The D.C. Public Service Commission yesterday authorized the biggest electricity rate rise ever for District of Columbia residents -- a $35 million increase for the Potomac Electric Power Co.

The rate rise amounts to about a 10.6 percent increase in Pepco's annual revenues, but the impact on individual residential electric bills has not yet been determined.

The average Pepco customer in the District now pays an electric bill of about $21.76 a month. If the increase is applied proportionately to all customers, the average residential bill would go up about $2.30 a month to just over $24.

In the past, however, the commission has made residential customers pay proportionately less than other electricity users, so the monthly bills may not go up that much.

The new, higher electric rates will go into effect, as soon as the company completes the paper work necessary to implement the PSC decision -- probably a matter of a few days, Pepco officials indicated.

Pepco had originally sought to boost electric rates by 15 percent, or about $48.1 million. After 15 months of deliberations and hearings, the District utility regulators gave Pepco about three-quarters of what the company had requested.

Public Service Commission Chairman Elizabeth Patterson said the decision was "a balance of competing interests" -- the company's need for more money to pay for increased costs and consumers' need to minimize the impact of inflation.

Lowell Davis, Pepco's executive vice president, said the 10 percent increase is "clearly very welcome" and "will give us an urgently needed improvement" in revenues.

Noting the decision was based on Pepco's operating costs as of June 1979, Davis said inflation has increased, the cost of producing electricity since then.

Then Pepco officials refused to say whether the company would soon file an application for another rate increase, but D.C. People's Counsel Brian Lederer predicted that the electric company will quickly ask for more money.

Lederer warned that raising electric rates will "increase the Metrorail operating deficit and will put added pressure on the rest of the community." About a third of the subway's operating costs goes to pay for electricity, he noted.

Paying higher bills, he added, "will put added pressure on the business community, which is already suffering economic problems," and "will aggravate the financial condition of the District government" by making city hall pay more for street lighting and other electricity it uses.

Counting the latest rise in electric costs -- including extra charges for fuel price increases -- rates will be up about 12 percent over the last three years. The consumer price index has increased 24 percent during that time.

The decision allows Pepco to increase the profit it earns on power plants serving the District by a fraction of a percentage point. The company previously had been authorized to make a 9.03 percent return on its investment and now can earn 9.38 percent. Pepco asked for 10 percent, and Lederer claimed "there was no evidence any increase was justified."

The last previous increase was $5.8 million, approved in July 1979.

As the PSC decision was being announced, Pepco reported it earned profits amounting to 35 cents for each share of common stock during the first four months of this year, up from 27 cents a share for the same period last year. The company's earnings totaled $19.6 million, compared with $14.9 million last year.