Companies in the nation's five most traffic-congested cities -- including the second-ranked Washington metropolitan area -- would receive incentives to allow their employees to telecommute, under legislation introduced yesterday by Rep. Frank R. Wolf (R-Va.).

Wolf's plan would give companies pollution credits if they let their employees work from home, helping regions meet smog-reduction goals set by federal clean air laws. The companies would be free to buy and sell the credits in deals with other businesses and nonprofit groups.

"This concept is a win-win proposal for reducing traffic congestion and improving air quality -- at virtually no cost to the federal government," Wolf said.

Wolf, chairman of the House Appropriations subcommittee on transportation, introduced the measure as an attachment to the pending transportation funding bill. He acknowledges the proposal is more visionary than concrete at this early stage.

But he said that given the Washington region's growing information technology industry, "If anyone can show how successful telecommuting can be, this business area is the one to show the way." Wolf represents western Fairfax, Prince William and Loudoun counties.

The legislation would award a $250,000 grant to the nonprofit National Environmental Policy Institute to work with the Energy and Transportation departments and the Environmental Protection Agency to develop trading programs in five cities by next year.

Two of the cities would be Los Angeles and Washington, where the average commute reached 36 minutes in 1994, according to the Census Bureau. The pilot program's directors would select the other three participating regions.

Wolf's proposal is modeled after a national credit trading program targeted at acid rain emissions. Since 1995, the EPA-led effort has helped cut such pollution by coal-burning utility plants in the nation's midwest and east by 40 percent.

The program awards businesses credits for cutting their emissions below certain levels. Businesses can allocate their credits as they see fit, keeping, stockpiling or trading them.

In 1998, about 9.5 million credits changed hands, each one equivalent to one ton of sulfur-dioxide pollutants, according to the EPA. With the average credit traded at about $159, the market is valued at $1.4 billion, said David Ryan, an agency spokesman.

Yesterday, Wolf was joined by the nonpartisan environmental institute and the American Automobile Association. Also on hand were executives from AT&T Corp., Litton Corp. and its subsidiary, PRC Inc., and SAIC, which do significant business with the federal government or employ a large number of workers in the region.

Don Ritter, chairman of the National Environmental Policy Institute and a former congressman from Pennsylvania, said the program would give companies a bottom-line return for fighting traffic congestion.

"If you give value to vehicle-miles traveled and you allow people to bank that value, or store it for sale some other time, or sell it, people are going to want to take that value and get a financial return for it," Ritter said.

Alice Borelli, director of federal government affairs at AT&T, estimated that since 1995, the company has saved $500 million in office lease costs by promoting telecommuting. In 1998, about 55 percent of the company's 55,900 managers telecommuted at least once a month, she said.

Perhaps 5 percent of the Washington region's 2.6 million workers telecommute, employers estimate.

Gail Martin, executive director of the International Telework Association and Council, said that 60 percent of area workers, and perhaps 40 percent of 133 million workers nationwide, perform tasks that could be done by telecommuting.

CAPTION: Rep. Frank R. Wolf (R-Va.) calls his plan a "win-win proposal."