The Federal Trade Commission is investigating whether Virginia Natural Gas and Washington Gas Light Co. broke federal antitrust laws in maneuvering over construction of a new natural-gas pipeline across Virginia.

VNG first proposed building the 144-mile line in October, and in January WGL filed a competing application. Within six weeks, however, the Washington Gas proposal had been withdrawn and Virginia Gas had changed its plans to include a new gas supply link for Washington Gas.

Representatives of both companies confirmed that the pipeline project is under investigation, but denied any wrongdoing. FTC officials refused to discuss the inquiry.

Officials of the Virginia State Corporation Commission, which is still considering the VNG proposal, said they were aware of the federal antitrust probe.

"I understand that both were served with a document demand" by the FTC, said William Stephens, director of the energy regulation division of the corporation commission.

"They are looking at antitrust implications of that pipeline," he said. "It appears the focus is Washington Gas Light in terms of filing a competing application ... and whether that had anticompetitive undertones."

Stephens said he was mystified at the FTC's actions. "I'm not a lawyer, but I don't see how it could be viewed as anticompetitive." Stephens said the current VNG proposal that the SCC is considering will lower costs to utilities such as WGL and Virginia Power by opening up cheaper sources of natural gas and will benefit WGL by allowing it to tap into an interstate pipeline that is currently not accessible. "The proposal could generate more competition," he said.

Though FTC officials would not discuss the specifics of the local investigation, recent statements by agency officials suggest why the antitrust regulators are looking into the pipeline dispute.

In remarks last month to an industry forum, FTC Commissioner Terry Calvani said the agency will keep a close eye on "the anticompetitive problems posed by legal abuses of the regulatory system" in the energy industry.

Abuse can come in forms other than predatory pricing -- in which one company tries to drive out its competitors by illegal price-cutting, Calvani said. Two pipeline firms could agree that one will build a new line in exchange for a market-sharing agreement, he said, or one pipeline could file a competing application for no reason other than to stymie a competitor and raise its costs, he said.

WGL spokesman Jack Raymond said there was "no sham or hidden agenda involved" in WGL's proposal to build the pipeline. "The primary consideration was it was a business opportunity that looked good at first blush."

VNG is owned by Dominion Resources Inc., which also owns Virginia Power. A spokesman for the Richmond utility holding company said the FTC had sent the company a letter. "The letter states the FTC office is conducting an inquiry into potential violations of the Federal Trade Commission Act" that prohibits anticompetitive activities, said Edward W. Ware III, a VNG spokesman.

"We don't believe there is any basis for the inquiry, but we are cooperating fully with the FTC in their request for information," he said.

The pipeline dispute began in October when VNG asked the SCC for authority to build a $60 million pipeline running from Loudoun County west of Washington through Prince William County and then southeast along the I-95 corridor, terminating near Williamsburg. The pipeline would go through parts of Loudoun County served by WGL. VNG said the line was needed to supply gas to a proposed new power plant at Chesterfield. The line would have tapped into a Consolidated Gas Transmission Corp. pipeline to open up gas supplies for the Richmond and Washington areas.

In January, WGL filed its own proposal for a pipeline along a similar route. At the time, WGL said its costs to build the pipeline would be no more than Virginia Natural Gas', and might be less.

WGL originally voiced concern that if VNG built the pipeline, it could take away large industrial customers in Northern Virginia by supplying them with gas.

In February, WGL withdrew its application after VNG asked Consolidated to study the feasibility of joining in the project and building the northern portion of the pipeline through WGL's territory in Loudoun county to eastern Fauquier County. VNG said it would pick the line up there and build the rest along the route it originally proposed.

The SCC's Stephens said the commission could have approved VNG's s original proposal, but would not have allowed the company to directly sell gas to industrial customers in WGL's service territory. Stephens said WGL's concern had more to do with VNG's role as an intermediary between Consolidated and WGL.

WGL officials said they feared they could end up paying more for gas if it were purchased from VNG than if it were purchased directly from Consolidated, which would build part of the line and a spur from its system to that line.

The two companies at one point discussed a joint venture to build the pipeline together, he said. The final VNG proposal, and WGL's withdrawal, "seemed like a perfectly logical sequence of events," said Stephens.