UPDATE 1-Iran may hike power price by five times -reports

(Adds quotes from Ahmadinejad, paras 11-13)

TEHRAN, July 22 (Reuters) - Iran is considering proposals to increase electricity prices by nearly five times to encourage savings in a country facing daily power cuts at the height of summer, Iranian media reported on Tuesday.

The world's fourth-largest oil producer has had to implement daily electricity cuts in Tehran and elsewhere as temperatures climb above 40 degrees Celsius.

President Mahmoud Ahmadinejad last month outlined plans to overhaul the country's subsidy system, a move aimed at introducing more direct subsidy payments to the needy.

Economists have said the step will help to rein in state spending and curtail waste. But the short-term inflationary impact makes it a sensitive issue ahead of next year's presidential election. Inflation has already hit 26 percent.

Deputy Energy Minister Mohammad Ahmadian was quoted as saying the cuts of electricity, the price of which is subsidised, may be extended, without giving details.

"In view of the rising temperature the country is confronting 1,000 megawatt of electricity shortages ... and there is no way except increasing the period of power cuts," the Etemad-e Melli daily quoted him as saying.

Saying the cuts inflicted a heavy burden on the economy, he added: "The power wastage in the country is as much as 18 percent ... Economising in power consumption is almost zero in view of the entry of new consumers in the power network."

Sarmaye daily said electricity prices might increase to 770 rials per kilowatt hour (kWh) from 160 currently starting from Sept. 22, which marks the beginning of the second half of the Iranian year running to March.