This summer, major natural-gas companies armed with the latest Japanese technology are challenging electric companies to a marketing duel: natural-gas air conditioning versus electric cooling as a way to cut utility bills.

Washington Gas Light Co. has intensified efforts begun two years ago to sell natural-gas equipment as an alternative to electric cooling. In effect, they may beat Potomac Electric Power Co. and Virginia Power out of electricity sales to commercial customers.

Sales of natural-gas air-conditioning systems -- which use the heat from burning gas to start a cooling process -- fell off during gas shortages in the late 1970s. But now WGL is back with a distributorship for Yazaki Co., a Japanese natural-gas equipment maker. Hitachi and Sanyo, makers of things from microwave ovens to TVs, are also in the American market, and WGL will evaluate these technologies for gas customers. These manufacturers are mainly marketing large units for apartment buildings and commercial establishments.

Depending on electric rates and the energy efficiency of a building, customers could save up to 5 percent in Maryland, up to 10 percent in Virginia and up to 20 percent in the District by using a combined natural-gas air conditioner and heater, according to WGL. Those savings are disputed by Pepco.

"We'd love to sell more gas in the summertime," said Cate Barnett, a spokeswoman for WGL. "There is more of an effort now because there are more brands of natural-gas cooling equipment available."

WGL will be field testing a residential natural-gas heat pump this summer that is made by a consortium of eight Japanese companies. A heat pump ejects heat from the house during summer and takes cold out during winter.

WGL also bought a 50 percent interest last summer in Advanced Mechanical Technology Inc., a Massachusetts research and development firm that manufactures high-efficiency space- and water-heating systems. AMTI is doing preliminary research on a new combination natural-gas heating, hot water and air-conditioning unit.

"The idea of gas equipment in the residential market is catching on, and in order to compete some strides in technology will have to be and are being made," said Barnett.

Promoting natural-gas equipment is a boon to gas companies that find they can sell gas in the summertime, when demand for it is at a seasonal low. But even utilities that sell natural gas and electricity see the technology as a way to cut electricity use in the summertime and to delay construction of costly new generating plants.

Harry Brattin, supervisor of commercial gas sales for San Diego Gas & Electric Co., said the company is selling dozens of large Japanese commercial units. The company serves as a matchmaker between vendors of the equipment and customers.

Baltimore Gas & Electric Co. is picking up on the new technology that experts say will expand the use of gas cooling. Currently, the industry estimates 4 percent of the cooling market nationally uses gas.

"We're in the process right now of trying to find some place to put in a Yazaki unit as a test," said Ralph Young, a BG&E official in the energy services department. "We're interested in anything that is a benefit to the customer and anything that helps us sell gas in the summertime while cutting demand for electricity at the same time."

The basic technology for gas cooling isn't new but is more streamlined than it was a decade ago, according to the American Gas Association.

"The new technologies we're seeing right now are about twice as efficient as the old gas units that are out there," said Kenneth T. Cuccinelli, vice president of marketing services for the AGA. "It's newer technology, it's been proven reliable, especially in Japan, where about 65 percent of the new air-conditioning market now uses it."

To air condition, natural gas is used to start a several stage process. First an absorbent solution made of lithium bromide and water is heated with natural gas to boil the water off.

The steam produced in the process is condensed, then sprayed onto water-filled coils in a lower pressure chamber. That produces a cooling effect, much like stepping out of a swimming pool and being cooled by the water evaporating off of your skin. Fans blow over the cooled coils, spreading the cool air.

The evaporated water is then absorbed in lithium bromide, and once again the solution of lithium bromide and water is heated by natural gas. The gas boils the water off and readies the lithium bromide for reuse. The cycle begins again.

The initial cost of gas cooling equipment -- which is available as just an air-conditioning unit or as an air-conditioning and heating unit -- is higher than that of electric air conditioning coupled with a conventional boiler. But, electricity is currently about four times more expensive than natural gas, Cuccinelli said.

AGA estimates that a 500-ton natural-gas air conditioner and heater suitable for a 10- to 12-story building would cost $173,000, including installation. A comparable 500-ton electric chiller with a natural-gas boiler would cost $107,000.

But the operating costs in the mid-Atlantic region, including D.C., Maryland and Virginia, would be $49,000 a year for the natural-gas unit, compared to $75,000 a year for the electric unit with natural gas boiler, the AGA estimates. "The payback in energy savings would be three years," said Cuccinelli.

Similar savings are not available to residential customers. One American company -- Preway Industries of Evansville, Ind. -- makes residential natural-gas air-conditioning units. Preway bought Arkla Industries, a natural-gas equipment division, from Arkla Inc. some time ago.

