The People's Counsel of the District of Columbia asked the city's public service commission yesterday to abolish a fuel-adjustment clause that allows Potomac Electric Power Co. to pass through fuel cost increases on a dollar-for-dollar basis without a hearing.

In a brief filed with the commission late yesterday afternoon People's Counsel Brian Lederer recommended instead a system that would allow for no fuel cost adjustment unless cost went up or down by more than 5 percent.

"If OPEC [the Organization of Petroleum Exporting Countries] quadrupled the price of oil, they'd [Pepco] still have a mechanism for adjusting," siad Lederer. On the other hand, the so-called "dead band" would encourage the utility to be more efficient, he said.

The proposal is similar to regulations adopted in Maryland, Lederer said.

Pepco defended the current automatic fuel adjustment clause, in use since 1976, as "just, reasonable and nondiscriminatory" in its brief to the commission. The commission is expected to act within the next few months.

"As shown in the testimony of the company's witnesses . . . and as repeatedly confirmed by independent investigation, the existence of such a fuel adjustment clause does not reduce management incentive to achieve economies in operation and provide reliable service at lowest cost," the company maintained in its brief.

According to Lederer, his proposal would allow the electric company to recover all its cost increases if costs rose by more than 5 percent. If costs rose by less than 5 percent each month for several months, Pepco would be allowed to pass through the costs once the increases totaled more than 5 percent.

By the same token, it costs fell less than 5 percent, Pepco wouldn't be required to reduce rates right away.

The stakes in the argument are large. According to Lederer, fuel adjustment pass-throughs amounted to $117 million in 1979, or 36 percent of total D.C. revenues for the company.

Pepco Comptroller Stanley Bright said that the Maryland procedure allows all company costs to be recovered. "Ultimately costs are included in the billings as long as they are properly incurred," Bright said. "Our feelings throughout the process are very clear and support the position we've taken that the fuel clause we have now is the best mechanism and should be maintained."

"They think they have a right to recover specific dollars. They don't," said Lederer. Rate-making "was in no way ever intended to be recovery of specific costs," he said. "That's as fundamental to rate-making as babies are to the human race."

The briefs also address standards for review of automatic adjustment clauses, with Lederer urging the commission to adopt standards contained in the Public Utility Regulatory Policies Act of 1978. The standards call for more formal review than now in use.