Disputes over the use of small-scale solar power are flaring across the nation, with utilities squaring off against solar-energy marketers over rules for the growing technology.

Until now, the fights have been mainly before state regulators. In California, Louisiana and Virginia, utilities have sought to cut what they claim are unfairly high payments they are required to make to owners of homes or larger buildings with solar systems.

At issue in an Iowa lawsuit is whether solar-system marketers can sell electricity in territories where local utilities have exclusive rights to customers. Such an arrangement isn't allowed or is under dispute in many states, limiting solar firms to sales of panels to homeowners and businesses.

But if they win in Iowa, it could pave the way for fledgling solar industries to expand in other states. The case is being watched closely elsewhere in the Midwest, where policies granting utilities a monopoly on electricity service are one reason a solar-construction boom hasn't occurred, unlike in states such as California and New Jersey.

Utilities "are proponents of renewable energy," said Barry Shear, president of Iowa's Eagle Point Solar LLC, but only "if they own the energy assets and the electrons flow through their grid and they can bill you."

In March, an Iowa District Court judge said Mr. Shear's 18-employee company could sign power-purchase contracts in the Dubuque territory of Alliant Energy Corp., one of the state's largest utilities. Under the disputed deal, Eagle Point would own solar panels on the roof of a Dubuque municipal building and sell power to the city at a rate similar to Alliant's.