Parker Heating and Air Conditioning Inc., a Rockville seller and installer of both natural-gas and electric residential units, said a three-ton single family Preway natural-gas unit would cost $3,995 installed, compared to $2,633 for a comparable electric air conditioning unit.

According to salesman Al Myers, operating costs in the Washington area are 5 to 10 percent more expensive for the natural-gas units. But natural-gas units require less maintenance, have a 10-year warranty and can be financed with low-interest loans from WGL, he said.

Experts say availability and cost of residential units will change soon.

"We see American equipment around the corner," said San Diego Gas' Brattin. "We see residential equipment coming -- the Japanese companies have some residential-sized units on the drawing board and we'll see those in the next three years."

Michael Wahlig, staff scientist at Lawrence Berkeley Laboratory, said much higher efficiency natural-gas machines are being developed now. "The Department of Energy is funding Carrier, Trane, Phillips Engineering and Lawrence Berkeley Labs to work on higher efficiency natural-gas or solar operating machines," he said.

The Gas Research Institute, funded by the natural-gas industry, is helping companies develop natural gas fired heat pumps. GRI says the high-efficiency equipment, which heats and cools, will be on the market by 1989 for residential customers and 1990 for small commercial customers.

WGL says it is eyeing a marketing window that did not exist before. The rate structure of Potomac Electric Power Co. is making it more attractive for some commercial electric customers to switch to natural-gas air conditioning, said WGL.

In order to push back the construction date of a costly new generating plant, Potomac Electric Power Co. is introducing programs to cut down on times of highest demand for electricity -- usually on the hottest summer afternoons. The programs penalize customers who use electricity at times of peak demand by charging higher rates.

Because some commercial customers resent having to pay penalties or rearrange the times they use electricity during the summer, WGL sees an opportunity.

"It would definitely open up a market where gas could be very competitive," said Barnett. "Those customers are people who could use the gas equipment in a cost-effective manner."

Ultimately, Pepco could end up lowering electric rates, said the AGA. "Pepco has a situation where they have virtually no competition," said the AGA's Cuccinelli. "So they can set the price -- they sock it to the summer customers to help subsidize the winter customer. So this will make them price electricity more competitively."

Pepco, which currently holds by far the majority of the cooling market in Washington, isn't thrilled with WGL's marketing thrust.

"I don't think it's a godsend," Jack Stevenson, manager of Pepco's sales department, said of WGL's strategy.

"From the standpoint of competition we may lose some market share in one and a half to three years, but we won't see anything happen overnight," he said. Customers currently being charged time-of-day rates are not switching to gas technology, he said.

So far, Pepco estimates WGL has sold about 30 commercial units in the past year or so, half to new installations and half to customers looking to replace electric cooling and heating units.

"Our electrical energy costs are lower, operating costs are lower, maintenance costs are lower and the equipment costs are lower, everything is lower. . . . The gas units are more efficient than they used to be but so are electric units," he said.

Virginia Power, which sells electricity to the Virginia suburbs of Washington, would not comment on the competition between electric and gas cooling systems.

Despite what may end up being tough competition, WGL is beginning to chalk up successes.

"There is a lot of resistance to putting the equipment in, and it's a lack of familiarity with it," said WGL's Barnett. Another problem is that the equipment is Japanese and not American.

Nevertheless, the company has helped distributors sell Hitachi units, which can burn either natural gas or oil, to the Lakeside Terrace Condominiums in Bethesda, the Diamond Farms Condominium in Gaithersburg and the Linda Pollin Memorial Housing Corp. in Southeast Washington. All of these buildings had older, less efficient gas units.

Currently, the most likely target for natural-gas equipment is a customer that has an old natural-gas unit that needs replacing.

Mike Mcchesney, chief engineer at the Diamond Farms Condominium, is putting in two Hitachi natural-gas units and said air-conditioning costs are expected to fall as much as 15 percent. "We decided to go with this because it is state of the art," he said. "The units are becoming more and more interesting because of the relative cost of electricity to the relative cost of gas."

In contrast, Morton Funger, president of Community Realty Co. Inc., a Washington management firm that owns or manages five office buildings and 7,000 apartment units, said, "I would have to be convinced that natural gas is the way to go and maybe the gas company could convince us . . . but it would take some convincing."

Several years ago, Funger pulled out 25-year-old old natural-gas equipment and went to electric when maintenance problems with the old gas equipment developed.

The AGA waves those problems away. "There are many young architects and engineers who have grown up not being familiar with gas cooling technology," said Richard R. Kolodziej, spokesman for the association. "The factor that will increase the penetration will be the economics, including the ease of maintenance and the substantially lower operating and maintenance costs."