Workshop on SB X1-2 Maximum Gross Gasoline Refining Margin and Penalty Structure

The California Energy Commission (CEC) will host a workshop to explore structures for determining a maximum gross gasoline refining margin (max margin) and penalty pursuant to Public Resources Code section 25355.5. In March 2023, Governor Gavin Newsom signed Senate Bill (SB) X1-2 (Stats. 2023, 1st Ex. Sess. 2023, ch. 1), the California Gas Price Gouging and Transparency Law. This bill, along with SB 1322 (Stats. 2022, ch. 374), added to the CEC’s oversight of the petroleum industry established by the Petroleum Industry Information Reporting Act (PIIRA) of 1980 (Public Resources Code, §25350 et seq.). Among other things, SB X1-2 increases transparency through new data collection and reporting, creates an independent division to monitor petroleum markets and flag potential market manipulation, and requires the CEC to assess the transportation fuels market and identify methods to ensure an adequate, affordable, and reliable fuel supply as the state transitions away from petroleum fuels. SB X1-2 authorizes the CEC to set a max margin and a penalty for refiners that exceed it.

On October 18, 2023, the CEC adopted an Order Instituting Informational Proceeding (OIIP) to collect information and perspectives on establishing a max margin, and if a max margin is warranted, determine the level it should be set at and the associated penalty to be imposed on refiners that exceed the max margin. Prior to setting a max margin and penalty, the CEC must find: “…that the likely benefits to consumers outweigh the potential costs to consumers.” The CEC has discretion to consider all relevant factors in making this determination, including:

1. Whether a max margin and penalty are likely to cause greater imbalance between supply and demand in the California transportation fuels market.
2. Whether a max margin and penalty are likely to cause higher average prices at the pump on an annual basis.
3. Whether case-by-case exemptions from the max margin will give refiners to sufficient opportunity to demonstrate the need for a greater margin before making production decisions.

The CEC seeks public input from multiple perspectives, including those of consumer advocates, environmental justice and environmental groups, labor, industry, academia, and the public. CEC staff will use the input received through the OIIP to develop recommendations for the max margin and penalty, and to consider the effect of exemptions from the max margin, if applicable.

The public can participate in the workshop consistent with the attendance instructions below. The CEC aims to begin promptly at the start time posted and the end time is an estimate based on the proposed agenda. The workshop may end sooner or later than the posted end time.

Notice and Agenda

• Notice of Workshop on SB X1-2 Maximum Gross Gasoline Refining Margin and Penalty Structure
• Workshop Schedule

Presentations

• SB X1-2 Workshop Refining Margin Establishment and Penalty Determination
• Maximum Gross Gasoline Refining Margin Analysis
• Economic Perspectives on Maximum Gross Gasoline Refining Margin and Penalty
• Gasoline Margin Management Refinery-Specific Profit-Sharing Concept

Event Recording

• Workshop on SB X1-2 Maximum Gross Gasoline Refining Margin and Penalty Structure - Zoom