U.S. Senate Minority Leader Mitch McConnell (C) departs the senate floor with an aide after a senate vote in the early morning hours at the U.S. Capitol in Washington January 1, 2013.

CHICAGO | Wed Jan 2, 2013 8:22pm EST

CHICAGO (Reuters) - The U.S. Congress prevented hefty tax hikes and spending cuts with a "fiscal cliff" deal this week, but grassroots conservatives are already seeking 2014 primary challengers for high-profile Republican lawmakers who backed the deal.

Few challengers have yet come forward. But fiscally conservative activists irate at Republicans who voted to raise some taxes without cutting spending are casting about for opponents to Republicans including Senate Minority Leader Mitch McConnell and senators Saxby Chambliss of Georgia, Lindsey Graham of South Carolina and Lamar Alexander of Tennessee.

"Many people here have watched Mitch McConnell's voting record and are dissatisfied with what they've seen," said Eric Wilson, executive director of the Kentucky 9/12 project, a Tea Party group in McConnell's home state. "There are some potential candidates working in the background and doing the right thing" including visiting Kentucky's conservatives to gauge support.

Wilson declined to divulge names, citing McConnell's fundraising prowess that allowed him to amass almost $19 million for his 2008 re-election bid. McConnell could not be reach for comment.

"Anyone who sticks their neck out now will get their head cut off," he added. "But there are definitely people here with real potential."

In the 2010 midterm elections the Tea Party movement took the Republican "establishment" by surprise with high-profile primary victories over more conventional candidates and brought a wave of freshmen to the House of Representatives.

But despite successes in the primaries in 2012, most notably the defeat of Indiana's six-term Republican Senator Dick Lugar by state treasurer Richard Mourdock, conservative candidates fared poorly in the general election.

Tea Party supporters claim 2014 should be different as lower turnout in midterm years allows fiscal conservatives to punch above their weight.

"Presidential politics in 2012 sucked oxygen out of the conversation in local races," said Matt Kibbe, president of FreedomWorks, which coordinates with Tea Party groups around the country. "So to us, 2014 looks more like 2010."

After some disastrous showings by Tea Party candidates, most notably Christine O'Donnell in Delaware in 2010 who ended up running a television ad denying she was a witch, conservatives are on the lookout for credible candidates who can run effective campaigns and raise sufficient funds for a general election.

It is reasonable to expect challenges to some Republicans from the right in 2014, said James Henson, a politics professor at the University of Texas in Austin.

"Whether they use the name Tea Party or not is irrelevant," he said. "The DNA of their movement has now been spliced into the DNA of the Republican Party."

'IN MAJOR TROUBLE'

Previous battles in Congress have been marked by Tea Party activists around the country bombarding their elected representatives, mostly Republicans, calling on them to hold the conservative line.

Many did not bother ahead of the fiscal cliff deal, a bipartisan agreement to raise tax rates on incomes of more than $450,000 per household.

"We knew the Republican leadership would cave in," said Debbie Dooley, a coordinator at national umbrella group Tea Party Patriots and a founder of the Atlanta Tea Party. "So we didn't expend a lot of energy on this issue."

Instead, Dooley said activists in her home state of Georgia are focused on educating voters about America's spiraling debt and seeking a replacement for Saxby Chambliss, who was forced into a runoff election in 2008 and only narrowly managed to return to the Senate.

No one has announced a challenge to Chambliss, but Georgia representatives Tom Price and Paul Broun are seen as potential candidates. Chambliss could not be reached for comment.

"If a credible candidate comes forward, then Saxby Chambliss is in major trouble," Dooley said.

In South Carolina, Joe Dugan of the Myrtle Beach Tea Party said there are credible alternatives to Senator Lindsey Graham, including three representatives elected in 2010 who have been reliably conservative on most issues.

"I am over 90 percent certain that if there is a reliably conservative candidate in 2014 he will have my total support," against Senator Graham, Dugan said.

