The D.C. Court of Appeals yesterday upheld a plan to make business pay higher rates for electricity used during periods of heavy power consumption.

Consumer advocates said the decision could eventually lead to a similar system for all Washington customers of Potomac Electric Power Co.

The court unanimously rejected legal objections to the D.C. Public Service Commission plan that were raised by the Metropolitan Washington Board of Trade and the Apartment & Office Building Association.

Since last May, the 250 biggest users of electricity in the District have been paying rates that vary with the season and the time of day to reflect the cost of producing power at different times.

Those big customers use about 40 precent of the District's electricity.

During the summer, the big business rates are highest from noon to 8 p.m., lowest from midnight to 8 a.m. and in between from 8 a.m. to noon and from 8 p.m. to midnight.

Time-of-day rates are meant "to give a price signal to customers of what it costs to produce electricity," explained John Derrick Jr., Pepco's vice president for customers services.

Pepco's cost of producing power is highest during the afternoon on hot sumemr days, because the company has to build special generators that are used only during those peak periods and sit idle most of the rest of the time.

Time-of-day pricing is meant to discourage customers from using power during peak periods and in theory and could save Pepco -- and its customers -- the cost of building new power plants by slowing the growth in peak demand.

D.C. People's Counsel Brian Lederer said the Court of Appeals decision ought to give support to a plan now before the PSC to extend time-of-day pricing to other resdential and commercial customers.

"You have to take a hard look at extending it," he said. "In my view, it is not good policy to have it apply to only 40 percent of the market."