The D.C. Water and Sewer Authority yesterday approved a 4.8 percent rate increase for business and residential customers in the city to take effect in April, followed by a 4.9 percent increase in April 2001, but rejected a management proposal for a four-year rate hike.

Water and sewer authority staff had proposed an increase that would have raised rates more than 18 percent over four years. At public hearings, most speakers opposed the increase and authority Chairman Ron M. Linton said the panel decided on a two-year increase to match its budget cycle.

The rate increase would bring in $9.6 million through Sept. 30, 2001, the end of the fiscal year. It is intended to help pay for $1.6 billion in improvements through 2008 to comply with federal consent orders at the city's sewage plant and in its water distribution system.

The average residential bill for water and sewer services, now $34.07 a month, will increase by $1.75 per month in April and $1.92 in April 2001, according to water authority officials.

The board voted to establish a "Voluntary Customer Assistance Program" that would accept contributions to help low-income customers pay their water and sewer bills. The board had considered a "lifeline rate" for low-income customers, but the cost was projected at $1.5 million a year, and authority members did not want to subsidize it with public funds.

The water authority's general manager, Jerry N. Johnson, is expected to submit a plan to the board by mid-March modeled on low-income programs of the Washington Suburban Sanitary Commission and Washington Gas. Officials say the fund could begin helping low-income customers this year.

The board tabled a proposal to set up a separate fund to help churches and nonprofit groups pay their bills. Nonprofit groups paid reduced water and sewer rates until 1997, and many say they are struggling to keep up with the bills. But authority members said they had too many questions about how such a fund would work, which they want answered before approving the idea.

Authority members approved a charge to the District for water used at fire hydrants, a charge of $217 per hydrant that authority officials estimate will bring in just under $2 million.