An abandoned shack on the C&O Canal near Key Bridge houses a hole in the ground that some potential investors are hoping to convert into a gold mine.

The hole leads to a turbine that helps generate electricity when canal water drains into the Potomac River. And as any 20th century person knows, energy -- electrical or otherwise -- can bring a handsome profit to those who have it to sell.

Both Potomac Electric Power Co. and the Federal Energy Regulatory Commission have received inquiries from individuals interested in buying the deserted Georgetown powerhouse and selling the hydroelectric power they believe it can generate to the local utility.

Pepco and FERC officials say the competition over the plant is part of a national scramble to convert abandoned mills, dams and hydroelectric plants into sources of energy and thereby reap the benefits of a conservation-minded law passed by Congress in 1978 that requires utilities to buy any power generated by small producers.

The Georgetown generator was built, according to FERC, in the early part of this century by an ice company that didn't anticipate refrigerators. It was later sold to the owners of Washington Flour Co., which used to be located off the Whitehurst Freeway. The generating plant has not been used since Washington Flour started buying its power from Pepco in the '60s.

At least two appplications for a preliminary permit to restart the hydro generating station at the Georgetown plant are pending with FERC. The plant is still owned by Wilkins-Rogers Inc. of Ellicott City, the company that owned Washington Flour.

"We look at [the applications] on a case-by-case basis," said Bob Cecil of FERC. "We've gone from a handful of these preliminary permits [nationwide] in 1980 to 1,800 . . . during fiscal year 1981. There is a great deal of interest in hydro."

One potential investor, real estate developer Craig M. Lussi of Georgetown Hydro, said the plant "is no big deal" and could probably only generate electricity for about 300 homes. Lussi said one of his partners stumbled onto the Georgetown generator while exploring other hydroelectrical opportunities.

The partner was talking to a Wilkins-Rogers official who mentioned the firm's hydro equipment in Georgetown, Lussi recalled. "That was about a year ago," Lussi added.

The other person who has filed papers with FERC indicating an interest in the Georgetown facility declined to comment.

One Pepco engineer described the obstacles -- both regulatory and logistical -- to tapping the hydroelectric power from this source. "From our standpoint, it's feasible," said Jack Stevenson, Pepco's manager of commercial energy services. "All we have to do is be able to arrange the service, whether they can fit into our system. They have to meet our safety requirements. Any costs that we incur in connecting them they have to reimburse us for.

"One of the problems right now is we don't have an approved co-generation rate in D.C. . . .It depends on the situation, what electrical facilities we have in the area, what the customer is doing, the size of the facility. It can be complicated."

Stevenson said that once Pepco determines the "most economical and best way to interconnect" with the Georgetown plant, it could go into operation three months to a year from now.

"There's not supposed to be any negative impact on our customers, and whether there would be a positive impact, I don't know," Stevenson said.

Lussi said his interest in hydro has changed his attitude toward the weather. "When it rains now, I say 'ain't that great?' "