UPDATE 2-French state reminds EDF it still controls prices

* EDF CEO made faux pas on price hikes without govt approval

* CEO might have lost support for his contract renewal

* State says will only allow limited electricity price hikes

(adds quote, details)

By Astrid Wendlandt and Benjamin Mallet

PARIS, July 19 (Reuters) - The French government has made it plain to EDF (EDF.PA) that the state still calls the shots on electricity prices, opposing the energy giant's proposal of a 20 percent increase over three to four years.

Claude Gueant, chief of staff of French President Nicolas Sarkozy, promised voters on Sunday that future price increases would be "extremely limited."

The state still owns 85 percent of EDF, which has been listed on the Paris stock exchange since 2005.

Paris had already made clear it was annoyed by EDF Chief Executive Pierre Gadonneix's public calls for price hikes without running them by the government first.

And some government advisers said the move could undermine Gadonneix's long-term future at EDF.

"I have found it regrettable that the president of EDF worries French people with prospects of increases he knows well the government... will not support," Gueant told French radio Europe 1 on Sunday.

The brewing row over prices highlights how delicate it can be for a partially privatised company to make decisions that align its financial needs with the government's political agenda.

Gueant said France had invested heavily in energy infrastructure in the past decades to offer residents and industries cheaper electricity prices than in many other European countries.

"We do not want to raise electricity prices in France to the same level as elsewhere," Gueant said. "If there is an increase, it will be extremely limited."

Gueant said the French government would take its decision on electricity prices "in the next few weeks."

SHOT HIMSELF IN THE FOOT

EDF, which runs 58 nuclear reactors in France, said it needed to raise prices to help finance investments, which would total 7.5 billion euros in 2009, some 2.5 billion more than in 2008.

"There are some electricity tariff hikes that could stem from the fact that EDF needs to balance its books and finance its investments," Gueant said.

But presidential aides said Gadonneix's public calls for price hikes had backfired and he might have lost some political support for renewing his contract this autumn. "By calling out to public authorities as he did, he did himself a disservice," a person part of the entourage of President Nicolas Sarkozy said, declining to be named.

An EDF expert said Gadonneix might have already been told that he needed to start looking for another job but a person close to the French government, who did not wish to be named, told Reuters recently that such speculation was unfounded.

Members of the French president's entourage have also said that the French state was not unanimously behind EDF's international ventures.

Sticking points included the price EDF paid for British Energy [EDFBR.UL] and its plans to acquire half of the nuclear business of U.S. group Constellation CEG.N for around 17 billion euros.

"The only points that provide ground for contestation are investments abroad," said a member of the president's entourage.

"Did we have to invest at that price in Great Britain? Did we have to go the United States?" he said, adding the state, which is on EDF's board, was not against these investments.

EDF shares have lost 24 percent since Jan. 1.

(Additional reporting by Emmanuel Jarry)

(Editing by David Cowell)