UPDATE 2-Spain approves energy legislation to promote clean energy, curb prices

* Spain approves cap on windfall profits of hydro, nuclear plants

* Government aims to reduce customers’ energy bills by 4%-5%

* New draft to lead to 1 bln euros cut in utilities’ remuneration

* Government also approves fund to mobilize clean technologies

* Consumers’ bills could fall 15% with all measures in 5 years (Adds details on energy regulation, utilities shares’)

MADRID, June 1 (Reuters) - The Spanish government on Tuesday approved new draft legislation to curb a recent increase in energy prices for end-consumers while promoting clean energies, with a fresh cut of one billion euros in utilities’ remuneration.

“It is an important piece of legislation to ensure that consumers also benefit from the rising price of CO2 and that the profits that go into the utility’s balances can have a positive impact on clients’ bills”, Environment Minister Teresa Ribera told a news conference after a cabinet meeting.

The government’s attempt to rein in rising CO2 prices that drive power bills limit the windfall profits enjoyed by hydro and nuclear plants above 10 megawatts (MW).

The new regulation will not be ready for approval before year-end.

A government source said the proposed regulation, which will be subject to public consultation, aimed to reduce power bills by 4% to 5%, depending on CO2 prices.

“This is just over 1 billion euros that (...) we think should reduce consumers’ electricity bills,” Ribera said.

The minister said 90% of this amount would help cover the costs of renewable energies, and the rest would go towards vulnerable customers through a so-called social voucher.

The preliminary bill, part of a wider pledge by the ruling Socialists and left-wing party Unidas Podemos to protect end-consumers, seeks to reduce part of the carbon dividend for pre-2005, non-emitting plants that sell energy on the market.

The energy pool price has surged since the beginning of the year, to an average of 52 euros per megawatt hour, up about 90% on-year, Spanish investment firm Alantra said, as CO2 prices have risen 40%.

The government separately approved creation of a national fund that will help mobilize investments in coming years in clean technologies.

With implementation of both measures, consumers’ energy bill could fall up to 14-15% in five years, a government source said.

Shares in power companies, such as Endesa, Acciona , and Iberdrola with higher exposure to nuclear and hydraulic power took a hit on Monday and were little changed on Tuesday..

The new legislation coincides with the implementation of a controversial new power tariff scheme as of June. (Reporting by Belen Carreno and Jesús Aguado Additional reporting by Emma Pinedo. Editing by Mark Potter and Bernadette Baum)