Utah Power & Light Co. can't tap cheap federal power a move company officials said could have reduced its rates by 25 percent.

UP&L, along with 155 cities and counties, had filed suit challenging the government's practices for marketing cheap federal electricity. But a federal judge in Salt Lake City dismissed UP&L's case Thursday.While the court accepted marketing and allocation policies of the federal Western Area Power Administration, it set a date to schedule hearings concerning allegations of certain business and environmental practices involved in the generation and sale of federal power.

"We are delighted," said Don Allen, attorney for the Colorado River Energy Distributors Association, a regional organization of publicly owned power systems, including several in Utah, which entered the suit on behalf of WAPA and the U.S. Department of Energy.

He labeled issues left to resolve as "sand in the crankcase," which wouldn't have much impact on the federal power allocation program.

"We are disappointed obviously," UP&L spokesman John Ward said. "The judge didn't rule whether preference (to public utilities) was fair, but when it comes to selling power the government can discriminate."

He said a decision to appeal the decision on the preference issues hasn't been made.

"There's always the possibility that Congress will recognize the unfairness of the system and fix it through legislation."

CREDA filed the motion for summary judgment last year on behalf of about 1,000 publicly owned utilities across the nation, fearing their rates would soar if UP&L succeeded and opened the door for investorowned utilities to receive shares of federal power. "If we had lost this it would have overturned a multitude of other decisions that have gone in this same direction," Allen said.

UP&L and more than 150 communities it serves in Utah and Wyoming filed suit in October 1986 challenging WAPA's denial to give them an allocation of inexpensive hydro-power generated from Colorado River Storage Project dams and lower UP&L's rates by 25 percent. Studies show that WAPA power costs about one-fifth as much as UP&L's coal-generated electricity.

The plaintiffs contended that WAPA's practice of giving publicly owned power systems and rural electric cooperatives first rights to cheap federal hydro-power was discriminatory and illegal.

U.S. District Judge J. Thomas Greene said WAPA's allocation policies are legal and reasonable because even if the court ruled that UP&L and its customer municipalities be among preference candidates for federal power, no law exists that determines "priorities between or among preference entities."

Greene said WAPA's policies and operations are reasonable and consistent with long held judicial decisions and congressional debate on the issue.

But, Greene didn't dismiss allegations by UP&L that WAPA illegally marketed non-federal power by establishing a Colorado electrical cooperative, Rocky Mountain Generation Cooperative, "to sell power allegedly at preditorily(sic) low rates."

Ward said the utility did lose the big issue of preference allocations, but it will proceed with its claims on alleged illegal business and environmental practices by WAPA. "Those issues aren't small themselves. We are just saying that if they are going to act like a business they shouldn't get away with stuff we can't. They should be bound by the same legal restraints we are."