A new era of confrontation politics and economics took hold at Potomac Electric Power Co.'s annual meeting yesterday, with the D.C. Public Service Commission the target of stockholder's wrath.

Gone were the pickets and protesters of earlier years, who have staged demonstrations in opposition to nuclear power - of which Pepco has none. Absent, also, were consumer advocates who protested rate policies or the absence on Pepco's board of persons to represent their interests.

In their place were stockholders, more than a dozen of them speaking out in a question-and-answer period with Pepco Chairman W. Reid Thompson. But the common theme of their questions did not reflect the typical annual meeting rite of criticizing management for alleged sins or omissions.

The target for their ire yesterday was the District government in general and the city's regulatory agency, in particular, which has not acted after nearly two years on a Pepco petition to raise rates in the city by $45 million a year.

Thompson was given plenty of advice yesterday on how Pepco might retaliate. "We must take tough action," said stockholder Norman Wolcott, who suggested abandoning service in the District, cutting back on street lighting or reorganizing Pepco to "isolate D.C. from the rest of the company."

Another shareholder said Pepco could stop paying D.C. taxes to get attention of the regulatory commission, and other persons in the crowd of 450 at the Sheraton-Park Hotel applauded.

"We, the stockholders and the compay, are entitled to a decision - yes, no or maybe," he added.

In response to these and other suggestions about fighting back, and in a formal address to the meeting, Thompson used strong words to denounce the D.C. agency but said the Washington-based electric company would not respond to "irresponsible action" by the government with "an irresponsible action of our own . . . of course, we can't do that."

Noting that Pepco's rate case was filed in July 1977 and that the next-oldest electricity rate case in the country involves Long Island Lighting Co., filed 11 months ago and due for a decision this weekend under New York State law, Thompson said the local case "indicates a breakdown in the process of government in the District . . . . the PSC is not functioning . . . for some unaccountable reason."

He recounted steps Pepco has taken to seek action by the PSC, among them a court appeal and a petition for emergency, interim rate boosts while the case is being decided.

The D.C. Court of Appeals said las fall there was no evidence at that time of "abuse" by the PSC and the agency itself has ignored the interim request. Earlier this week, the agency did state that within a few days it will announce when the rate decision is to be forthcoming. That announcement came during initial discussions about future hearings in yet another Pepco case, filed on Feb. 15 and seeking an additional $15.5 million in annual revenues.

Current rates in D.C. are based on 1975 costs while in Maryland, where Pepco serves the most populated suburbs in Montgomery and Prince George's counties, rates now are based on 1978 costs and a $14.1 million increases in revenues has been approved.

Thompson characterized the D.C. rate situation as Pepco's most serious problem and said it is the main factor in the company's declining profitability. For the 12 months ended March 31, per-share earnings declined to $1.62 a share from $1.77 a year earlier.

"We have the best brains we can muster to work on this problem," Thompson declared in response to one question. and Pepco is considering other steps if a decision is not made rapidly, he added.

He indicated that, at some point, a court would find the PSC guilty of abuse of its independent authority. Thompson said also that several groups are working on legislative proposals to limit thee time for PSC decisions, which would have to be considered by the city government.

Thompson began yesterday's meeting, which lasted about two hours, with a brief history lesson on the changes in society brought about by Thomas Edison's invention of a century ago. A large display about the history of electricity occupied one-third of the hotel's ballroom, where the meeting was held.

On other subjects, Thompson said Pepco has no plans to build a nuclear reactor "in any time frame," although the company might possibility need such power production by the early 1990s. The company is still moving on a "low-key basis" to get a site approved for a nuclear plant south of Washington, at Douglas Point, on the Potomac River. A plant planned there earlier was canceled.

Current uncertainties about safety as well as economic and regulatory problems would have to be resolved before Pepco would move into nuclear generation, he added. At the same time, Thompson advocated some form of sharing costs - such as an industry-wide insurance program - to prevent bankruptcy for any companies whose costs escalate sharply because of nuclear accidents. CAPTION: Picture, Pepco Chairman Reid Thompson during slide presentation at utility company's annual meeting here yesterday. By John McDonnell - The Washington Post