STATE SEEKS PRICE CAPS ON POWER BUSH: NO HELP; DAVIS: I'LL SUE FEARS OF ENERGY RECESSION MOUNT.

Byline: Dana Bartholomew Staff Writer

After butting heads with the president over energy policy in a private Century City meeting Tuesday, Gov. Gray Davis declared he will sue the Federal Energy Regulatory Commission for failing to cap electricity prices.

President George W. Bush, on his first visit to California as commander in chief, told the governor face to face that price caps would only make the crisis worse over time by decreasing the financial incentive to boost energy supplies. However, he offered a package to help the poor pay their power bills.

``I did tell him, if we have to pay $50 billion for power (this year), it could well trigger a recession in California which could drag down the American economy into a recession as well,'' Davis told reporters after a 35-minute, closed-door meeting with Bush.

``On the big enchilada - the thing that really matters above all else, temporary price relief - I'm disappointed we do have a major disagreement.''

Los Angeles city and county officials, meanwhile, continued to fret over how an energy-driven recession and plunging bond ratings might affect millions of dollars in state funds funneled to local agencies.

``They're scared to death,'' said Jack Kyser, chief economist for the Los Angeles County Economic Development Corp. ``If you really want to see long faces, go to a meeting with county or city officials.''

Though Los Angeles and the surrounding cities of Burbank and Glendale have been sheltered from the power shortage by owning their own municipal utilities, a state recession coupled with a prejudicial East Coast media frenzy would not bode well for local business, he said.

``We are in danger,'' Kyser said. ``We are not immune. You have a more diverse economic base, but you're still part of that great boat called California.''

And while hundreds of demonstrators protested outside the Century Plaza Hotel - where Bush and Davis met - against the president's refusal to control costs, Bush defended his free-market stance on energy during a speech nearby as the best long-term solution to California's energy mess.

``For too long, too often, too many have wasted energy pointing fingers and laying blame,'' said Bush, in a jibe directed at the critical Davis, who was two seats away. ``Energy is a problem that requires action, not politics - not excuses, but action.''

But any action must increase energy supplies at fair, reasonable prices, Bush said.

``We will not take any action that makes California's problem worse, and that's why I oppose price caps,'' he said to great applause from a crowd of 2,500 people just after two demonstrators were tossed from the room for interrupting his speech.

``For those struggling to pay higher energy bills, price caps may sound appealing, but the result will ultimately be serious shortages and therefore even higher prices.''

Bush also said he would promote new energy supplies through environmentally friendly nuclear, coal, hydroelectric and other alternative means, and he pledged to uphold a moratorium on drilling off California.

Pressure on both Bush and Davis has mounted since the energy crisis began last summer before erupting this year in weeks of power alerts, outages to business and institutional users, and six days of intermittent blackouts throughout the state's main power grid.

Increased demand, soaring energy costs, an unprecedented number of power plants down for repairs and crippled hydroelectric capacities have all contributed to the state's energy woes - not to forget price hikes of about 40 percent to the heaviest customers of the state's largest private utilities.

The governor's lawsuit, expected to be filed within 30 days, would be the second by state officials to accuse federal energy regulators of failing to ensure ``just and reasonable prices'' in wholesale electricity markets.

The announcement followed a day of political jockeying by Davis and Bush over a power crisis that has eroded state credit and turned its $8 billion surplus on its head.

A Davis administration lawsuit against the Federal Energy Regulatory Commission for failing to uphold its regulatory duty would follow a similar complaint by Assembly Speaker Bob Hertzberg, D-Van Nuys, and state Senate President Pro Tem John Burton, D-San Francisco, which was thrown out by a federal appeals court Tuesday.

At issue is the wholesale cost of energy, which has grown from $7 billion in 1999 to an estimated $50 billion this year. Many accuse Bush, a former oilman, of cozying up to his Texas cronies, whose earnings have risen 700 percent in two years.

``We have a fundamental disagreement over whether California is entitled to price relief,'' Davis said. ``I don't think it's a matter of philosophy, or ideology; it's a matter of law.

``We are entitled, by law, to some form of price relief.''

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3 photos

Photo:

(1 -- 2 -- color) President George W. Bush reacts to one of Lakers star Shaquille O'Neal's shoes, above, given to him by Mayor Richard Riordan. Below, Bush and Gov. Gray Davis shake hands after Bush spoke at the L.A. World Affairs Council.

(3) President Bush's refusal to cap energy prices triggered heated debate by protesters outside the Century Plaza Hotel in Century City, where the L.A. World Affairs Council met.

David Sprague/Staff Photographer