Polish watchdog raises power prices by 2 pct

WARSAW, April 17 (Reuters) - Poland's energy watchdog URE raised regulated electricity prices for the second time this year, by a lower-than-expected 2 percent on average for households, its spokeswoman said on Thursday.

The hike, albeit smaller than the 11.6-percent increase URE approved in January, reflects the growing costs faced by power companies. It comes into effect on May 1.

Two electricity distributors in Poland which are not state-owned, Vattenfall VTTG.DE and RWE Stoen (RWEG.DE), have clashed with the regulator earlier this year by raising prices without its approval.

Rising electricity and gas prices have contributed to rising inflation in Poland in recent months, prompting the central bank to raise interest rates seven times since April 2007, but this decision eases inflationary pressure.

"We were expecting a larger hike, reaching even 8 percent," said Piotr Kalisz, chief economist at Citi Handlowy in Warsaw. "It's probably a way to spread the hikes out over several months."

He added that if the watchdog approves another increase in the second half of the year it could again fuel inflation, which stood at 4.1 in March.

Several state-controlled power companies are set to debut on the Warsaw bourse over the next 12 months as part of the government's privatisation drive and every regulated price increase makes them more attractive to investors.

The companies argue that artificially set prices do not reflect their expenses, especially since the producers want to improve and expand their outdated facilities and cut carbon dioxide emissions. (Reporting by Pawel Bernat; writing by Marynia Kruk)