ALTAMONT, Ill. (AP) _ Decorate your house with more than a strand of holiday lights in this city and your electric bill will read: $0.00.

For the fourth consecutive December, Altamont is paying 90 percent of its residents' electric bills. And the city will throw in the remaining 10 percent for anyone who enters its annual holiday lighting contest.

''Anybody who hears about it is amazed,'' said Helen Moll, city clerk for the farming community of 2,400. ''They don't know how we can manage it.''

The free electricity became available in 1987. Altamont, a member of a power distribution cooperative with several other cities, had wanted to drop out because it had found a cheaper supplier. To keep the cooperative together, the other cities agreed to pay Altamont the $7,000 a year the city would have saved.

The money is used to cover the cost of residents' December lighting bills.

''It was an easy way to give a little back to the community when the Christmas bills came due and to help decorate the city at the same time,'' said Donald Wendling, the city's electrical services commissioner.

It has also revived a threatened Yuletide ritual.

''We're a small German community with a tradition of Christmas, and it has been a tradition here for years to decorate,'' Wendling said. ''But when the energy crisis hit in the '70s it kind of died off.''

The rebates from the cooperative end after next year, however, and Wendling said he doesn't know if the discounts will continue past 1991.

In the meantime almost everyone in town is lighting up the house. Last year, Moll said, 600 of the city's 800 residential customers entered the contest and got the full December discount, which averaged $55 to $65.

Anyone who puts up more than a string of holiday lights is eligible.

Moll said the decorations have made an impression on out-of-towners, recalling the words of a visitor from Chicago: ''He told us we had the prettiest town he ever saw.''