We will not take any action that makes California's problem worse

President Bush

Following a meeting in California with Mr Bush, Mr Davis said he would file a lawsuit against the Federal Energy Regulatory Commission over its alleged failure to ensure that energy costs were just and reasonable.

President Bush had earlier rejected demands by the authorities in California for the federal government to intervene to force down the prices.

Mr Bush had argued that price-caps would make the problem of chronic energy shortages worse.

But the president said he would ask Congress to release $150m to help low-income Californians pay their energy bills.

Calls for relief

Governor Davis had argued that California was being "gouged unbelievably".

An anti-Bush protester sees red

Mr Davis, a Democrat with hopes of challenging Mr Bush for the presidency in 2004, had earlier demanded that Washington force down electricity prices that have cost California nearly $8bn since January.

"It does not matter if someone thinks we should have relief; the law says we should have relief," the governor said.

Earlier on Tuesday, a federal appeals court declined to order US energy regulators to cap wholesale electricity prices.

California State Senate President John Burton, Assembly Speaker Robert Hertzberg and the city of Oakland had asked the court to order the Federal Energy Regulatory Commission (Ferc) to cap electricity prices.

"The citizens of California are suffering immediate irreparable harm as a result of Ferc's abrogation of its duty to establish just and reasonable rates for electricity," they argued in their suit.

The court panel ruled that the appeal did not warrant its intervention.