Virginia Electric & Power Co. signed an agreement yesterday with Transco Energy Co. to study building a pipeline to carry a mixture of coal and water across the state.

Vepco said a study by Virginia Polytechnic Institute showed that the coal pipeline could save the utility between $5 and $11 a ton on coal transportation costs. That savings would translate directly into lower electric bills for Vepco customers, the company said.

Nearly all the coal Vepco burns now is hauled by railroads, which have already persuaded the Virginia legislature to pass laws making construction of coal pipelines all but impossible.

If Vepco decides to proceed with the proposal, there undoubtedly will be a legislative showdown between two of the state's most powerful lobbying interests: Vepco and the railroads.

O.J. Peterson, vice president and treasurer of the Richmond-based utility, said the company has studied four different routes and pipeline sizes. The smallest line would be able to haul 5 million tons of coal a year and cost about $200 million to build. The largest could move up to 25 million tons at a cost to build of $900 million at current prices.

The small line would satisfy Vepco's needs only. Vepco said that if it finds a market for the coal with other utilities, it would consider building the bigger line.

A spokesman for Potomac Electric Power Co. said the Washington utility is aware of Vepco's interest in building a slurry pipeline and is exploring whether it would be worthwhile to buy coal from Vepco.

Vepco and Transco will do a market survey during the next eight months to see what other utilities might be interested in buying coal from the pipeline. Transco is one of the nation's biggest natural gas pipeline companies and presumably would build and operate the slurry line if Vepco decides to build one.

Peterson said the pipeline would originate in the coalfields of Western Virginia and would terminate at the utility's Portsmouth generating facility in Hampton Roads. The coal slurry would be dried, then shipped by barge to other Vepco generating plants.

Peterson said it costs $19.50 a ton to bring coal to Portsmouth by rail. It would cost an estimated $8 a ton by pipeline.

Vepco expects to burn about 2.7 million tons of coal this year, providing about 30 percent of the power consumed by its customers. Since 1975 Vepco has converted seven oil-burning plants to coal and expects to convert seven more by 1986. By then the company will burn 6 million tons of coal a year.

Peterson said Vepco will add one more nuclear plant -- North Anna Number Three -- late in the decade, but he said the next facility it plans to bring on line in the 1990s will burn coal.

Some oil-burning power plants that cannot efficiently be converted to coal might be able to utilize a new technology that permits them to use a mixture of 30 percent water and 70 percent pulverized coal instead of oil, Peterson said.

A pilot project is under way in Hampton Roads. If the technology proves successful, said Peterson, then there would be an even bigger market for coal slurry.

Back in 1962, when the idea of mixing pulverized coal and water and pumping it through a pipeline was first introduced, the railroads persuaded the legislature to keep slurry pipelines out of the state.

Peterson said that until the law is changed, Vepco will not sink large amounts of money into the project. Vepco, Transco To Study Va. Coal Pipeline By James L. Rowe Jr. Washington Post Staff Writer

Virginia Electric & Power Co. signed an agreement yesterday with Transco Energy Co. to study building a pipeline to carry a mixture of coal and water across the state.

Vepco said a study by Virginia Polytechnic Institute showed that the coal pipeline could save the utility between $5 and $11 a ton on coal transportation costs. That savings would translate directly into lower electric bills for Vepco customers, the company said.

Nearly all the coal Vepco burns now is hauled by railroads, which have already persuaded the Virginia legislature to pass laws making construction of coal pipelines all but impossible.

If Vepco decides to proceed with the proposal, there undoubtedly will be a legislative showdown between two of the state's most powerful lobbying interests: Vepco and the railroads.

O.J. Peterson, vice president and treasurer of the Richmond-based utility, said the company has studied four different routes and pipeline sizes. The smallest line would be able to haul 5 million tons of coal a year and cost about $200 million to build. The largest could move up to 25 million tons at a cost to build of $900 million at current prices.

The small line would satisfy Vepco's needs only. Vepco said that if it finds a market for the coal with other utilities, it would consider building the bigger line.

A spokesman for Potomac Electric Power Co. said the Washington utility is aware of Vepco's interest in building a slurry pipeline and is exploring whether it would be worthwhile to buy coal from Vepco.

Vepco and Transco will do a market survey during the next eight months to see what other utilities might be interested in buying coal from the pipeline. Transco is one of the nation's biggest natural gas pipeline companies and presumably would build and operate the slurry line if Vepco decides to build one.

Peterson said the pipeline would originate in the coalfields of Western Virginia and would terminate at the utility's Portsmouth generating facility in Hampton Roads. The coal slurry would be dried, then shipped by barge to other Vepco generating plants.

Peterson said it costs $19.50 a ton to bring coal to Portsmouth by rail. It would cost an estimated $8 a ton by pipeline.

Vepco expects to burn about 2.7 million tons of coal this year, providing about 30 percent of the power consumed by its customers. Since 1975 Vepco has converted seven oil-burning plants to coal and expects to convert seven more by 1986. By then the company will burn 6 million tons of coal a year.

Peterson said Vepco will add one more nuclear plant -- North Anna Number Three -- late in the decade, but he said the next facility it plans to bring on line in the 1990s will burn coal.

Some oil-burning power plants that cannot efficiently be converted to coal might be able to utilize a new technology that permits them to use a mixture of 30 percent water and 70 percent pulverized coal instead of oil, Peterson said.

A pilot project is under way in Hampton Roads. If the technology proves successful, said Peterson, then there would be an even bigger market for coal slurry.

Back in 1962, when the idea of mixing pulverized coal and water and pumping it through a pipeline was first introduced, the railroads persuaded the legislature to keep slurry pipelines out of the state.

Peterson said that until the law is changed, Vepco will not sink large amounts of money into the project.