MADRID (Reuters) - There were clear signs of manipulation at a Spanish wholesale power auction used to set household bills that was later annulled by the competition authorities, the Industry Minister said in an interview published on Saturday.

The quarterly auction of wholesale electricity on Thursday logged a sharp jump, which would have translated in to a 10.5 percent rise in power bills, prompting the regulator to annul the auction.

"There has a clear manipulation to modify the prices. That much is clear," Jose Manuel Soria said in an interview for the daily newspaper ABC. "And, on top of that, it has been done very clumsily."

The Industry Minister said auction prices were around 7 percent higher than market reference prices in previous days and notably higher than at previous auctions. The government said in its official gazette on Saturday that those differences, as well as markedly low bidding volumes, gave the competition regulator reasons to investigate.

A sharp increase in power prices would have put more stress on recession-battered Spaniards. The Spanish economy has shrunk around 7.5 percent since 2008, and the jobless rate looks set to end this year above 26 percent.

The minister declined to say that any crime had been committed at the auction. He said domestic power prices would be fixed provisionally for the first quarter and until the government could determine an alternative method to set prices.

The auction had added to doubts on whether Soria's signature energy reform, passed in July, would be enough to fix a distorted power market that has led to 30 billion euros of state-backed debt, known as the tariff deficit.

The 3.6-billion-euro deficit this year will be held on the balance sheets of utilities such as Endesa <ELE. MC>, Iberdrola <IBE. MC> and Gas Natural <GAS. MC>.

Soria recognised the utilities' concern over this year's tariff deficit, though he added any chance of the government giving state backing to the debt was "very complicated."

(Reporting by Paul Day; Editing by Larry King)

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