Tim Phillips, president of Americans for Prosperity which has backing from the billionaire oil and gas brothers Charles and David Koch, said it is too early to say whether the group will get involved in primary challenges in 2014.

But the group, which raised $140 million in 2012 compared to $51 million in 2011, will focus on educating voters in 2013 on how their representatives voted on the fiscal cliff and the upcoming U.S. debt limit debate.

"We aim to hold elected officials accountable," he said. "Lawmakers will not be judged solely on how they voted on the fiscal cliff, but it is a big vote to get wrong."

Some conservative activists admit they face a steep climb at best if they want to unseat their local Republican representative. The West Chester Tea Party in House Speaker John Boehner's district in southwestern Ohio, for instance, has begun looking for a challenger to him even though he amassed nearly $22 million for his 2012 re-election bid.

"We've been getting emails from around the district and around the country asking if this is the best we can do for a representative," West Chester Tea Party member Ann Becker said. "That's not an easy question to answer."

"It will be a David-versus-Goliath battle if we do find somebody, but nothing is impossible," she added.

Unlike Indiana's Dick Lugar, who refused to recant on key votes that angered Tea Party activists, Utah Senator Orrin Hatch tacked rightward to defeat a primary challenge in 2012.

The University of Texas' Henson said that in the months to come the behavior of Republican lawmakers who voted for the fiscal cliff may show how seriously they take the threat of primary challenges next year.

"We will have to see what kind of compensatory behavior we see from Republicans," Henson said. "I suspect we will see more conservative Republicans try to make up for the fiscal cliff by trying to revert to form on other issues."

(Editing by Alistair Bell and Lisa Shumaker)

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U.S. House Speaker John Boehner (R-OH) arrives to speak to the media on the ''fiscal cliff'' on Capitol Hill in Washington, December 21, 2012.

WASHINGTON | Wed Jan 2, 2013 8:08pm EST

WASHINGTON (Reuters) - House Speaker John Boehner abruptly reversed course on Wednesday and set a timetable to approve $60 billion in Superstorm Sandy relief, after fellow Republicans including New Jersey Governor Chris Christie heaped scorn on his cancellation of an earlier vote.

The Republican-controlled House of Representatives will now vote on Friday on a $9 billion down payment for storm-related support to the National Flood Insurance Program.

Boehner also assured New York and New Jersey lawmakers that the House will take a second vote on January 15 on the $51 billion remainder of the Sandy disaster aid package approved last week in the U.S. Senate.

"This procedure that was laid out is fully acceptable and fully satisfactory. It provides the full $60 billion that we require," said Representative Peter King, a high-ranking House Republican from Long Island, New York.

Earlier, King had condemned Boehner's adjournment of the House before the Sandy vote, saying on the House floor the inaction was "a knife in the back."

Sandy, the second-costliest storm in U.S. history, devastated the northeastern United States on October 29, smashing New York and New Jersey coastal communities.

New Jersey Governor Chris Christie, seen as a potential Republican presidential candidate in 2016, said the vote's cancellation reflected the "toxic internal politics" of House Republicans.

"There is only one group to blame for the continued suffering of these innocent (storm) victims - the House majority and the speaker, John Boehner," Christie told a news conference in Trenton, New Jersey.

"It is why the American people hate Congress," he added.

Christie tried to telephone Boehner four times after 11:20 p.m, when House Majority Leader Eric Cantor told him the vote was canceled. The speaker declined to take his calls, the governor said.

President Barack Obama also made a last-minute overture to Republicans to pass the plan and spoke to both Christie and New York Governor Andrew Cuomo by telephone.

Angry New York and New Jersey lawmakers said the House delay marked a stark contrast to congressional reaction to Hurricane Katrina in 2005. Then, a Republican-controlled Congress swiftly approved $62.3 billion in aid just 10 days after the storm devastated the Gulf Coast.

