Spain cabinet to study latest energy reform on Friday

Industry Minister Jose Manuel Soria has pledged a definitive reform to end the so-called tariff deficit - created after years of selling energy below costs - for the past nine months.

But an initial proposal for a variable tax rate on power generation met with fierce opposition from other government officials and the private sector, which said such a tax would be illegal, and sent Soria back to the drawing board.

"The report I'm taking to the government (today) has various measures, some tax proposals and others that try to find a definitive solution to this (tariff deficit) problem," Soria said in an interview with Telecinco television on Friday.

Uncertainty over the reform, which is closely watched by the European Commission, has weighed heavily on Spanish utilities' shares prices this year and has caused outrage among international investment funds that put money into the sector under current rules.

Analysts said the new proposal could include a flat tax rate on revenues or profits, though it was still unclear whether the cabinet would give final approve to the reform on Friday or at a later date. ($1 = 0.7748 euros)

(Reporting By Tracy Rucinski; Editing by Fiona Ortiz)