West Virginia utility regulators have approved a plan for two of that state's utility companies to buy a share of Virginia Electric & Power Co.'s $1.7 million pumped storage project near the Virginia-West Virginia border.

The decision means Vepco's Virginia customers will not have to pay the full cost of the project, which is hundreds of millions of dollars more than expected and which may not be needed because demand for electricity has fallen drastically.

The West Virginia Public Service Commission last week authorized Monongahela Power Co. and Potomac Edison Co. to purchase at least a 20 percent stake in the Vepco project in Bath County, Va.

Vepco expects to collect $180 million from the buyers this year as the first payment.

Monongahela, Potomac Edison and West Penn Power Co. of Pennsylvania have formed a joint venture called Allegheny Generating Co. that plans to acquire at least 40 percent, and perhaps as much as 50 percent, of the Bath County facility. Under their agreement with Vepco, the companies either will invest in the plant directly or buy a portion of its output.

The West Virginia commission is the third of seven regulatory agencies to approve the plan to share the plant. The remaining approvals are expected later this year, Vepco officials said.

Vepco's Bath County project does not generate electricity; it stores it for use during periods of peak need, such as hot summer days. The power plant is between two artificial lakes in the Allegheny Mountains. When Vepco is producing surplus electricity at other plants, the excess will be used to pump water from the lower lake to the upper one. When extra power is needed, water will be released from the upper lake to run through a hydroelectric plant and generate electricity.

The plant originally was scheduled to be operating by now, but has been delayed repeatedly because energy conservation has slowed the growth in demand for electricity. About 60 percent of the work is finished and Vepco expects to put half the plant in service in 1985 and the rest in 1986.