Washington Gas Light Co. yesterday proposed to increase rates for its Maryland customers by 7 percent and shift more of the costs of maintaining the gas distribution system onto residential and small business customers.

The plan, which would change the rate structure from a flat rate to one that provides volume discounts for natural gas, resembles one proposed by WGL for the District of Columbia in January. That plan called for a 22.3 percent increase in residential rates.

The Maryland Office of the Peoples Counsel, which represents ratepayers before the Maryland Public Service Commission, had no comment yesterday.

WGL needs the $17.9 million in additional annual revenue to cover rising labor, capital and investment costs and to help the company stay in a "position to meet the next five years of growth demands," particularly in Prince George's and Montgomery counties, said Edmund W. Smallwood, vice president of Maryland Natural Gas.

The proposed rate structure also "will promote the use of gas" among larger customers, he said. "The electric companies have a volume discount rate and they are competing with us for new business. We had a rate that did not provide the same benefits. This will put us on a level playing field."

For years, WGL dominated the heating market for new homes. But gas shortages and a six-year moratorium on new gas connections left WGL's Maryland division with "zero" new-home market share by 1978, he said. "We now run between 35 percent and 40 percent market share for heating {new homes}. We're not satisfied and we want more," he said.

The request would result in an average monthly increase of $6.15 for residential heating customers and $3.71 for residential nonheating customers. Small commercial customers will see their average rates rise by about 12.6 percent, while the biggest commercial customers will see an increase of less than 1 percentage point, he said.

The request is the first in Maryland in five years. Cate Barnett, a spokeswoman for WGL, said the company plans to ask for an increase in Virginia this year and is considering the same rate structure.