FPL sues Md. and PSC over merger review

Florida's FPL Group said yesterday that it filed a lawsuit against the state and the Maryland Public Service Commission to force a timely review of its proposed merger with Constellation Energy Group and clarification on who may rule on the transaction.

The $11 billion deal has been on hold since a court ruling last month barred PSC members from taking final action on it. The merger needs approval from state regulators to move forward.


"FPL Group has no means available to have the Public Service Commission issue a final ruling on the merger," the filing states. If nothing changes, the "merger will be placed in legal limbo, from which there is no escape. The practical effect is that the merger would be denied."

If that were to happen, millions in savings promised to Constellation's Baltimore Gas and Electric Co. customers would be revoked.


The Maryland attorney general's office will represent the legislature. Spokesman Kevin Enright said his office learned of the suit late yesterday and planned to review it last night. Calls to the PSC were not immediately returned, nor were calls to several Maryland legislators.

The 11-page lawsuit, which FPL said it filed in Baltimore City Circuit Court late yesterday, came a week after FPL Chief Executive Officer Lewis Hay III told investors in New York that he "would like to, sort of, get through the election," before determining what to do.

"I just think frankly, people's attention in Maryland, particularly the key politicians, they're not focused on this merger," Hay said.

The merger became a political issue during this year's General Assembly session and emerged as a factor in the race for governor.

FPL spokesman Steven Stengel declined to address FPL's change in course yesterday. He said the company was still committed to the merger as long as the timeline and the terms are "acceptable." The court filing states that either company may terminate the deal if "all regulatory approvals are not obtained by June 30."

"We have been seeking clarity and a path forward, and we think that the action that we took today will help us achieve those objectives," Stengel said of the lawsuit.

Constellation spokesman Robert Gould said his company will be watching "with interest" to see what happens.

The lawsuit follows a Maryland Court of Appeals ruling last month that struck down legislation intended to fire and replace the PSC members. But it didn't address another part of the law that prevents those members from ruling on the FPL/Constellation union, further stalling regulatory approval of the merger.


FPL's lawsuit contends that the situation violates the due process requirements of the Maryland Declaration of Rights, as well as the Equal Protection Clause of the 14th Amendment to the U.S. Constitution because it prevents the PSC from taking action "without any rational basis for such disparate treatment." It asks the Circuit Court to allow the PSC to rule on the merger and that its litigation costs be covered.

"This [lawsuit] shouldn't really come as a surprise to anybody," said Bill Scherman, a former general counsel to the Federal Energy Regulatory Commission. His Washington firm, Skadden, Arps, Slate, Meagher & Flom, is among those representing FPL in its lawsuit, though Scherman was not part of that team.

The appeals court ruling Sept. 14 pointed out the paradox of regulators keeping their jobs but not being allowed to rule on the merger, in a footnote that virtually invited litigation, Scherman said.

In an interview last week, Sen. Thomas M. Middleton - a Charles County Democrat and chairman of the Finance Committee - suggested one of the companies take the burden of the situation off the legislature's shoulders and file suit.

"If they felt that this merger was, or is, that important that it be considered as expeditiously as possible, then they have some legal recourse themselves," Middleton said.