UPDATE 1-Polish watchdog raises power prices by 2 pct

(Adds URE deputy head quote, paragraph 7-8)

WARSAW, April 17 (Reuters) - Poland's energy watchdog URE raised regulated electricity prices for the second time this year, by a lower-than-expected 2 percent on average for households, its spokeswoman said on Thursday.

The hike, though smaller than the 11.6-percent increase URE approved in January, reflects the growing costs faced by power companies. It comes into effect on May 1.

Two electricity distributors in Poland which are not state-owned, Vattenfall VTTG.DE and RWE Stoen (RWEG.DE: Quote, Profile, Research), clashed with the regulator earlier this year by raising prices without its approval.

Rising electricity and gas prices have contributed to rising inflation in Poland in recent months, prompting the central bank to raise interest rates seven times since April 2007, but this decision eases inflationary pressure.

"We were expecting a larger hike, reaching even 8 percent," said Piotr Kalisz, chief economist at Citi Handlowy in Warsaw. "It's probably a way to spread the hikes out over several months."

He added that if the watchdog approves another increase in the second half of the year it could again fuel inflation, which stood at 4.1 in March.

URE's deputy chief said he saw further prices increases in the pipeline.

"I think this is the last one this year," Marek Woszczyk told TVN CNBC. "I see no reasons for further hikes in energy prices."