Developers need as much knowledge of future prices as possible to make informed decisions about investments. A volatile market is sending out a price signal for peaking generation. The peaking unit will pick-off the higher prices, thereby reducing them. Alternatively, if there is lower volatility and higher average prices, the appropriate business decision is to build baseload plants that are designed to run relatively cheaply and all the time. This takes advantage of higher average prices and does not really address price peaks.
Caps tend to distort the market signal in favor of baseload generation.
With the scarcity problem in California, that may not seem like an important problem right now since any generation would be helpful. However, baseload plants can cost several times as much as peaking units and take considerably longer to construct. The market will either pay to recover those costs or those plants may go bankrupt and cease operations in the future. Regardless, efficient economic decision-making by developers requires the correct price signal coming from the market. The legislation before you also proposes refund requirements on companies that own generating facilities, essentially rewriting the rules under which the transactions were made.