A plan to streamline the regulation of Washington's troubled taxicab industry ran into a snag yesterday when the city's Department of Transportation, which was supposed to do the streamlining, announced that it did not want the job.

"The department would not want to assume the responsibility . . . " said Director of Public Works John Touchstone, who oversees the transportation department.

That reluctance to assume regulatory control of the city's 8,800 licensed taxicab drivers is a setback to a bill proposed by City Council member Betty Ann Kane (D--At large). The bill would strip the D.C. Public Service Commission (PSC) of its control over taxicab fares and consolidate all regulation of taxis in the transportation department, which already issues licenses and has authority to discipline drivers.

"Obviously, we are going to have to do some additional research," Kane said after presiding over a hearing during which taxi drivers and city officials condemned the District's regulation of taxicabs for being confused, inefficient and maddening to passengers who want to complain about having been cheated.

Kane's proposal for more efficient regulation of the city's cabdrivers--who face the stiffest competition and collect the lowest fares of those in any major U.S. city--came as a result of complaints both from passengers about drivers who overcharge and from the taxi industry about the PSC.

The PSC--which regulates public utilities in the District, as well as taxicabs--prompted an outcry last June from the taxi industry and city officials when it decided to give passengers the right to forbid drivers to pick up additional riders. Under pressure from the City Council, that action was postponed and a final decision is expected later this fall.

The PSC has also been criticized for taking nearly four years to decide on a change in the fare zones, a delay that Kane described as "intolerable" and "an abuse of their power."

As they have for more than three decades, cabdrivers yesterday grumbled about Washington's zoned fare system, unique among large cities, claiming that it deprives them of income they would receive with a metered-fare system or if charges were calculated on the basis of miles traveled.

In defending the PSC's authority over taxicabs, PSC general counsel Lloyd Moore yesterday said the transfer would violate federal law. But Moore added that consolidation of taxicab regulation "deserves serious consideration." He said that City Council might want to transfer all control of cabs to the PSC.

Kane said after the hearing yesterday that action by the council on any version of the taxicab bill will probably not occur for at least three months.