The Environmental Protection Agency will propose in January the government's first comprehensive regulations limiting cancer-causing chemicals in drinking water.

The move is expected to spark widespread controversy when financially pressed cities are forced to spend millions of dollars on new water treatment methods, passing the costs on to consumers in higher water bills.

The long-awaited regulations already are reopening the emotional debate over the safety of the nation's most basic commodity, pitting environmentalists against city officials. with EPA in the middle.

The alarming discovery that drinking water might contain small amounts of cancer-causing substances was first disclosed in November, 1974, when an EPA study found 66 chemicals in New Orleans' water supply.

Two weeks later, reviving a bill that had languished for four years, Congress passed the Safe Drinking Water Act requiring federal standards for the nation's 240.000 hitherto independent water supply systems.

Since then, an EPA survey of 80 cities' water systems found chemicals in all of them, including chloroform, aldrin, dieldrin, DDT, carbon tetrachloride and benzene - all of which cause cancer in animals. In addition, several studies have found higher cancer rates among people drinking chlorinated river water as compared to non-chlorinated ground water.

With sophisticated new instruments to detect minute traces of chemicals "we are finding a whole variety of new substances we were not able to measure before,' said Victor J. Kimm, head of EPA's water supply program.

"The adverse health effects are potentially very serious. . .But it's very hard to say how big the risk is. We're at the limits of what's understood in the scientific community."

The regulations would set a limit of 100 parts per billion for a group of chemicals called trihalomethanes, of which chloroform is the best known. These organic chemicals are formed when natural substances such as decaying leaves or sewage mix with chlorine, used as a disinfectant.

The regulations also would try to reduce synthetic or manmade chemicals that flow into rivers from farms, industrial wate pipes and urban runoff. Cities that take water from dirty rivers, rather than underground aquifers or upstream reservoirs, would be required to install carbon filtering equipment.

Kimm sees the regulations as "an insurance policy" despite scientific doubts over how many people might die from ingesting small amounts of chemicals over a lifetime.

But the engineers and politicians who run the nation's water supplies would rather wait for more certainty. "It's accepted that chloroform causes cancer in test animals, but not that it causes it in man from trace quantities in drinking water," said Eric Johnson, head of the American Waterworks Association.

"Until it's proved to be bad, I'd prefer to believe it isn't. Municipalities have plenty of things to spend their money on."

The controversy echoes the classic environmental health battles of the decade from pesticides and air pollution to saccharin. While most Scientists accept the correlation between high doses in test animals and low doses on humans over the long term, ubiquity of cancer causing substances.

Anticipating controversy, EPA is cautiously applying the regulations only to cities with populations exceeding 75,000. Thus, above hald of the 190 million people who use public water supplies would be affected.

All the cities would be required to monitor their water regularly. Since quality varies dramatically from region to region, some will have to make only minor adjustments in their treatment plants.

However, EPA estimates that between 61 and 78 cities will need to switch from traditional sand-filtering techinquies to running the water through granulated activated carbon beds an expensive process since the carbon, which absorbs chemicals, must be changed as frequently as every eight weeks.

The result would be a massive national construction program over the next five years costing between $291 million and $685 million with annual operating costs of $34 million to $92 million, all of which would be paid out of city budgets. In contrast to its large subsidies for sewage plants, the federal government provides virtually no funds for drinking water treatment.

A new plant for a city of 80,000 would costs $2 million to $5 million with a per capita increase in water bills of $3.80 to $11 a year. A city of more than 1 million people would pay $12 million to $27 million with a per capita water bill increase of $2.20 to $6.50, EPA syas.

"The cost of treating this water is going to come as quite a shock to most cities, where people think water is a free, God given right," said Oscar Adams of the Virginia Health Department.

"Most state water people are not convinced there is a public health problem. You have many carcinogens in the environment whether it's sweeterners in Coke or choloroform in toothpaste. Are we going to save that many people by making all these changes in water treatment?"

The city of Richmond, which takes its water from the polluted James River, estimated last week that a new carbon system would cost $10 million to build and $900,000 a year to maintain, thus increasing water bills by 27 per cent, or $3.91 per person a year.

Fairfax County, which has measured high levels of chlorogorm in the Occoquan Reservoir, would probably have to switch to carbon, while the city of Roanoke, which has clean upstream reservoirs, would not, Adams predicted.

Baltimore, the District of Columbia and suburban Maryland could probably comply with the regulations without major construction programs, local officials said. EPA will not release the names of the 61 to 78 cities likely to need carbon systems, except for New Orleans, Philadelphia, Cincinnati and Miami, where extensive testing has already uncovered high chemical levels.

Many local officials are skeptical of EPA's cost figures. Philadelphia estimates its average household water bill would increase from $45 to $71 a year. Cincinnati predicts and increase from $40 to $65.

But resistance will only backfire, according to Robert Harris, a scientist with the Environmental Defense Fund, which has sued EPA of delaying the regulations. "We're seeing the public turn away from drinking water," he said. "Sophia Loren is making her TV debut advertising a carbon filter. Industry sees home filters as a growth market even though the gadgets don't work."

Harris applauds the upcoming regulations, which go far beyond what was contemplated by the Ford administration. When EPA Administrator Doughlas Costle took office he was presented with a proposal that limited trihalomethanes but did not address synthetic chemicals. After a meeting with Harris and consumer activist Ralph Nader, the current more controversial proposals were drafted.

However, the agency has yet to deal with what some consider an equally serious hazard: the leaching of lead and cadmium into drinking water from antiquated distribution pipes. Soft water, such as that in Boston, Seattle and Montgomery County, comodes pipes, and the ingestion of heavy metals could cause mental retardation, hypertension and kidney damage, Harris said.