Virginia Electric and Power Co., the nation's eighth largest private electric utility, described itself yesterday as so weak financially that it needs a $246 million rate increase to avoid the possibility of having to black out customers on a rotating basis.

Vepco filed a five-inch stack of papers with the Virginia State Corporation Commission this week in an effort to justify a rate increase that would raise residential customer bills by about 20 percent beginning Sept. 1.

Without the increase, according to Vepco president Stanley Ragone, the utility would be forced to cut back construction plans, which "more than likely" would mean "curtailment of service to all customers."

In the closely regulated world of utility financing, where state commissions often approve only about half what is asked for, Vepco's request is among the largest pending in the country. The company said a current summertime bill of $25 would become $29.61 under the new rates: a $40 bill would be $48.49 and a $100 bill would be $120.49.

A special lower rate for Virginia's poor was outlined in the Testimony, as requested earlier by the SCC, but Vepco recommended that it not be approved.

Vepco's arguments for the rate increase are fairly typical of most utilities. Inflation, the executives said, has caused all the company's costs to sky-rocket. There were some investments that didn't work out, among them a uranium mine in Wyoming; there were others that cost more than had been predicted and there were government decisions made elsewhere that added to expenses.

The result, Ragone said, is that Vepco is having a hard time selling its stock and bond offerings on Wall Street. "Most of the other electric utilities with whom we compete for capital are in much better financial condition, and investors value their securities more highly," he said.

Consultant Norman reenberg, a security analyst, put it more bluntly in his supporting testimony: "Vepco ranks as one of the weakest companies in the industry," he said.

A $15.7 million chunk of the proposed rate increase would finance the loss Vepco sustained when it decided to cancel the construction of the Surry 3 and 4 nuclear power units. When authorized in 1971, the cost estimate was $608 million, company controller B. D. Johnson recalled. By the time Vepco decided to cancel them in March 1977, the estimated cost had tripled to $1.8 billion, and now it is $2.8 billion. Vepco had spent $70.3 million by the end of 1977 and will have to spend another $40 million this year in cancellation of equipment charges.The requested $15 million would finance that latest loss.

The largest chunk of the requested increase, $82 million, is for the startup financing of a nuclear power plant that has been completed on the North Ann River in Louisa County. Other building projects now under way will cost the company $600 million this year and $1.5 billion in the next two years, and the public is being asked to make possible the higher dividends that will give investors the incentive to provide the money.

"We cannot conscript capital. We must compete for it in the security marketplace," Ragon said his testimony. If Vepco is not allowed to set rates high enough to earn 14 percent per year on most of its $4.8 billion in assets, he argued, Vepco will not be able to offer dividends high enough to interest any investors. The current return authorized is 13.5 percent, but inflation has driven up expenses so badly that the company will fall $164 million short of that earning level by the end of the year, Ragone said.

Without investors, there will be less money to finance construction, and that means dangerous shortages of reserve capacity to produce electricity by 1982. "By 1984, the picture looks even worse: Reserves are at so low a level that we must prepare for repetitive interruptions to some or all of our customers," he said. New hookups would be limited and new industry curtailed, he said.

West Virginia is responsible for $4.2 million of the proposed rate increase, the testimony indicated. Vepco's fired plant is located in Mount Storm, W. Va., and every kilowatt of power exported from that state to Virginia is taxed. This will cost Vepco's Virginia customers $4.2 million this year.

Vepco earlier protested the tax was unfair, and Virginia Attorney General J. Marshall Coleman is considering whether to ask the U.S. Supreme Court to block its imposition.

President Carter got the blame for another $8.1 million of the proposed rate increase. The sum will finance permanent storage facilities for the highly radioactive nuclear waste from Vepco's operating Surry 1 and 2 reactors and, soon, from North Anne 1, which should go into commercial operation next month.

"Unfortunately, the Carter administration's policy is to forbid reprocessing and recycling spent fuel," Ragone said. "Not only do we lose the value of the uranium and plutonium (in the waste), but also we must provide for costly permanent storage facilities."

Carter argued that the dangers of nuclear proliferation in the recycling of plutonium were too great to justify reprocessing.

Less splashy in terms of public debate but more important financially are bookkeeping changes that will cost Virginians $40.5 million. Regulators have already approved an accounting change in the rate of depreciation that Vepco says will cost $8.3 millpon, and another refiguring of Virginia gross receipts taxes that will cost $8.2 million.

The third change is much more controversial in utility circle. It accounts for $24 million of the plan and would change construction financing methods so that Virginians would pay the freight on construction work in progress from now on, as do residents of Maryland and the District, rather than paying only when the facility comes into commercial operation, as they now do.