ANALYSIS-East Europe must hike power prices to avoid trouble

By Anna Mudeva

SOFIA, June 5 (Reuters) - East Europeans will likely face bigger rises in power bills than their richer Western neighbours, and for once the high oil price is not the main culprit.

Without price hikes they may suffer severe electricity shortages and possible blackouts, analysts say.

Higher prices are needed to encourage investment in new power plants to feed the region's booming economic growth as well as replace ageing Soviet-era stations, they say.

Most countries in the former bloc have yet to abolish a communist legacy of state control over household power and gas prices.

Poland will have to add 1,000 megawatts of new capacity to maintain its energy security, analysts reckon, while Albania, the poorest nation in the region, already has frequent blackouts due to shortages in the Balkans.

"If the new (European Union) member states are tinkering with prices, then they will probably pay a very high cost rather soon," said Christian Egenhofer, energy expert at the Brussels-based Centre for European Policy Studies.

"New investment would not come and they would run out of capacity," he added. "I don't see any alternatives -- governments have to take the bitter medicine (and hike prices) or leave it to the next government."

Global rises in energy costs have caused higher prices this year in Poland, Hungary, Romania, Bulgaria, Croatia and the Czech Republic after a series of gradual increases this decade.