UPDATE 2-Hokuriku to sue Hitachi for $214 mln over turbine

* Along with Chubu suit, Hitachi faces $656 mln in damages

* Liability unclear in Japan utility-supplier contracts

TOKYO, May 25 (Reuters) - Japan's Hokuriku Electric Power Co (9505.T) plans to sue Hitachi Ltd (6501.T) for 20.2 billion yen ($214 million) to cover oil and fuel costs incurred after a turbine at a nuclear power plant failed in 2006.

Along with a similar suit by Chubu Electric Power Co (9502.T), it brings the total potential damages faced by Hitachi over its faulty turbines to 62 billion yen, plus late payment charges.

Hitachi, which expects a net loss of 270 billion yen in the financial year to next March, has not included the potential impact in its earnings forecast.

Hokuriku Electric said on Monday the Hitachi turbine caused a shutdown at a nuclear power unit, forcing it to run its thermal plants harder at higher costs for nearly two years and hurting its earnings.

In the United States and Europe, utility firms and their suppliers typically sign agreements that exempts suppliers from indirect damages that might arise from equipment failure.

But Japanese utilities and their suppliers rarely include such a clause in their agreements, leaving the legal situation hazy.

Hokuriku Electric will argue that Hitachi is responsible under a defect liability clause in Japanese civil law, which defines manufacturers' obligations more broadly, spokesman Hideki Nakano said.

The No.2 reactor at Hokuriku Electric's Shiga plant in western Japan began operating in April last year and is now running at a rate of 1,206 megawatts, about 10 percent below its former output.

In the financial year ended in March 2007, Hitachi factored in a 38 billion yen cost to fix the turbines it supplied to the two utilities.

Prior to the announcement, shares of Hitachi closed up 0.6 percent, in line with Tokyo's electrical machinery index .IELEC.T, which closed up 0.5 percent. ($1=94.57 Yen) (Reporting by Mayumi Negishi; Editing by Michael Watson)