UPDATE 2-Germany to postpone nuclear tax decision

*Proposed tax on nuclear fuel angers utilities

*Companies want nuclear plant lifespans extended

*Government prepares long-term energy strategy

*Merkel says another option may be possible

(Adds Merkel)

By Andreas Rinke

BERLIN, Aug 18 (Reuters) - Germany will postpone a decision on a contentious nuclear power tax to give the government more time to talk to utilities, who are furious about the proposal but also want to have the lifespan of nuclear plants extended.

Officials said on Wednesday the government would decide by the end of September, when it presents its energy strategy for the next two decades, instead of the start of the month when more details of Chancellor Angela Merkel's austerity drive are due.

It proposes that nuclear power station operators such as the world's biggest utility E.ON pay a new tax per gramme of nuclear fuel (uranium or plutonium) that they use, according to a draft law from the finance ministry made public in July.

"If another solution can be found, that's also fine," Merkel said in the northeastern city of Rostock on Wednesday.

The government has targeted an extra 2.3 billion euros a year from the nuclear power industry as part of an 80 billion euro savings plan to rein in the budget deficit and there was no indication that its resolve was slipping on principle of a nuclear tax.

Merkel's government originally hoped to make a decision at the start of September. Asked whether the cabinet would do this, the chancellor said the key consideration for Sept. 1 was that the government agreed on how the planned sum could be raised.

Environment Minister Norbert Roettgen said he believed the decision would be delayed and a government spokesman said it was "reasonable for the decisions on lifespan and nuclear power taxation to be taken at the same time" because they were linked.

The tax proposal has angered the four biggest utilities, who last week proposed an alternative payment method in return for being allowed to extend the lifespan of existing nuclear plants.

The industry proposes paying tax-deductible charges into a fund from which the government could make fixed withdrawals.

On Tuesday, E.ON chief executive Johannes Teyssen was quoted as saying the new tax would be illegal. The utilities have said their profits would be hit by the tax, forcing them to cut investment and possibly shut down some nuclear plants.

Postponing the tax decision would give Berlin more time to resolve the stand-off with E.ON, RWE, EnBW and Vattenfall Europe, which provide some 80 percent of Germany's power.

It would also give the utilities time to see more details of the long-term energy policy plan and find a way to link the taxation issue and their wish for the planned roll-back of nuclear plants to be postponed.

German nuclear power plants have to be phased out by 2021 after an average 32 years of life, but the operators hope that Merkel's government will reverse legislation imposed by a previous centre-left government under Gerhard Schroeder.

On a tour of energy plants in Rostock, Merkel said Germany needed to substantially increase its usage of wind power.

"We need an accelerated approval process not just for expanding plants and financing them, we also need it for building new networks," she said.

(Reporting by Andreas Rinke and Matthias Sobolewski; writing by Stephen Brown; Editing by Toby Chopra)