Potomac Electric Power Co. yesterday abandoned plans to install two additional generators at its Benning Road power plant in Northeast Washington in the face of strong protests by neighborhood groups and environmentalists.

The utility put the proposal on hold earlier this year when it won approval from Maryland to add two 105-megawatt units at its Chalk Point plant in rural southern Prince George's County.

Utility officials said they decided to drop a proposal for the generators at Benning Road because of the Maryland approval, plans to buy power from other sources, forecasts of a slow-growth economy, and new programs to encourage electricity conservation.

But residents of the River Terrace neighborhood in Northeast near the plant said the victory was partly because of their protests. Neighborhood activists had complained the generators would spew more pollution into an already dirty urban area near the Anacostia Freeway and the city incinerator. They said the units would not be needed if the utility tried tougher conservation measures.

"They did respond to the will of the people," said Kevin Chavous, a lawyer who represented the River Terrace residents. "It shows David can beat Goliath."

Pepco, which serves 645,000 customers in the District and suburban Maryland, applied to install the generators in 1988, saying it needed to increase its reserve power capacity because of growing demand.

Reserve generating capacity had dropped to less than 9 percent above the utility's historic peak demand for power, but Pepco said its approved plans to add 380 megawatts at Chalk Point by next summer and 500 megawatts at its Dickerson plant in Montgomery County will restore that figure to a safer 16 percent by the mid-1990s.

"All of that will keep us matching our customer demand with enough reserve," said utility spokeswoman Nancy Moses.

The battle over the Benning Road generators was the centerpiece of local Earth Day celebrations. Neighborhood residents enlisted support from national environmental groups such as Greenpeace and prominent persons such as Jesse L. Jackson, received help from the District's Office of the People's Counsel, and claimed the backing of a majority of D.C. Council members.

Utility officials argued that the generators should be placed at Benning Road because that plant now supplies only 15 percent of Pepco's generating capacity, while 40 percent of the electricity demand is in the city.

The District's Public Service Commission, which must approve proposed new generators, told Pepco last month that it had until tomorrow to justify its application or drop it. Pepco chose to drop the application.

"Based on our current expectations of reaching agreement with others to build the plants we might need for the immediate future, we now have options other than Benning," said William R. Gee Jr., the utility's vice president for generating engineering and construction.

Moses said Pepco is "talking with several private parties who have plans to build generating facilities in this area," and who would sell Pepco at least as much power as the two Benning Road generators would have supplied. She would not give details about the proposed facilities.