In a blow to Constellation Energy Group, a judge dismissed Thursday the company's lawsuit challenging the authority of Maryland regulators to investigate its deal to sell half its nuclear power business to a French utility.
The ruling means Constellation has little choice but to proceed with the regulatory review of its $4.5 billion transaction with Electricite de France, a regulatory hurdle that the utility had hoped to avoid and had argued was not required under state law.
In a statement, Constellation expressed disappointment with the judge's decision and said it would review its legal options.
The legal battle stemmed from the Maryland Public Service Commission's ruling last month that Constellation's deal must be in the public interest to go forward, thereby requiring the panel's approval. Constellation, the parent of Baltimore Gas and Electric Co., the region's largest utility, filed a lawsuit seeking to overturn the PSC ruling.
In granting the state's motion to dismiss the lawsuit, Baltimore Circuit Judge Stuart R. Berger did not rule on the merits of Constellation's argument. Instead, Berger held that the court lacks jurisdiction at this time to grant Constellation judicial review of a regulatory decision.
The PSC's decision to investigate the deal does not constitute a final order, which would have entitled the party to an appeal, according to the judge's order. And the judge noted that Constellation is participating in the review process.
Meanwhile, negotiations between Gov. Martin O'Malley and Constellation over a potential settlement have stalled in recent weeks.
The sides had been holding behind-the-scenes discussions while the regulatory process was under way, with the governor seeking rate relief and other concessions.
O'Malley has sharply criticized the company's compensation package for Chief Executive Mayo A. Shattuck III, particularly a potential $87 million golden parachute. (The EDF deal would not trigger the payment, and Constellation officials say Shattuck would not receive any money because of the transaction.)
O'Malley said Thursday that the state remains "focused on the goal we have held throughout these proceedings: a thorough review of this proposed transaction by professional regulators to ensure that the transaction is consistent with the public interest and adequately protects ratepayers."
The O'Malley administration had laid out an extensive settlement proposal that could cost Constellation hundreds of millions of dollars, including one-time credits for residential customers equal to a roughly 10 percent reduction in their yearly bill and a pledge to contribute about $20 million a year to a program that helps low-income residents pay utility bills.
The governor's spokesman said Thursday that the state "hasn't left the table."
Constellation spokesman Rob Gould said the company has been willing to engage in "fruitful dialogue."
"Financial demands that would harm Constellation Energy, BGE and our customers would not be productive," he said.
The company reiterated Thursday that its proposed new reactor at Calvert Cliffs in Southern Maryland won't be built unless the EDF deal goes through, describing the two issues as "inseparable."
The legal wrangling is the most recent dispute between state officials and the company, whose relationship has been rocky for several years amid rising electricity rates. The tensions appeared to ease last year when the sides struck a $2 billion settlement that was approved by the General Assembly and included rebates, rate credits and other concessions.
Under that settlement, lawmakers raised the threshold that triggers regulatory review of transactions to those that involve at least one-fifth of the voting control or board seats at Constellation.
EDF owns a 9 percent stake in Constellation stock and would hold one of 13 seats on the board if the deal goes through.
Constellation has argued that state law does not allow the PSC to review the company's transaction with EDF, while the PSC came to the opposite conclusion because EDF would acquire Constellation assets, not voting interests. Therefore the "safe harbor" from regulatory scrutiny does not apply, the commission concluded.
"We continue to believe there is strong legal merit to our position that Maryland Public Service Commission approval of Constellation Energy's pending nuclear joint venture with EDF Group is not required as a matter of law," Constellation said in a statement.
"We are committed to ensuring Maryland officials honor the agreement they signed with our company just last year, which clearly permits a transaction of this kind without PSC pre-approval," Constellation added.
Berger's decision does not prevent Constellation from appealing once the PSC rules on the EDF deal.
The state attorney general's office, which had asked the court to dismiss Constellation's lawsuit, said it was pleased with the judge's decision.
Berger's order recognized that the PSC decision to investigate the EDF deal "is not a final order under the traditional understanding of finality and therefore is not subject to immediate judicial review," said Raquel M. Guillory, a spokeswoman for Maryland's attorney general.