HARRISBURG -- Price caps on electricity are on their way out and a new challenge is on its way in.

The state Public Utility Commission is trying to prevent the kind of sudden rate spikes Maryland and other states saw when utilities were fully deregulated there.

The commission invited 26 stakeholders -- including power distribution companies, electricity generators, consumer advocates and energy consultants -- to testify at a public hearing in Harrisburg yesterday.

"It's up to all of us to prepare now to protect our customers from the brunt of possible price spikes," said commission Chairman Wendell Holland.

Rates for most Pennsylvania customers are capped according to limits negotiated separately by each utility company. Those caps are being phased out as part of a deregulation law that provides for utility competition. Most caps end in 2009 or 2010, although some already have, including Duquesne Light's.

Consumer groups predict rates will increase, like they did in Maryland, because too few competitors have entered the marketplace. Rates will soon mirror the price of natural gas and oil, they said.

One solution commissioners are considering is for customers to begin paying more now to utility companies, said state Public Utility Commission spokeswoman Jennifer Kocher. The additional money -- as well as interest --could be used to offset rate hikes later when caps expire, Ms. Kocher said.

Generation companies, though, say rates won't necessarily increase.

"Having a utility company collect, in advance, payments for events that might not transpire seems unnecessary," said Rick Rathvon, president of the Retail Energy Supply Association.

Residential electric rates decreased when Duquesne Light became one of the first companies in Pennsylvania to have rate caps removed. Those who have electric heat and who live in territory served by Duquesne Light's poles and wires save an average of $440 a year since the caps were removed in 2002, according to testimony yesterday.

Industrial customers, though, say they their electric bills have become high and unpredictable. Duquesne Light charges them for energy use by the hour and rates fluctuate according to market conditions.

That's troubling to Allegheny County officials.

"Many of our local employers face the complicated task of adjusting to price increases from one day to the next without the ability to forecast prices even in the short-term," according to a statement from county Chief Executive Dan Onorato and read yesterday by Shawn Fox, his chief of staff.

"This is a precarious position for these companies, which in some cases have electricity costs as much as 30 percent of their total operational costs," Mr. Fox read.

The region would be devastated if its large manufacturers moved to states where electricity remains regulated and rates remain capped, Mr. Onorato's statement said.

John Hanger, president of the environmental group PennFuture, cautioned commissioners against acting too quickly on a problem that may resolve itself through the marketplace.

"Don't be stampeded into action based on some belief that we have an energy crisis in the electricity sector," Mr. Hanger said.

Jay L. Kooper, director of regulatory affairs for Hess Corp., which plans to enter the supplier market in Pennsylvania, also cautioned the commission against being so aggressive that they harm the "robust, competitive retail market that stakeholders are trying to build."

Testifiers recommended a variety of measures, including educating consumers about electric choice, increasing reliance on solar power, providing more energy assistance to low-income families and supplying customers with devices that allow them to view their consumption and electricity rates in real time.

Commissioners plan to consider the suggestions as they draft policies aimed at mitigating price increases.