On August 24, 1996, at 0845 mountain daylight time, a Balloon Works Firefly 7, N7414U, registered to and operated by a private owner under Title 14 CFR Part 91, collided with power lines while maneuvering near Rio Rancho, New Mexico. The private pilot and the passenger were not injured and the balloon sustained substantial damage. Visual meteorological conditions prevailed for the local personal flight and a flight plan was not filed. The flight originated about 1 hour before the accident. During telephone interviews, conducted by the investigator-in-charge and on the enclosed Pilot/Operator Report, the pilot reported the following information. Upon arrival at the launch site, the release of several pibal balloons indicated that the winds were from the north-northeast. The pilot launched his balloon about 0740 and flew solo for approximately 40 minutes. On the subsequent flight, one passenger was aboard the balloon. The pilot executed a controlled descent and ground tracked the balloon at altitudes from 5 feet to 500 feet AGL. During the ground tracking, the pilot noted that winds at about 50 feet AGL were increasing from the north; however, at higher altitudes the winds had been more from the east and slower. Upon observing east to west power lines about a mile beyond the balloon track, the pilot planned the flight to "burn and climb over the power lines." Upon realizing that the balloon was not going to clear the power lines, the pilot pulled the vent line and tried to land the balloon. The balloon struck the power lines. The FAA inspector, the pilot and the repair facility (statement enclosed) personnel examined the balloon. The group found numerous damaged panels with 7 panels requiring replacement, 3 panels requiring partial replacement, and 7 panels requiring patches. Chaffing was found on 2 stainless steel suspension cables. At least 2 of the horizontal load tapes were heat damaged. The FAA inspector and the repair facility reported that the balloon would require the repairs prior to further flight.