Local officials in battered coastal Long Island communities complained on Wednesday that they could not launch rebuilding projects without knowing aid funds were on the way.

Recreation and senior centers are closed and boardwalks splintered in Long Beach, New York, where $250 million in estimated repair costs far exceed the city's $88 million annual budget.

"We need Congress to pass the bill. That's how we're going to rebuild," said Long Beach spokesman Gordon Tepper.

After reversing course on Wednesday afternoon, Boehner and House Majority Leader Eric Cantor said in a joint statement: "Getting critical aid to the victims of Hurricane Sandy should be the first priority in the new Congress, and that was reaffirmed today with members of the New York and New Jersey delegations."

NOT A GOOD TIME

Boehner had called off the vote on aid after the House passed a budget deal.

But critics complained Boehner should have allowed the House to give final approval to the Senate-passed Sandy rescue package before the current Congress officially ended on Thursday, causing all pending legislation to expire.

Explaining the adjournment without a vote, a Boehner aide said it "was not a good time" to vote on $60 billion in relief spending as Congress dealt with the broad tax measure, which had few spending cuts.

With Boehner facing an internal House Republican leadership re-election on Thursday after a majority of his party members voted against the "fiscal cliff" deal, some Republican lawmakers said a massive, $60-billion spending bill would have been too much to handle.

"It was a horrendous day with some horrific votes that a lot of our conference was very unhappy with," said Michael Grimm, a Republican from hard-hit Staten Island, New York.

Grimm and other New York and New Jersey Republican congressmen said they were satisfied with Boehner's new plan and would support his bid for another term as House speaker.

Even King said late in the day that his earlier vitriol "seems like a lifetime ago."

SHRINKAGE RISKS

But the new plan could still see some Republicans trying to shrink the aid package, as the $51 billion portion may be split into two parts - one for initial needs and another for longer-term projects. Fewer Republicans are likely to support the longer-term funds, but Democrats gained eight seats in the new Congress in November's elections.

Many House Republicans had complained that the Sandy aid bill was loaded with spending on projects unrelated to storm damage or long-term projects that needed more scrutiny.

Among expenditures criticized in the Senate plan were $150 million to rebuild fisheries, including those in the Gulf Coast and Alaska, and $2 million to repair roof damage at the Smithsonian Institution buildings in Washington that pre-dates the storm.

(Reporting By David Lawder, Ian Simpson, Jeff Mason, Hilary Russ and Tom Ferraro; writing by Ian Simpson; editing by Todd Eastham and Philip Barbara)

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LOS ANGELES | Wed Jan 2, 2013 8:28pm EST

LOS ANGELES (Reuters) - The U.S. wind industry is powering up once again after Congress extended a critical tax credit that wind companies say will save tens of thousands of domestic jobs and allow more clean energy projects to ramp up this year.

About half of the sector's 75,000 jobs in the United States had been expected to disappear if the wind production tax credit had been allowed to expire at the end of last year, according to trade group the American Wind Energy Association.

"There will be a lot of activity that wouldn't have otherwise occurred," said David Burton, an attorney with Akin Gump Strauss Hauer & Feld who works on the tax aspects of financing renewable energy projects.

The extension and several other clean energy tax breaks came out of a Senate Finance Committee "tax extenders" bill in August and was included, along with a host of other business tax incentives that industries had been pushing for all year, in the deal to avert the "fiscal cliff."

The tax break provides an income tax credit of 2.2 cents per kilowatt hour for electricity produced by utility-scale wind turbines, helping it compete with power generated from cheap fossil fuels like coal and natural gas.

Importantly, the credit was changed to allow project developers to claim it when they begin construction, rather than only once turbines are up and running. It addresses the stop-start nature of the tax credit and takes into consideration the two years it can take to develop a wind farm.

"That's a huge difference," said Lance Markowitz, a senior vice president in the leasing and asset finance division of Union Bank, a unit of Mitsubishi UFJ Financial Group.

