Green groups say the existing rule is important to protect public health from smog, acid rain and soot, while U.S. utility groups contend that the rules require expensive investments in equipment that drive up the cost of electricity.

The Clinton administration in 1999 filed lawsuits against nine U.S. utilities to enforce the new source review rule. One case has been settled out of court.

"I think you saw a real backing off on getting settlements as soon as the (Bush) administration took its position" on new source review, Vermont Sen. Patrick Leahy, a Democrat, told reporters after a joint hearing by the Senate Judiciary and Environment committees.

Thomas Sansonetti, the assistant attorney general for environment and natural resources at the Justice Department, said the new rules have not affected the government's enforcement actions against utilities.

CLINTON-ERA LAWSUITS

"I'm going forward with them regardless of what happens with these policies," Sansonetti said. "I've got to go forward. I have no choice."

New York's two Democratic senators and its litigious Attorney General Eliot Spitzer vowed a court battle if the administration finalizes new rules it proposed in June.

Spitzer accused the Environmental Protection Agency of creating "an intentional regulatory limbo" to put the cases on hold. Finalizing the rules would be an "illegal act. We would go to court to prevent it and I think we would win," he said.

Hanging in the balance are the Clinton-era lawsuits brought in November 1999 against several Midwest and Southern utilities that operate dirty, coal-fired power plants.

Another case is pending against the Tennessee Valley Authority, the nation's largest public power producer. The 11th U.S. Circuit Court of Appeals in late June ordered the TVA case put on hold until the end of August to allow mediation talks.

Sansonetti told reporters after the Senate hearing that he did not believe the new Bush administration rules affected the judge's decision to call for TVA mediation talks.

Leahy said the mediation talks were "a much weaker outcome than expected."

Five other cases are "in active discovery on liability issues," Sansonetti told the senators. A case against Southern Indiana Gas and Electric Co. is set for trial in October.

A federal judge in Buffalo, New York, was also scheduled to hear arguments in a separate lawsuit filed by Spitzer against Niagara Mohawk, owned by British company National Grid Group Plc , and NRG Energy Inc. for clean air violations.