swift approval of a fine against oil companies in October when he announced his intention to convene state lawmakers in special session to curb the oil industry’s excessive profits. He blamed the oil companies for lowering prices at the pump after gasoline prices hit $6 a gallon.
But determining the level at which refinery profits should be penalized has become a political hotpot in Sacramento. Democrats feared the plan could backfire due to the complicated nature of oil markets, a lack of transparency in the industry and concerns that it could have unintended effects on gasoline prices.
Newsom’s office outlined its plan to limit industry profits to lawmakers in December when the special session was convened, but allowed lawmakers to place limits on those profits.
In more than three months, lawmakers held just one hearing on the proposal. State senators seemed concerned about the plan, and experts urged the state to take more time to study and understand the issue before making a resolution.
Newsom’s new proposal would shift that responsibility to the Energy Committee, but his staff acknowledged that regulators would not be required to cap profits or penalize the industry. All five members of the committee have been appointed or reappointed by Newsom.
Yuba City Republican Assembly Speaker James Gallagher criticized Newsom’s decision to put the decision in the hands of the committee.
“No matter how many false investigations he calls for, no matter what kind of ‘fine’ he claims, there is one indisputable fact: California drivers are paying more than they should because of government-imposed taxes, fees and regulations. imposed on Newsom. and his ultraliberal allies,” Gallagher said in a statement. “If Democrats empower unelected bureaucrats to impose these new taxes, they will be responsible for the associated shortages, rationing, gas lines and price increases.”
The governor’s office said that with a strengthened regulator, the commission would have the power to prevent the kinds of gas price hikes consumers experienced last year.
The bill would create an independent monitoring agency within the committee with subpoena powers to monitor gas prices and investigate increases. Oil companies must also provide more data to the state to help regulators understand prices.
Newsom chief of staff Dana Williamson said the governor’s office “worked very closely with experts and the legislature to get this right.”
“It’s the only one of its kind in the country and it really sets up a surveillance unit that will watch the industry every day,” Williamson said. “The Energy Commission will then be able to comment on the findings of the department’s work.”
Consumer Watchdog president Jamie Court welcomed the governor’s plan to increase government oversight of the industry.
The agreement between Newsom and lawmakers includes a requirement that oil refiners report maintenance work to the state in hopes of avoiding a rapid and unexpected drop in California’s gasoline production.
California depends on only a handful of oil refineries that are not required to report scheduled maintenance to the state. When multiple refiners simultaneously cut production due to routine equipment work or unexpected problems, supply falls and prices rise.
The oil industry has blamed maintenance problems for California’s historic peaks in summer and fall gas prices.
The court said moving the fine to the Energy Commission for a decision puts more responsibility on the governor to get through it.
“It gives the governor and his commission the power to do the right thing and it will reflect on them whether or not it gets done,” Court said.
Source: LA Times