(Releads with minister)
MADRID, Nov 7 (Reuters) - Spanish Industry Minister Miguel Sebastian on Friday condemned a non-binding proposal by the energy watchdog to hike electricity charges by 31 percent to cover the widening gap between sales prices and estimated costs.
"I have not formally received it and of course it is not reasonable. I don't think it's a serious proposal, it is scandalous," Sebastian told journalists.
Spain's power market is still largely regulated and utilities have to sell electricity at below estimated costs, which causes a so-called "tariff deficit."
In a statement, the National Energy Commission (CNE) calculated a tariff deficit of 6.716 billion euros ($8.59 billion) for 2009, up from 4.8 billion this year.
The proposal received widespread coverage in the media before it was announced by the CNE and also drew swift condemnation from the Union of Spanish Consumers (UCE).
"UCE considers that a price increase of these proportions as of Jan. 1, 2009, is intolerable and unsustainable given the economic situation of Spanish families," a UCE statement said.
The government has the final word on electricity prices and has pledged to eliminate the tariff deficit within its term of office, which is due to end in 2012, but has yet to reach agreement with generators as to how to do this.
It has attempted to finance the deficit by selling bonds at quarterly auctions, but market turbulence forced the government to scrap its last attempted sale of 3.85 billion euros' worth of tariff-related debt in September.
One dispute is about electricity prices, which the government is keen to hold down to control inflation.
"We've already made the first big move, which was the July 1 rise (in prices), now it's up to the electricity companies to make a move," Sebastian has said.
The CNE estimated that demand for power in Spain would rise by 1.9 percent next year to 290,200 gigawatt hours. (Reporting by Martin Roberts and Sergio Perez; Editing by Anthony Barker)