Senate Bill X1-2 Implementation

In March 2023, Governor Gavin Newsom signed Senate Bill X1-2, the California Gas Price Gouging and Transparency Law, to protect Californians from experiencing price gouging at the pump by oil companies.

The new law:

Authorizes the California Energy Commission (CEC) to set a maximum gross gasoline refining margin and a penalty for refiners that exceed it.
Increases transparency by providing new data collection authority and creates an independent division to monitor petroleum markets and flag potential market manipulation.
Requires an assessment of transportation fuel demand and discussion of methods to ensure an adequate, affordable, and reliable fuel supply as the state transitions away from petroleum fuels.

Chart shows 2023 prices stable from March though mid-July. 2023 prices rise from late July to mid-September. 2022 prices spike through March and again in May through June.

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Collect Data

Requirements: Expands the CEC’s data collection authority for the petroleum industry.

Status: The CEC is requesting all the data expressly required under SB X1-2, which took effect June 26, 2023. The CEC hosted a public webinar on June 15, 2023, to review data forms and the submission process.

Starting June 26, 2023, the CEC started receiving data through a portal. The data that the CEC requested were:

Monthly refining margin reports that provide costs and profit information that helps to understand whether a refiner margin should be sent.
Daily reports for spot market transactions that will be used to analyze the petroleum market. That information will be used to look at whether there is market manipulation.
Planned and unplanned refinery maintenance reports that provide insight on the timing of planned outages.
Petroleum product imports (including costs) that are 96 hours away from landing that will provide additional insights.

The CEC has also asked for 10 years of historical monthly profits and costs data. This is scheduled to be received September 30, 2023.

All these information helps expands the CEC situational knowledge of the working of the petroleum market.

These reports are considered confidential under the Petroleum Industry Information Reporting Act (PIIRA), which requires qualifying petroleum industry companies to submit weekly, monthly, and annual data to the CEC.

The CEC is required to publish aggregated reports for the monthly refiner data on gasoline production, sales, and cost. Staff is analyzing the July data with plans to post that information by September 15, 2023 on the SB 1322 webpage.

Set a Refining Margin and Determine Need for Penalty

Requirements: Authorizes the CEC to set a maximum gross refining margin and to impose a civil penalty for exceeding that margin.

Status: The law requires the CEC to conduct an analysis on the effects of a margin penalty before setting any penalty. This analysis will require profit margin information. The CEC has begun receiving that information. The first full month of data for July 2023 was reported August 30, 2023.

The analysis will look at the impacts and benefits of assessing a civil penalty on refiners that exceed a defined margin threshold. The final analysis will include a staff recommendation that would be presented to the Commissioners for consideration at a business meeting.

Develop Transportation Fuels Assessment

Requirements: Develop and submit the first triennial Transportation Fuels assessment by January 1, 2024.

Status: On May 16, 2023, the CEC held a public workshop to review fuel demand scenarios and the framework for the assessment. The CEC held a workshop on August 17, 2023 to confirm the demand scenarios and discuss price spike policy and mitigation options. A workshop to discuss results is planned for November.

Develop Transportation Fuels Transition Plan

Requirements: The CEC and the California Air Resources Board (CARB) must develop and submit a Transportation Fuels Transition Plan by the end of 2024.

Status: CARB and CEC are developing a work plan.

Develop Annual Report on Tax Revenues

Requirements: The CDTFA and the CEC must develop an annual report to examine the relationship between gasoline prices and state revenues, and whether market manipulation may impact prices.

Status: The CEC and CDTFA have biweekly meetings scheduled and are currently discussing the contents of the report.

Coordinate on Maintenance Reporting

Requirements: The CEC must consult with the Department of Industrial Relations (DIR) on managing refinery turnaround to ensure proper safety.

Status: The CEC and DIR are discussing the means to share information.

Create an Independent Fuels Advisory Committee

Requirements: Create an independent committee to advise the CEC and the independent division. Appointees would come from the Governor, the Speaker of the Assembly, and the Senate Committee on Rules.

Status: Pending appointments.

Form Division of Petroleum Market Oversight

Requirements: Create an independent division within the CEC that would provide independent market oversight, analysis, and guidance and recommendations to the CEC, California Department of Tax and Fee Administration, and the Governor’s Office. The director will be appointed by the Governor and confirmed by the Senate.

Status: The formation of the Division of Petroleum Market Oversight at the CEC was pending the appointment of the director. Governor Gavin Newsom announced Tai Milder’s appointment as director on August 1, 2023. Milder started his new role at the end of August.

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