The commercial pilot was competing in a balloon fiesta, with 2 passengers. The pilot selected a landing field with power lines and a street running east and west across it. The balloon was drifting south and the pilot selected the south end of the field for landing, requiring the flight path to cross over the lines. During the descent from 200 ft AGL, the pilot applied heat to level off so the balloon would clear the power line in the flight path. The pilot said the elevation made the balloon's response sluggish and the basket descended below the power lines. The pilot attempted to climb by adding more heat, then deflated the balloon to strike the lines with the envelope rather than the basket. The envelope hit the lines and burned. The basket hung 20 ft off the ground for about a minute, then slid to the ground. Molten material from the burning envelope fell on the passengers as they exited the basket.