ALBANY -- Is it worth raising the electric bills of most upstate residential electric customers by $5 to $10 a month so more cheap power is available to retain jobs and even attract new ones to the struggling region?

That is the choice that could face Gov. Eliot Spitzer and state lawmakers later this year as they try to decide what to do with a pool of cheap hydropower: continue giving it to upstate utilities to help keep residential costs down or set it aside for businesses that use a lot of power?

On the one hand, New Yorkers already pay among the highest rates for electricity in the country, and taking away the hydropower would make that situation worse.

On the other side, the cost of power is one of the major disadvantages companies that are heavy users of electricity have in competing against firms in other states -- they pay 42 percent more than the national average for power, according to the state Business Council, a lobbying group.

Spitzer and lawmakers have to decide this year because the major job-subsidy power program expires at the end of June, and contracts for the cheap power for residential customers run out Aug. 31.

The issue came to the fore this week when a group of upstate business leaders traveled to the Capitol to lobby for changes in state laws to improve the economic climate in their struggling region.

One of them, Jay Simonis of Endicott Interconnect, said his firm might look outside the state when it considers expanding if it loses its subsidy on electric bills.

"We are winning new business, and it's going to require investment in new equipment," Simonis said. "We're making decisions now to stay in Endicott or move to a place with cheaper electricity."

A state-subsidy program cuts the annual electric bill of Endicott Interconnect, which manufactures electro-mechanical equipment, from about $12 million a year to $8 million, he said. The firm, which has about 2,000 workers, is the largest manufacturing employer in Broome County.

The subsidies help protect about 360,000 jobs across the state, many of them highly paid manufacturing positions.

Last December, a state panel came up with recommendations on what to do about the subsidy programs.

The key idea: take 500 megawatts (enough energy to power 500,000 homes) of cheap power generated by the Niagara and St. Lawrence hydroelectric plants that now go to three upstate utilities (Rochester Gas and Electric, National Grid and New York State Electric and Gas Corp.) and set that power aside for businesses.

The utilities now spread the power among their residential customers, which helps to hold down rates. But that has to change, a business advocate said.

"We have to do this to protect manufacturing we have left," the Business Council's Kenneth Pokalsky said. "Energy-dependent companies need this badly."

But Democratic members of the panel dissented on the report, in part because the group had "no specific voice for residential or agriculture customers who have benefited form this (current) power allocation at the table."

Instead, they recommended the state find $300 million from a number of sources, including tax money, to continue existing subsidies while the matter is studied further.

Spitzer said he wants to use the state's hydropower "more efficiently," but hasn't detailed what that means. Spokesman Marc Violette on Friday said he had no comment on the panel's recommendation to redirect the cheap power.

"We're waiting for the governor's recommendation on this," said Senate Energy Committee Chairman James Wright, R-Watertown, Jefferson County. But he thinks other recommendations in the report -- including eliminating subsidies for some not-for-profit organizations and universities that now get cheap power -- provide a useful starting point for discussions.

He said any plan that includes raising the bills of residential customers would be a "last resort."

The state's electricity is more expensive than in any other state except Hawaii in part because more power plants are fueled by oil and natural gas than in most other parts of the country, where cheaper coal is the dominant fuel. State taxes and charges on utility bills in New York also are among the highest in the country.

That in part is what makes hydropower, which supplies about 20 percent of power generated in the state and is by far the cheapest way to generate electricity, so valuable. By law, much of the output of the two big hydro plants owned by the state Power Authority in Niagara Falls and Massena is reserved for local industries. The rest has been allocated under various laws and contracts all over the state.

The state launched its Power for Jobs program, through the Power Authority, in 1997. It was intended to act as a three-year bridge to continue supplying relatively low-cost power to energy-intensive industries until the newly deregulated market drove down prices across the board.

Instead, prices went up, and the program was extended in several stages to its current expiration date of June 30.

A problem has been that originally half of the electricity for the jobs program came from the Power Authority's Fitzpatrick nuclear plant in Oswego. But in 2000, the authority sold the plant (as well as Indian Point 3 in Buchanan, Westchester County), losing a large source of relatively cheap power. Contracts with the new owner, Entergy Nuclear Northeast, to provide low-cost power that were part of the original deal expired in 2005.

Simonis, the Endicott Interconnect executive, said if the electric-price issue isn't resolved, other state efforts to improve the business climate, like reforming the workers' compensation system and liability laws, won't do his firm any good.

"If I don't have a low-cost source for electricity, I don't even get to that point of worrying about those other things," he said.