Dec. 7 (Bloomberg) -- The U.S. Senate blocked legislation that Republicans said would raise energy prices by increasing taxes on oil and gas companies and requiring utilities to get a portion of their power from renewable sources.

The vote on a bid by Senate Majority Leader Harry Reid today to begin considering the measure was 53-42, seven short of the 60 needed to overcome objections. Democrats said the measure is needed to diversify energy supplies and reduce greenhouse gas emissions.

The legislation would raise car fuel economy standards for the first time in 32 years and more than quadruple the use of gasoline alternatives such as ethanol. It also includes a $21 billion tax package that repeals credits for major oil and gas companies and extends wind and solar energy tax incentives.

``This doesn't mark the end of this bill,'' said Senator Pete Domenici of New Mexico, the senior Republican on the Energy and Natural Resources Committee. ``We've got to go to work at trying to fix some of the problems the House bill has generated for us.''

The House of Representatives passed the measure by a vote of 235-181 yesterday. The legislation represented the House's attempt to reconcile differing versions of energy legislation that have been approved this year. Congressional action on energy comes as crude oil prices last month nearly touched $100 a barrel, hitting a $99.29 record on Nov. 21.

Three Democrats joined 39 Republicans in opposing the measure, while five Republicans, 46 Democrats and the two independents voted to consider the legislation.

`Twin Millstones'

It was burdened by ``the twin millstones of utility rate hikes and massive tax increases,'' Senate Republican leader Mitch McConnell said.

President George W. Bush today threatened to veto the legislation in part because of the tax plan and a provision requiring investor-owned utilities to buy 15 percent of their power from renewable sources.

``This bill could pass in a day if they stripped the taxes out and the renewable portfolio standard'' for electricity production, said Texas Republican Senator John Cornyn.

Democrats are trying to figure out whether to drop the tax provisions or the renewable power standard, not both, said Jim Manley, a spokesman for Reid.

`Disappointed'

House Speaker Nancy Pelosi said she was ``disappointed'' by the Senate's vote. ``The House will work with the Senate on a bipartisan basis to pass a strong energy bill and send it to the president's desk for his signature,'' she said in a statement.

Today's proposal includes $13.5 billion in taxes on oil and gas companies, including $10 billion over 10 years on the five top oil and natural gas companies -- BP Plc, ConocoPhillips, Chevron Corp., Royal Dutch Shell Plc and Exxon Mobil Corp.

Part of the money raised by that tax and others would fund an extension of tax credits for wind, solar and biomass power providers, as well as credits for hybrid cars.

``It's imperative that those provisions be available to help our energy independence,'' said Senator Max Baucus of Montana, chairman of the Finance Committee. He rejected the idea that the tax portion of the bill might be jettisoned.

Opponents of the legislation ``are turning their backs on the hardworking American families who are suffering under the skyrocketing energy costs brought on by decades of failed energy policies,'' Carl Pope, executive director of Sierra Club, said in a statement.

Stripped-Down

``It's going to be tough to get a bill out'' this year, said Bill Kovacs, vice president of environment, technology and regulatory affairs for the U.S. Chamber of Commerce. ``What you're going to see is a stripped-down version of the bill'' sent back to the House, without a renewable power requirement and without the $21 billion tax package, he said.

The White House has said it is prepared to act through regulatory rulemaking to help boost car fuel economy and increase the use of gasoline alternatives if Congress delivers ``unacceptable'' legislation.

``We believe the intention in the Senate is to send the president a bill close enough to his demands that he would hold his nose and sign it,'' Christine Tezak, a Washington-based analyst for Stanford Group Co., said in a note today. ``There is still a reasonable chance that can happen.''

Domenici said in a statement that energy legislation with fuel economy changes, a new standard for gasoline alternatives and energy efficiency improvements ``is the right approach.''

Democrats will ``see if we can make some changes in the legislation that will allow us to get the necessary 60 votes,'' New Mexico Senator Jeff Bingaman, chairman of the energy committee, said on a conference call with reporters. ``That effort will be going on today and over the weekend and early next week.''

To contact the reporter on this story: Tina Seeley in Washington at tseeley@bloomberg.net.

Last Updated: December 7, 2007 14:32 EST