By Leonard Anderson

SAN FRANCISCO, July 5 (Reuters) - California leads the United States in solar power generation but a bill sponsored by Gov. Arnold Schwarzenegger that would sharply expand sun power use is drawing fire as too costly for utility customers and manufacturers.

The bill aims to put photovoltaic solar panels on the roofs of one million new homes and businesses within 10 years, increasing solar generation from a current 100 megawatts to more than 3,000 megawatts, equivalent to 30 new "peaking" plants to deliver electricity during high-demand periods.

That would make California the world's third largest solar energy producer behind Japan and Germany, according to solar advocacy group Environment California.

"Building a million solar roofs will make this common-sense technology mainstream and cost-effective in a decade," said Bernadette Del Chiaro, clean energy advocate for Environment California.

The bill, drafted by state senators John Campbell, a Republican, and Democrat Kevin Murray, is scheduled for a vote on Wednesday in the Assembly's Utilities and Commerce Committee. The measure has already passed the Senate.

Utilities like the Pacific Gas & Electric unit of PG&E Corp. (PCG.N: Quote, Profile, Research), manufacturing groups and pro-consumer advocate The Utility Reform Network say the measure is too costly at an estimated $2.5 billion.

Most of the bill for the program would be paid by utility customers through a surcharge set by the California Public Utilities Commission, plus rebates on solar equipment and other incentives.

The California Manufacturers and Technology Association, which represents about 600 large commercial and industrial companies, said the legislation would hit its members with too much of the program's costs.

"Electricity rates for manufacturers in California are way too high, nearly twice as high as in other states in the West," Joseph Lyons, energy lobbyist for the CMTA, said.

Del Chiaro of Environment California said the solar plan would more than recover its costs by a reduced use of power plants running on fossil fuels like coal and natural gas.

Schwarzenegger's energy plans call for making renewable energy 20 percent of California's electricity resources by 2017.