* New energy body aims to improve decision making
* Bulgaria is one of the most corrupt EU members
* South Stream gas pipeline remains frozen (Releads, adds details)
SOFIA, Aug 27 (Reuters) - Bulgaria's interim government said it had set up an energy board to ensure that badly needed multi-billion euro projects in the poorest European Union state are transparent.
The board will assist the incumbent cabinet in an attempt to stabilise the energy sector of the Balkan country, which is deemed one of the most corrupt nations in the European Union.
"The energy board will analyse the state of the energy sector and will determine the reasons behind the instability of the energy system," the government said on Wednesday.
The board will be led by Interim Deputy Prime Minister Ekaterina Zaharieva and is expected to bring together market participants, the regulator and experts from the European Commission, the World Bank and the European Bank for Reconstruction and Development.
"We could say the energy sector is in a very poor financial state," Interim Economy and Energy Minister Vasil Shtonov said on a local television channel.
A Socialist-led government resigned last month after being in power for just over a year, criticised for the way it handled large-scale infrastructure projects such as the Russian-led South Stream gas pipeline.
South Stream, expected to cost $40 billion, has been designed to carry Russian gas to central Europe via the Black Sea, bypassing Ukraine. Bulgarian President Rosen Plevneliev had said the project will remain frozen until Sofia gets an EU green light.
The interim cabinet, which took charge on Aug. 6, will leave to its successor a move to approve another major agreement with Westinghouse of Toshiba Corp for construction of a new nuclear reactor. The next government is to take over following parliamentary elections in October.
State-owned power company NEK said on Wednesday it would increase electricity prices by 16 percent from next month for industrial consumers that do not buy energy on the free market.
The move comes just days after NEK said it had amassed debts of 3.53 billion levs ($2.4 billion).
The price hike will affect around 20 percent of companies in Bulgaria including water utilities, state railway lines, schools, hospitals and universities.
On Tuesday, Interim Deputy PM Zaharieva said NEK was losing about 50 million levs a month, while giving preferential treatment to firms with political connections.
Electricity costs are a politically sensitive issue in Bulgaria, where power bills consume a large slice of household income especially during the winter season.
Bulgaria raised power prices by an average of just 2 percent as of July 1, despite concerns over the energy sector losses.
Shtonov also said on Wednesday that a member of the Bulgarian Energy Holding (BEH) board, Ilko Zhelyazkov, had been dismissed for "not working well". It was the second official at BEH, which owns NEK and other major state energy companies, to be sacked by the government within a week.
Earlier this month, the EU antitrust watchdog told Bulgaria's state-run power firm that restrictions on where the electricity it supplies is resold could amount to anti-competitive behaviour and lead to a fine.
($1 = 1.4831 Bulgarian lev) (Writing by Radu Marinas; editing by Jane Baird)