RICHMOND -- Virginia Power President Jack H. Ferguson lost his temper in a courtroom here last week, and therein lies the story of wrenching change in the electric power industry. If state regulators fail to understand that change, the utility's 4 million customers will pay a lot more to turn on the lights.

Virginia Power needs more electricity to meet its customers' needs, and the State Corporation Commission will decide this summer whether to let it build a generating plant or force it to buy the juice from small private companies. Regardless of how the SCC rules, the costs to consumers will be unknown for decades.

Nonetheless, many utility experts expect the SCC's decision to have a ripple effect that will be felt by other energy goliaths, including the Potomac Electric Power Co., which serves 1.8 million customers in the District and Maryland.

Ferguson's outburst in front of the three-member SCC came after a commission attorney suggested that Virginia Power did not need to build a $126 million generating plant. "That's pretty hypothetical," Ferguson snapped. ". . . You made some remarks earlier suggesting we're incompetent and ignorant." Competent electric utilities, he suggested, build and run their plants in response to their projections of how much power will be needed, and consequently, there is less risk of brownouts and unpredictable rate increases.

Outside suppliers disagree, insisting that they are just as reliable and that they can produce power for less and save customers money.

Two factors started this debate: the passage of a 1978 federal law that encouraged small producers to get into the power business and the development of generating technology that makes it possible to build small plants that are as efficient as the behemoths of the past.

As a result, state regulators no longer decide simply whether a plant should be built; they also decide who should build it and own it. If an outside supplier is chosen, however, Virginia Power must purchase all the electricity the supplier provides, whether needed or not.

"It's a test case . . . on issues the commission in Virginia has never dealt with before or any commission in this country has made a finding on," said Jerry Pfeffer, a Washington-based utilities analyst. "It really comes down to what is an appropriate level of reliance by a utility on independent generators."

In the worst possible case, according to Virginia Power, it would have to reduce the output of one of its relatively economical nuclear plants to take more expensive electricity from the independents.

The customer, of course, would pay higher rates.

That, said William W. Berry, the chairman of Virginia Power's parent company, would be "insane."

Pfeffer and other experts are following the case because it highlights the decentralization of the electric power industry. Once-unbreakable energy monopolies such as Virginia Power now must fight a growing number of contestants for the right to build new power plants.Betting on Gas Prices

To Virginia Power, the case represents a test of whether it can control its destiny. It also constitutes something of a financial gamble because the utility is betting that the price of natural gas will be stable. Gas, not coal or nuclear energy, would fire the new plant Virginia Power is seeking SCC permission to build.

The plant, near Richmond, would be called Chesterfield 7.

Other regulatory issues include whether the small power producers who would like to prevent Chesterfield 7's construction will be reliable when, say, a 100-degree day drives up the demand for electricity-eating air conditioning.

There is also a risk for the SCC, which is accustomed to controlling the electrical supply decisions of Virginia Power but would have little leverage over the independents.

These issues -- which affect the smallest residential user of electricity as well as Fortune 500 corporations sprinkled across the state -- have thrust the powerful yet publicity-shy SCC into the limelight.

"We're on the leading edge," commissioner Preston C. Shannon declared at the close of last week's hearing, which was conducted before a standing-room-only crowd of lawyers, SCC staff members and industry officials.

Shannon, the SCC's senior member, knows just how difficult the SCC's course will be. His counterparts in some other states, notably Texas and California, have set off stampedes in independent power production and stuck customers there with multimillion-dollar bills to pay for power they must buy but do not need.

Many large utilities such as Virginia Power are no longer trying to build costly nuclear or coal-fired power plants and instead are seeking approval for miniplants such as Chesterfield 7, which can be built quickly and give utilities more flexibility in dealing with fluctuating demand.

Chesterfield 7 is not large as power plants go: It would produce enough in one hour to meet the needs of 20 typical residential users for a year.

Chesterfield 7 would employ the same technology that private firms have pioneered and are using around the nation. These plants produce electricity with highly efficient turbines and waste heat.

