Spain energy reform delayed over deficit squabble

MADRID (Reuters) - Spain is likely to delay energy reforms by as much as a month as government officials argue over a proposed tax, which some say should be used to cut the public deficit rather than reduce a tariff deficit to energy companies, energy sector sources said.

Spain had planned to introduce the reforms in the second half of June to deal with a tariff deficit of close to 25 billion euros (20 billion pounds) - money promised to utilities to subsidise their costs for years of selling power to consumers at prices below what they spent to produce it.

The reforms come at a critical moment for Spain as it battles to avoid a fully fledged sovereign bailout. As its sovereign debt costs soar, some officials are keen to shave the public deficit, which is firmly in the eye of investors.

The debate over priorities has led to the delay, the sources said. The government said on Friday the reform remained 'urgent', without giving a time for when it would be presented.

The proposed reforms include a 'green cent' tax, which would actually amount to an additional 5 or 6 cents on every euro spent on petrol or diesel, the energy sector sources said.

Such a tax, which is backed by energy companies, could raise around 1.5 billion euros a year, according to official estimates.

But sources said government officials are heatedly debating whether the funds raised should go towards reducing the energy tariff deficit or the public deficit.

"There is a clash among the government. Treasury Minister Cristobal Montoro wants extra tax to help the deficit, but not the tariff deficit, the public deficit," said a source close to the government.

Another high-level source in the energy sector, said he doubted the government would use the money to reduce the tariff deficit.

Other sources said a tax on all electricity generation could also be on the cards, which newspapers have reported could be around 5 to 10 euros per megawatt produced. Sabadell said in a bank research note that 5 euros on every megawatt would save 1.3 billion euros in 2013.

A rise in electricity costs for the consumer are also expected, which would help bring down the energy tariff deficit.

(writing by Nigel Davies, editing by Jane Baird)