On Jan. 18, 2023, a consumer advocacy group issued a letter urging the California Attorney General’s Office to initiate an investigation into rising natural gas prices in the state. If the group’s campaign gains traction, California could join New York as another sizable market investigating whether recent increases in energy prices might give rise to price gouging or other consumer protection-related liability for companies throughout the supply chain.
This pressure on the California Office of Attorney General follows shortly after California Gov. Gavin Newsom’s December 2022 proposal that the state impose an unprecedented “price gouging penalty” on Big Oil, targeting what he characterizes as “excess profits.” That first-of-its-kind proposal remains pending in the California legislature.
For their part, energy companies have been managing inflationary pressures and supply shortages since the Russian invasion of Ukraine, while also working to satisfy record demand. The resulting increases in the prices of various commodities have drawn consumer frustration and scrutiny, and have energized at least one state to investigate sales of various fuel commodities for potential price gouging not just at the pump, but further back in the supply chain.
It has been almost a year since the New York State Office of the Attorney General launched a wide-ranging investigation of price gouging in the oil and gas industry. California initiating a comparable inquiry would be a significant development, given the size and complexity of its market for natural gas and other commodities. While the current consumer advocacy focuses primarily on the natural gas distribution utility that interfaces directly with consumers, any investigation likely would extend to scores of companies involved in everything from generation to transmission and wholesale activities between the wellhead and the utility.
Investigations such as these appear to be another hazard in an increasingly challenging “new normal” for energy companies. McGuireWoods has an experienced team, including former senior officials from key offices of attorneys general across the country, that counsels clients through price-gouging investigations in the energy space and other industries. The team also helps clients preemptively avoid state regulatory actions.