The payment-card industry is charging into one of the last bastions of consumer business that has been slow to accept plastic: utilities.

In the past year, a number of large natural-gas and electric providers have begun allowing residential customers to pay their bills with credit and debit cards. Utilities are dropping their longstanding opposition to plastic as new competition looms in states that have deregulated the former monopolies. To help hang on to customers, the utility industry is searching for ways to make bill-paying faster and easier.

California's Pacific Gas & Electric Co., a unit of PG&E Corp., is launching a pilot program this week in which it will accept Visa-branded credit, debit and prepaid cards (which are purchased with funds already loaded onto them) over the telephone and on its Web site. In Michigan, Consumers Energy, a unit of CMS Energy Corp., recently began accepting Visa card payments, after hearing for years from customers clamoring for the service. Other big utilities to drop their barriers to plastic include Houston-based Reliant Energy Inc., FirstEnergy Corp. of Akron, Ohio, and Salt River Project, which provides electricity in Arizona.

The moves come at a time when consumers are paying more of their monthly bills with credit and debit cards. Nearly 40% of U.S. households have at least one recurring monthly payment that is automatically linked to a credit card, according to MasterCard Inc. research. But only about 15% of consumers regularly pay their utility bills with a credit or debit card, according to the data. Such payments are convenient, because they are handled electronically. They also bring added perks for consumers who hoard credit-card rewards points.

Jeffrey Appel, a lawyer in Huntington Woods, Mich., already pays his phone, newspaper and cable television bills with a credit card. To pay his Consumers Energy bill, however, he stops by the company's payment center and pays in person. Now, Mr. Appel says he plans to take advantage of the utility's new card program. It's a "no-brainer, because you can get miles," or air-travel rewards points, which are offered by many cards based on the amount of purchases.

But the credit-card payment option can also result in added costs for some consumers. "If you pay with a credit card and don't pay off your balance, you'll wind up paying interest on your utilities," says George Feld, a Consumers Energy customer in Bloomfield Hills, Mich. Indeed, annual interest rates on unpaid credit-card balances can be more than 20%. One way to avoid that risk: Consumers can choose to pay by debit card, which draws money directly from a checking account.

In recent years, payment cards have made inroads into new markets, including fast-food chains, grocery stores and local dry cleaners. Industry data have repeatedly shown that Americans now use plastic more often than checks and cash. But the utility industry, which collects some $180 billion in payments each year, has been particularly challenging for the card companies to penetrate.

Part of the difficulty has been in persuading utility executives that cards are worthwhile. The card companies typically promote the use of plastic by telling merchants that consumers who use cards often spend more than cash-paying customers. That argument doesn't work for utilities, as people don't buy more power when they pay their bills with a credit card.

What's more, accepting payments by plastic can be expensive for merchants who must pay fees to the card-issuing financial institutions, buy new equipment and maintain strict security standards. While many merchants can pass on some of those costs by incorporating them into the prices of the goods they sell, utilities typically need permission from regulators to raise rates. Those government agencies are unlikely to approve across-the-board rate increases for a service that mightn't appeal to all utility customers.

"Utilities tell us that they can't justify raising their rates in order to accept our cards," says Jim Eitler, vice president of merchant relations at Visa USA Inc.

To overcome those hurdles, Visa and MasterCard are courting utilities with lower fees. (Both card networks set the fees that card-issuing banks charge merchants.) Under a plan introduced by Visa last year, utilities pay a flat 75 cents for any debit-card or credit-card transaction. At Consumers Energy, where the average monthly bill is about $200, that works out to 0.375%. By comparison, a gas station pays 0.7% plus 17 cents for each Visa debit-card purchase, and more than twice that amount when a Visa credit card is used.

San Francisco-based Visa has also launched a consulting service to help utilities update their computer systems, train customer-service representatives and set up billing programs. Visa estimates that more than 3,500 utilities nationwide now accept its cards, roughly a third of the industry when companies like municipal water utilities and neighborhood heating-oil businesses are added into the mix. By contrast, Visa says 95% of gasoline stations and 82% of food stores accept its cards for payments.

Like Visa, MasterCard also has a team dedicated to finding ways for utilities to accept card payments. "There are certain challenges in the industry, but we're working carefully with a number of players within the category to form a stronger relationship in terms of how we can provide a good solution for them," says Steve Carnevale, a vice president at Purchase, N.Y.-based MasterCard.

Still, some utilities continue to oppose accepting plastic payments. Ameren Corp., which provides electricity and natural gas in Missouri and Illinois, doesn't want to handle confidential customer information, says Mike Cleary, a spokesman for the utility. "We review it every year. It's always something we're considering," Mr. Cleary says of Ameren's policy on plastic. However, the company does allow its customers to pay by card if they use a special third-party service that charges a convenience fee, currently $3.50 per transaction. Other utilities have similar relationships with third-party vendors.

PG&E recently got a taste of competitive threat. The company last month fought off an effort by Sacramento's municipal utility to expand into PG&E's service area. The company, which has vowed to improve its customer service, hopes to attract at least 200,000 customers to its card-payment option during the 18-month pilot test.

Meanwhile, Consumers Energy plans to offset some of the costs associated with its card-payment program by cutting down on postage expenses. It is requiring plastic-paying customers to sign up for electronic billing, where payments are charged automatically. In the first week, some 2,000 customers signed up for payments by card. The utility plans soon to launch a big marketing and advertising campaign tied to the new service.