State utility regulators complained yesterday when Constellation Energy Group executives didn't attend a hearing to discuss disputed terms of a 1999 agreement to deregulate the power industry, continuing an escalating feud over rising electricity rates.

The Public Service Commission called the hearing to give Constellation subsidiary Baltimore Gas and Electric Co. a chance to rebut the panel's report that claims ratepayers took on potentially billions of dollars in costs in exchange for little benefit in the 1999 settlement.

Company executives sharply criticized the report, saying its adversarial tone has destabilized the state's power market by injecting politics into regulatory matters.

Commission members invited Constellation to attend the hearing if it could help BGE answer regulators' questions. But the order calling the hearing did not specify that Constellation lawyers should appear, since the company is outside the commission's reach as an unregulated entity.

The distinction did little to assuage commissioners, who repeatedly expressed frustration that a BGE attorney was unable to address concerns raised in the report.

"I can't help notice that it wasn't BGE but it was Constellation Energy that put out the press releases talking about the errors and omissions and flaws, etc. regarding our report, and they're not here," said Steven B. Larsen, PSC chairman, in an exchange with BGE's outside counsel.

Constellation said it was blindsided by the criticism, arguing that "at no point" was the company asked to appear.

"We complied fully with what was asked of us and any characterization to the contrary is simply not true," said Rob Gould, a company spokesman.

Deborah E. Jennings, who represented BGE at the hearing, said the company would pass the commission's questions along to Constellation.

The dispute centers on a pair of critical PSC reports that conclude the 1999 deregulation settlement was lopsided in favor of Constellation at the expense of ratepayers.

The company calls the report "revisionist history" and puts at risk its commitment to invest billions of dollars in energy infrastructure in Maryland.

The feud culminated last week with Constellation saying it will sue Maryland to recover $386 million in credits it was forced to give utility customers as part of 2006 legislation to soften a 72 percent BGE rate increase.

Company executives also suggested they may build a proposed $4 billion nuclear plant in New York instead of Maryland if the regulatory environment doesn't improve. The matter threatens to draw the General Assembly and Gov. Martin O'Malley into another argument over utility rates during the current legislative session. Larsen asked lawmakers Tuesday for more tools to investigate utilities, among other things.

"If Constellation is suing ratepayers for an additional $386 million, it seems only fair that they would appear before the Public Service Commission to explain why," O'Malley said in a statement yesterday. "We will support the Public Service Commission in its efforts to obtain answers to the very serious questions that have been raised."

The commission will examine BGE's response at yesterday's hearing and decide how to proceed later.

The disputed reports were ordered by lawmakers last year in a bid to re-examine the state's move to deregulation with an eye toward easing rates. After hiring consultants to study the matter, the PSC concluded the 1999 deal was not in the "public interest," and that Constellation may have violated some of its terms.

In particular, the consultants questioned the appropriateness of $975 million in stranded costs ratepayers paid to Constellation to compensate the company for taking over BGE's power plants in deregulation.

The report claimed BGE diverted some of the payments to offset losses incurred buying power from a Constellation affiliate. The PSC report suggests the company may be compelled to return some of the payments if it is found to have acted improperly.

BGE disputed those findings yesterday, saying the 1999 deal never placed restrictions on how the stranded cost payments could be used. The company also noted that the stranded costs and transfer of funds by BGE had no impact on customer bills.

In fact, the utility says, the diversion of the payments served to benefit BGE and, by extension, ratepayers.

The two sides also sparred over whether a fund to pay for decommissioning Calvert Cliffs has enough money, potentially putting ratepayers at risk for future rate increases to make up the shortfall. It's estimated it will cost as much as $5 billion to dismantle the two reactors after their licenses expire in 2036.

BGE's Jennings said the commission's analysis fails to take into account that money currently in the fund will grow through investment income and interest payments during the next few decades.

paul.adams@baltsun.com