Last month, settlement prospects were bright in the complex suit challenging the Western Area Power Administration's method of running Western dams. But on Monday they looked bleak indeed.

The suit by Salt Lake City, Utah Power & Light Co. and more than 150 other cities was filed in October 1986. Since then, U.S. District Judge J. Thomas Greene said, thousands of pages of exhibits have been received.As Max C. Vassenelli, a government lawyer, said Monday, "The parties have agreed in principle to a settlement of this case. That was before the National Wildlife (Foundation) filed their lawsuit."

The plaintiffs in the new suit, filed in late December 1988 and assigned to Chief Judge Bruce S. Jenkins, are the National Wildlife Federation, Grand Canyon Trust, America Rivers Inc. and Western River Guide Association. They allege that new power marketing criteria for Glen Canyon and Flaming Gorge dams could harm downstream habitat.

Not only did that derail the settlement by itself, but environmental lawyer Wayne G. Petty filed a motion for a preliminary injunction to prevent the signing of some contracts that WAPA hoped to ink soon.

In a hearing Monday, Greene chided Petty, "You came in not at the 11th hour, not at the 12th hour, but a minute after the 12th hour."

Petty responded that while the early stages of the suit proceeded, UP&L ably represented environmental issues. But now that it is close to the end, the parties have not asked environmentalists to review the matter.

Petty said the conservationists don't even know if the settlement would require the preparation of an environmental impact statement on the operation of Glen Canyon Dam, a matter of great controversy. Dam releases have badly damaged the Grand Canyon's river ecology, according to a federal report released last year.

The parties in the earlier suit asked Greene to order a consolidation of the two matters for the limited purposes of seeing whether the contracts could be signed.

With a full consolidation, he said, the parties could get to the point of trying the new suit "in what I consider a very, very expeditious time frame, three to six months from now."

Greene ordered the cases consolidated "for the limited purpose" of deciding if a settlement is still possible in the case before him. If it is, the contracts can be signed.

The next hearing is set for 2 p.m. on Feb. 14. Greene told the lawyers to bring valentines.