Markowitz added that he knows of several wind projects that will go forward that likely would not have without an extension of the tax credit. However, he cautioned that the industry still faces challenges such as weak power prices and an environment in which many utilities are close to fulfilling their state mandates for renewable energy generation and therefore are no longer required to buy more clean power.

The last-minute extension has already taken a toll on the industry, according to AWEA's interim chief executive, Rob Gramlich, who said some of the industry's jobs would not be saved.

"Some of the damage was certainly done," he said.

Manufacturers like Denmark's Vestas Wind Systems A/S, for instance, decreased their U.S. workforce in 2012 in anticipation of the tax credit expiring.

"Our order intake, like everyone else in the industry, saw a decrease in 2012," said Andrew Longeteig, a spokesman for Vestas' North American operations.

BIG HELP FOR SMALL GREEN INDUSTRIES

Allowing projects to claim the tax credit when they begin construction will be a big boon to less developed technologies like geothermal and biomass.

"They are less developed so tend to be looked at by investors as being riskier," said Michael Bernier, a senior manager at Ernst & Young who specializes in renewable energy tax credits. "Providing that certainty of 'OK, we're going to get this tax credit,' that helps you mitigate your risk."

The change could spur about $4 billion of new investment in geothermal projects, said Karl Gawell, executive director of the Geothermal Energy Association.

It remains to be seen how the federal government will define projects "under construction" and able to qualify for the tax credit. A popular solar power incentive, before it expired, allowed developers to qualify if they incurred five percent of the total project costs even if actual construction had not started.

"The Obama administration was very supportive of those guidelines and will push hard for those same guidelines," said Burton.

The bill to avert the fiscal cliff also included extensions of tax credits for electric vehicle chargers for individuals and businesses and electric motorcycles.

(Additional reporting by Valerie Volcovici in Washington; Editing by Phil Berlowitz)

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The interior of a Microsoft retail store is seen in San Diego January 18, 2012.

SAN FRANCISCO | Wed Jan 2, 2013 7:30pm EST

SAN FRANCISCO (Reuters) - Microsoft Corp bought start-up id8 Group R2 Studios Inc as it looks to expand further in technology focused on the home and entertainment, a person familiar with the situation said on Wednesday.

id8 Group R2 Studios was started in 2011 by Silicon Valley entrepreneur and investor Blake Krikorian. It recently launched a Google Android application to allow users to control home heating and lighting systems from smartphones.

Krikorian's Sling Media - which was sold to EchoStar Communications in 2007 - made the "Slingbox" for watching TV on computers.

Krikorian will join Microsoft with a small team, according to the Wall Street Journal, which reported the acquisition earlier on Wednesday. Microsoft also purchased some patents owned by the start-up related to controlling electronic devices, the newspaper added.

Krikorian and a Microsoft spokesman declined to comment.

Krikorian resigned from Amazon.com Inc's board in late December after about a year and a half as a director at the company, the Internet's largest retailer.

(Reporting By Alistair Barr; Editing by Steve Orlofsky)

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SAN FRANCISCO | Wed Jan 2, 2013 5:01pm EST

SAN FRANCISCO (Reuters) - Advanced Micro Devices said on Wednesday it promoted senior executive Devinder Kumar to chief financial officer after the struggling PC chipmaker announced in September its previous CFO was leaving.

Kumar, a 28-year AMD veteran, had been standing in as CFO since AMD announced the departure of Thomas Siefert, who was liked by many on Wall Street.

Since 2001, Kumar was corporate controller at AMD, which like other PC-related companies has been hit by a slump in demand as smartphones and tablets grow in popularity.

AMD, one of Silicon Valley's oldest chipmakers, has been laying off engineers while looking for new markets for its chips as it faces dwindling cash reserves.