The technology is called "cogeneration," and the private firms that sell it are called "cogenerators." The concept is prized by power producers, whether they be big utilities or small producers, because it extracts a lot of energy from small amounts of fuel.

For example, Potomac Electric Power Co. recently became the first utility in Maryland in seven years to ask permission to build a new plant. Pepco wants to build four cogeneration units at Dickerson, in western Montgomery County, between 1994 and 1998, at a total cost of $1.3 billion; together they would produce enough electricity to power 10 Washington Metrorail systems during rush hour. Vest-Pocket Plant

Pepco is also hedging its bets by negotiating with Tellus, a New York-based cogenerator, to build a vest-pocket-sized plant on an industrial site in Rockville. Tellus executives say their tiny plant would make the Chesterfield 7 and Dickerson projects at best questionable and at worst a waste of ratepayers' money.

"There is no need for an electric company to build another facility -- it can be easily supplied by independent producers," said Mitchell Dong, Tellus' president. Pepco, Dong added, could obtain "enough cogeneration to displace, defer or cancel their station up in Dickerson."

Identical arguments were advanced in the Virginia Power hearing last week as Applied Energy Services, a small Arlington-based producer, and Panda Energy, a Dallas corporation, urged the SCC to deny the utility's request to build Chesterfield 7 on the basis that they could offer customers a better electricity bargain.

In the hearing, small producers waved what they believe is the ultimate weapon in their fight against the Gullivers of the electricity business: the Public Utility Regulatory Policy Act, which Congress passed in 1978 to promote the development of alternative sources of power.

Because of the law, "If a utility is planning on building something itself and a cogenerator says, 'I can beat that deal,' there is a strong argument the cogenerator should be allow to build it," said James Liles, a senior official in the economic policy office of the Federal Energy Regulatory Commission in Washington.

Added J. Steven Herod, the director of coal, electricity and nuclear policy at the U.S. Energy Department: "There is no reason why future {power} generation has to be built by the utility company -- it can be built by others, by nontraditional players."

Virginia Power officials are quick to point out, however, that independent power production is not without its pitfalls. Even though they are gradually increasing their purchases of power from small suppliers, utilities say it would be foolhardy for states to depend on those producers for all of their new electric power needs.

David Nevius, president of the North American Electric Reliability Council, which represents utility interests, said, "There could be situations where a utility here or there could come up short . . . . You could have some brownouts."

"It's not a question of us saying we should own it all," said Virginia Power's Berry. "The question is whether all of it should be independent. I think it's a mistake to put all of our eggs in that basket."

Indeed, Berry contends that a truly competitive system, one in which utilities bid their services directly against those of small producers, could result in lower rates for customers. "There is no way I can quantify how much consumers will save . . . but I am convinced they will save money," Berry said. Growing Cogenerator Share

Today, only about one percent of Virginia Power's production comes from cogenerators, but the company is prepared to increase the share to 17 percent by 1995 -- far above the projected national average. At the same time, Virginia Power wants to influence the future of that emerging industry and hopes that Chesterfield 7 would serve as a model for other public utilities and private cogenerators alike.

"For each utility there is a threshold point" of reliance on outside producers, said Pfeffer. "You can't rely on a windmill to produce power -- you can have a hot day in Washington with not a breath of air . . . . Common sense dictates that Virginia Power must have a balance to meet its service obligation."

Small producers contend that the balance is tilted too far in favor of utilities. The SCC case, said Michael Zimmer, a lawyer for a coalition of independent power suppliers, "is boiling down to who supplies power to Virginia Power in the future and assumes the risk."

"Can that Chesterfield facility be postponed or deferred in a beneficial fashion to the ratepayers?" he said. "If there are cost overruns and the utility built the plant, the ratepayers pay. If the cogenerator overbuilds, the ratepayers don't pay anything."

For company president Ferguson, who watched the SCC hearing like a hawk when he was not testifying, the case is more than a matter of corporate pride. It is a matter of control.

"We're plowing new ground and have to be sure cogeneration doesn't get away from us," Ferguson said in an interview. "The ratepayers here don't deserve that. We and the commission have an obligation to see that kind of thing doesn't happen here."