CNN
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California Gov. Gavin Newsom signed a bill into law Tuesday that gives the state’s energy commission oversight power on oil companies to determine potential price gouging and impose corresponding penalties.

“Why is it that we are paying at peak $2.61 more per gallon of gasoline than the national average?” Newsom said Tuesday. “You should not have had to endure these price spikes, you should not have to endure them in the future. We are going to get under the hood, and we are going to address this issue like no other jurisdiction has in this country.”

Last year, Newsom accused oil companies of price gouging California residents even when crude oil prices started to decrease. In a press conference Tuesday, Newsom called it “one of the greatest rip offs in modern American history.”

The new law creates a new division within the California Energy Commission (CEC) to “investigate industry’s sales and pricing activities and can refer violations to the Attorney General for prosecution,” according to the governor’s office. If their office determines price gouging occurred, they will be able to impose a penalty on oil companies. A penalty amount will be decided on by the commission during their investigative process, the legislation says.

The law will give needed transparency into the state’s petroleum market and how the oil companies are coming up with pricing, according to state legislators who worked on the bill.

“California has sent a clear message to the oil industry – open your books and prove that you’re not price gouging. Otherwise, you, big oil, will pay the price, not consumers,” said California State Sen. Nancy Skinner, one of the sponsors of the law.

Ross Allen, a spokesman for Chevron, said in a statement that “Chevron believes California deserves affordable, reliable and ever-cleaner energy.”

“But this legislation does not address the fundamental production and supply shortage in California markets,” Allen said. “The high energy prices this bill purports to address are a function of an under-supplied, isolated market for specialized gasoline blends. The state’s own regulators have found time and again that California’s high gas prices are caused by regulation, policy and geography.”

The law will go into effect in 90 days, but it will likely take nine to 12 months to “stand up” the new division, Newsom said. This commission division is not a quick fix, but it will take on longer term solutions to make sure Californians don’t have to unfairly face high prices, he said.

Last November, Newsom called a special session on a potential “price gouging penalty” after previously calling on the legislature to enact a windfall tax on oil companies. The governor announced a deal with legislative leaders on March 20 allocating oversight power to the CEC so they could establish potential penalties.