The state of California just passed a new bill that provides regulators with the license to penalize oil companies if they make too much money. It also sets up a way for a new independent watchdog organization to monitor the state’s oil industry. It’s the first measure of its kind to take aim at potential price gouging at the pump.

Governor Gavin Newsom says that “We proved we can actually beat big oil” with the passing of this new Senate Bill No.2. At the heart of the issue are extremely high gas prices that Newsom says were $2.61 higher than the national average in 2022.

“For too long, Big Oil has operated in the shadows while taking advantage of families & raking in record profits. CA is taking action to get the answers consumers deserve – enhancing the state’s authority to analyze why Californians have seen unexplained higher gas prices,” Newsom said in a tweet on Thursday.

Read: New California Law Could Protect Against Price Gouging At Gas Pumps

California Passes Law To Penalize Oil Companies Overcharging Customers At Gas Stations

The watchdog organization tasked with keeping track of the oil industry is a new independent division of the California Energy Commission and is staffed by “market experts, economists, and investigators,” according to a statement from Newsom’s office. The division has subpoena power and can refer violations to the state’s Attorney General.

The law goes into effect on June 26th, 2023 so it’ll be some time before we know how effective it’ll be at dragging gas prices down. Jasmeet Bains, a democrat from a district where California’s oil industry resides, voted against the bill citing inconsistencies in the government’s strategy to reduce pain at the pump, according to the NBC.

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Under the new law, fuel refiners that exceed the “maximum gross gasoline refining margin” can be penalized. Civil penalties are also applicable in cases where an individual or organization fails to report requested data to the division in a timely manner.

“Oil has built the American economy, built the industrial economy, I get it,” Newsom said. “But we are transitioning. And all I’m asking for is don’t rip us off anymore.” Funds collected by the division will go into a new Price Gouging Fund to address any consequences of price gouging on Californians.