The city of Falls Church sued Fairfax County's water utility in federal court yesterday, charging that it was improperly offering connections to new customers in areas traditionally served by the city.

Governments at all levels often scuffle over water, but the disputes usually involve who gets to use it or who has to clean it up. Yesterday's action by the city is unusual because it centers on who has the right to sell it.

Most county businesses and residents get their water from the Fairfax County Water Authority. But Falls Church, like many cities, sells water outside its boundaries. Although it has about 11,000 residents, its system serves more than 34,000 businesses and homes, most of them in the surrounding county. Water service is also a key source of revenue for Falls Church, where it is expected to generate about $2.4 million in the current fiscal year -- a significant sum for a city with a $67 million budget.

The city's service territory includes areas undergoing major development or revitalization -- such as portions of Tysons Corner and Dunn Loring -- which make for a rich base of potential customers. Until recently, city officials said, the county shared copies of construction plans so that they could review them and offer water service to developers.

But in January, according to the lawsuit, water authority representatives contacted Trammell Crow, developer of a major commercial and residential project underway near the Dunn Loring-Merrifield Metro station, to offer service. According to the suit, the authority's approach was "part of a deliberate and concerted action" to interfere with the city's customer base.

The city, which gets its water through the Washington Aqueduct from the U.S. Army Corps of Engineers, is suing in the U.S. District Court in Alexandria because it asserts that the county water authority is interfering with acts of Congress that created its system of water distribution in the 1940s.

The city's announcement of the suit yesterday underscored what officials see as a matter of high stakes. Mayor Robin S. Gardner was flanked by City Attorney Roy B. Thorpe Jr., the head of the city's environmental services department, the public information director and two outside public relations consultants as she cast the dispute in almost apocalyptic terms.

If the county prevails, she said, "it could be the end of not only the city's water system but the city as we know it." She later explained that she meant that the decline or disintegration of the city's water system would damage its finances and quality of life.

Mark Looney, the attorney who represented Trammell Crow when the Dunn Loring project was vetted by the county -- it was approved in December -- said he didn't know what arrangements the company made for water service and would not comment further.

Water authority representatives and Fairfax officials said a 1959 agreement between the city and county that established service area boundaries expired in 1989, so they are under no obligation to pass up new water customers. Moreover, they said the authority, which serves more than 1.3 million people in Fairfax, Loudoun and Prince William counties and the city of Alexandria, has a better product at a lower price. It charges $1.50 per 1,000 gallons compared to the $3.03 price from Falls Church.

In a Feb. 15 letter to Gardner released by the authority yesterday, water board Chairman Philip W. Allin said: "Fairfax Water cannot ignore the politically unsustainable discrepancy in water rates charged to Fairfax County residents by the City of Falls Church."

Fairfax County Board Chairman Gerald E. Connolly (D) said it was "unfortunate" that the city elected to sue, but that he believed the water authority was on firm ground.

"I didn't know competition was illegal in the United States," he said. "Fairfax County is certainly not asserting some unilateral right to customers, but neither are we ceding that right."

Gardner said that although it is true that the territorial agreement expired 18 years ago, the county continued to honor it until a few weeks ago when, without prior notice, it stopped sharing development plans.

"We have been working with the exact same agreement since 1989, and there has never been any contesting of it until recently," she said. She added that, like Connolly, she supported competition, but only with "a level playing field" that allowed the city a fair chance to offer their services to potential new customers.

Jeanne Bailey, a spokeswoman for the water authority, said it was not in the interest of Fairfax County to renew the agreement as written. She also said that the city has actively resisted discussing alternate plans.

"Our board and executive management have tried to sit down and tried to talk, and they have not been agreeable," she said.