The Spanish government Friday outlined plans to overhaul its energy sector by raising taxes on fossil fuels and lowering subsidies on certain types of renewable energy generation.

The draft legislation was detailed after a government cabinet meeting Friday, and aims to raise Spain 's income from the sector by EUR2.74 billion ($3.5 billion).

At a press conference, Industry and Energy Minister Jose Manuel Soria said Spain will begin taxing all types of power generation by 6%, set two new taxes on nuclear power and tax hydro power.

In recent years, Spain has accumulated EUR24 billion in so-called tariff deficit--the difference between the actual cost of energy and what the consumer pays--mostly by subsidizing renewable energy generation.

Mr. Soria said the government wants to cap the increase this year to a maximum of EUR1.5 billion this year, and have no new deficit by 2013.
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