California Gov. Gray Davis told Fox News Wednesday he will sue the power companies if they do not cough up the $9 billion in rebates he believes are due in return for "gouging" his state’s energy customers.

He also praised a 5-0 decision by the Federal Energy Regulatory Commission (FERC) Tuesday that would impose a ceiling on wholesale energy prices in California and 10 other Western states in the event that California’s electricity reserves fall below 7 percent.

"After a year of public pressure and pounding on the Federal Regulatory Commission, they finally took a constructive step going forward," Davis said.

The Democratic governor also noted, however, that FERC found the California energy marketplace "dysfunctional," and electricity rates too high. "That meant by law we are entitled to refunds, we believe we are entitled to at least nine billion in refunds," he said.

Providers Protest Allegations

FERC singled out power generators in a report for overcharging the Golden State $124 million, but that report has since been challenged by the companies. They reject Davis’ claim that they "bilked" California $8.9 billion from May 2000 to the beginning of this month. According to Davis, the state will pay nearly $50 billion in energy costs this year.

When asked what action the state would take to reclaim those dollars if they refused to pay or if FERC failed to enforce such a rebate, Davis said "we’ll sue, we’ll go to court."

Davis also defended his handling of California’s energy crisis at Wednesday's hearings before the Senate Government Affairs Committee, where he said his administration has stepped up energy conservation efforts and plans are now underway to build new power plants.

He told senators that new power plants will provide 20,000 additional megawatts of electricity by 2003, including 4,000 megawatts by the end of the summer. "Everything that can be done to provide reliable, affordable energy to California is being done," he responded to his Republican critics.

Sen. Joseph Lieberman, D-Conn., in his new role as chairman of the committee, heaped blame on FERC, saying Wednesday that the agency up until now had been "surprisingly reluctant" to ensure that energy prices were reasonable, as required by the 1934 Federal Power Act.

Democrats Thursday introduced legislation to force FERC to order up to $9 billion in refunds for consumers in California, Oregon, Washington and other Western businesses. The legislation will be introduced in the Senate by Sen. Barbara Boxer, D-Calif., and in the House by Rep. Anna Eshoo, D-Calif.

But GOP leaders still insist that the price controls approved Tuesday by FERC are ill-advised. Former chairman and now ranking minority leader Sen. Fred Thompson, R-Tenn., said it was "laughable" to think a federal agency will resolve the crisis. "[Price caps] make a bad situation worse," he said.

The Bush administration, while praising FERC for taking steps yesterday to ease the energy crunch in the West, also appears reluctant to fully endorse price controls. In an interview with Fox News Wednesday, Interior Secretary Gail Norton said they are still not being considered by President Bush as an answer to tough conservation questions.

"The administration has always been quite reluctant to go in that direction," she told Fox. The administration disapproves of price controls because they do not help increase the supply of energy and do not help reduce demand. The administration views price controls as a short-term measure that don't address fundamental energy problems.

Fox News' Carl Cameron and the Associated Press contributed to this report.

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