A plan to create a municipal power system by spending $1.95 million to buy Utah Power & Light Co. operations within the city has been rejected by Panguitch voters.

"The people have spoken," City Manager Bruce Fullmer said Wednesday. "It looks like they don't want municipal power."Although residents in the Garfield County community voted by a 3-1 margin in 1986 to authorize a city study of municipal power, the majority who turned out for Tuesday's special election rejected the general-obligation bond proposal. The measure was defeated on a 267-216 vote.

City officials had proposed using the bond money to buy UP&L's transmission system in Panguitch and then purchase cheaper federal hydroelectic power from the Bureau of Reclamation.

But Fullmer said the vote "pretty well closes our options" to a municipal power system. The city could still sell revenue bonds, he said, "but the voters have told us they don't want that type of system."

The City Council has until June 1990 to renegotiate the 25-year franchise it granted UP&L, or it could negotiate a new contract with another utility, such as GarKane Power Association.

"The one thing we do want is a concession from the power company to sign a co-generation contract" with the Kaibab Industries sawmill, Fullmer said.

Kaibab produces up to 500 tons of waste sawdust and wood chips each week. The city and the timber company have proposed burning the waste to create electrical power, which then would be sold to a utility.