CONCORD, N.H. – A Statehouse hearing on whether to let Public Service Company of New Hampshire build a wood-fired power plant in the North Country turned into a debate over electric deregulation Tuesday.

Supporters of the wood-fired plant told the House Science, Technology and Energy Committee that loggers, foresters and timberland owners desperately need a new market for low-grade wood, due to the recent shutdown of Groveton Paper Board in Northumberland and the planned closing next month of the Fraser Papers Inc. pulp mill in Berlin.

“This is supported by the whole community,” said Berlin Mayor Bob Danderson, who also is a Public Service employee. “The more power we produce that’s domestic-based and not dependent on foreign imports, the better off the whole economy will be.”

But opponents said the proposal would turn back the clock on electric deregulation by allowing Public Service, the “incumbent monopoly,” to build a plant paid for by its customers through electric rates.

That would remove any incentive for other power companies to build plants in New Hampshire, crushing the state’s budding energy market and hurting smaller utilities like Unitil and National Grid that rely on independent power producers, they argued. It also could end up hurting Public Service’s customers, they said.

“This gives Public Service a leg up,” said Meredith Hatfield, a lobbyist representing Tamarack Energy, of Boston. “Our investors will turn away from New Hampshire.”

Public Service, which serves about 70 percent of the state’s electric customers, has been barred from building or buying new power plants since the state deregulated electric utilities a decade ago. It also was supposed to sell all its existing plants, although the Legislature has postponed that requirement and is poised to do so again.

Legislators repeatedly asked competing power companies whether they had spoken with Berlin officials and offered to build a wood-fired plant.

“We don’t see companies beating down the door to build plants in New Hampshire,” said Rep. Jacqueline Cali-Pitts, D-Portsmouth.

Several said they knew nothing about the state’s desire to see a wood-burning plant built in the North Country until last week. They urged the Legislature not to act hastily in addressing the region’s economic woes, and instead to solicit bids on building a wood-burning plant or request companies to offer proposals for other economic development projects.

Peter Riviere, head of the Coos County Economic Development Corp., a nonprofit that promotes business development in the North Country, echoed that sentiment in part, although he supports the proposal, with reservations.

First, he asked that Public Service consider all potential sites for a wood-burning plant, not just Berlin. He also said energy production may not be the best way to tie up the North Country’s wood supply.

“In the long term, there’s more value in producing ethanol,” he said. “I wouldn’t want to foreclose the future on ethanol production or chemical production.”

Most of the debate, however, revolved around whether Public Service’s customers would be hurt or harmed.

If the plant ends up producing low-cost power, they would benefit. But if it ends up being a bad investment and producing high-cost power, they could be stuck, once again, with the high regulated rates that drove the Legislature to deregulate electric utilities in the first place, said Thomas Bessette, of Constellation NewEnergy.

Bessette said power company shareholders and investors should pay the costs of building plants and shoulder the risks, not electric ratepayers.