(Reporting By Noel Randewich; Editing by Tim Dobbyn)

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Google's Executive Chairman Eric Schmidt poses prior to a meeting at the Culture Ministry in Paris October 29, 2012.

SAN FRANCISCO | Wed Jan 2, 2013 11:28pm EST

SAN FRANCISCO (Reuters) - Google Inc's executive chairman, Eric Schmidt, will travel this year to reclusive North Korea, where Internet use is subject to some of the world's tightest controls, the Associated Press reported on Wednesday.

Schmidt, one of the highest-profile leaders of the U.S. technology industry, could visit as early as this month, the AP said. The announcement was made days after North Korean leader Kim Jong-un, the third member of his family to rule the country since its inception in the Cold War, signaled a willingness to improve relations with South Korea.

It was unclear whom Schmidt will meet or what his agenda might be, the AP reported. Internet access is largely restricted to all but the most influential officials of the reclusive state. Media content is also rigidly controlled, although basic 3G cellphone use is said to be rapidly expanding.

Google did not directly respond to a question about whether Schmidt was going to North Korea, although a spokeswoman's response suggested a visit would not be for company business.

"We do not comment on personal travel," spokeswoman Samantha Smith said when asked about the AP report.

Schmidt, Google's main political and government relations representative, has also been a prominent supporter of President Barack Obama.

Google famously espouses a "do no evil" philosophy and campaigns for Internet freedom. It pulled its search service from mainland China in 2010, relocating it to Hong Kong because it said it could not conform with censorship requirements.

Last year, the company flew in North Korean defectors from Seoul for a panel discussion at a summit it hosted focusing on global illicit networks. It has also hosted North Korean officials in Silicon Valley, according to the Asia Foundation, which co-hosted part of a trip by the North Korean delegation.

"I think this is part of Google's broader vision to bring the Internet to the world, and North Korea is the last frontier," said Peter Beck, the South Korean representative of the Asia Foundation, a non-profit organization. "I suspect that Google's visit is more philanthropic than financial."

Beck said the North Korea delegation had been shown a Google Earth view of their capital Pyongyang.

Schmidt is writing, with former U.S. state department official Jared Cohen, a book due in April called "The New Digital Age." It will address how the Internet and technology can empower people and drive fundamental social, political and economic change.

"Perhaps the most intriguing part of this trip is simply the idea of it. The restricted control of information lies at the heart of the DPRK state and yet it is about to host one of the West's greatest facilitators of borderless information flows," said Victor Cha, a senior adviser and Korea expert at the Center for Strategic and International Studies.

The DPRK stands for the Democratic People's Republic of Korea, the North's official name.

"If Google is the first small step in piercing the information bubble in Pyongyang, it could be a very interesting development," Cha wrote on the center's website on Wednesday.

FIRST-TIMER

Schmidt's visit will make him one of the most prominent American businessmen to visit the country.

The AP cited two people familiar with his plans as saying the ex-Google CEO will join a private group led by former United Nations Ambassador and New Mexico governor Bill Richardson, a frequent visitor to North Korea.

Their visit follows a long-range rocket launch that has triggered a drive for further United Nations sanctions. North Korea is banned from testing missile or nuclear technology under sanctions imposed after its 2006 and 2009 nuclear weapons tests.

A second aspect of Schmidt's visit as part of Richardon's delegation could be to try to obtain the release of Korean-American tourist Kenneth Bae, accused of crimes against the state. Richardson has helped negotiate the release of detained Americans in the past.

"Richardson has had a history of trying to jump-start dialogue at low points in the U.S.-DPRK nuclear talks. He is a well-known quantity to North Koreans and does have credibility with them," Cha wrote.

(Reporting By Edwin Chan; Additional reporting by David Chance in SEOUL; Editing by Tim Dobbyn, Andre Grenon and Ron Popeski; eddie.chan@thomsonreuters.com; +1 415 677 2533; Reuters Messaging: eddie.chan.reuters.com@reuters.net)

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