Angry electrical workers on Monday asked Mexico's Congress to help them reverse the government's decision to disband the state-run utility that supplies electricity to Mexico City and several neighboring states.

The union, representing 66,000 current and retired workers, also threatened legal action to save jobs terminated Sunday when President Felipe Calderon ordered the dissolution of the utility, Luz y Fuerza del Centro.

Calderon said the utility was inefficient and its operation too costly during lean times. He appointed another government agency to take it over.

The lightning move came amid a dispute between the Mexican Electrical Workers Union, which represents Luz y Fuerza employees, and the Calderon administration over the outcome of the labor group's elections. The administration refused to recognize the reelection in July of union Secretary-General Martin Esparza, citing voting irregularities.

On Monday, Esparza went to Congress to argue that the move to disband the utility was illegal and an attack on his union, known as the SME, its Spanish initials. He called Calderon's decision "a provocation."

Administration officials said as many as 10,000 fired workers could be hired back by the new management, while the rest would be compensated with as much as 33 months' pay.

Federal police in riot gear guarded Luz y Fuerza facilities, but electricity flowed as normal to 24 million residents in the capital and parts of the states of Mexico, Hidalgo, Morelos and Puebla. Under the presidential decree issued Sunday, operations will be overseen by the Federal Electricity Commission, a separate government utility that supplies power elsewhere in Mexico.

Administration officials said dissolving Luz y Fuerza, or Light and Power, was needed to bring down electricity costs, improve service and modernize an overburdened system plagued by regular outages. The utility's costs of producing and buying electricity had swelled to nearly double its income from customers, according to government figures.

Customers have long complained about Luz y Fuerza's high rates and spotty service, and Calderon said its failure to provide adequate and steady supplies of electricity hurt Mexico's competitiveness.

The administration said federal subsidies for the utility -- about $3.2 billion this year -- were sapping the treasury at a time when Calderon wants to spend more on anti-poverty programs to offset the country's economic tailspin. Only a third of the utility's labor expenditures go to pay active workers, the administration said; the rest is for compensating retired workers.

"This institution was facing an unsustainable financial situation," Calderon said during a nationally broadcast address Sunday night.

He said the action was not an attempt to privatize electricity supplies, which were nationalized in 1960.

Thousands of members of the electrical workers union marched on the presidential residence Thursday to demand recognition for Esparza, who edged out Alejandro Muñozfor the SME's top post. The two men have joined hands since the Calderon decree Sunday.

The SME is one of Mexico's strongest unions. It had considerable say over how Luz y Fuerza was run, and its members earned relatively high wages. A carpenter employed by Luz y Fuerza would receive about $350 a month -- more than twice the market rate, according to a study last month by the Center of Research for Development, a Mexico City think tank.

Some analysts said Calderon's move was meant to signal to unions and other political foes that he retains clout. Calderon, whose six-year term ends in 2012, suffered a setback when his conservative National Action Party lost control of the lower house of Congress in July elections.

"He needed to relaunch the second half of his administration so he wouldn't be a lame duck for three years," said Jorge Buendia, who runs a Mexico City polling firm. "This was a perfect opportunity."

ken.ellingwood@latimes.com