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By ALEX DOMINGUEZ, The Associated Press Updated 8:36 PM Thursday, July 2, 2009

BALTIMORE — Constellation Energy Group Inc. lost a round in its battle with Maryland regulators over its proposed deal to sell half its nuclear operations to France's EdF when a judge ruled Thursday it could not appeal the decision to review the agreement while the review was under way.

The Maryland Public Service Commission is looking into whether the $4.5 billion deal is in the public interest. The PSC doesn't regulate Constellation, but regulates its Baltimore Gas and Electric utility subsidiary.

Constellation contends the deal is permitted under a settlement that raised the trigger for state review to 20 percent of Constellation's shares or its board. EdF would take a 9 percent stake, but the PSC decided the rule doesn't apply because EdF would acquire other rights and assets.

Constellation Energy issued a statement after Baltimore Circuit Judge Stuart R. Berger issued the ruling saying it was disappointed, but still believes the pending deal does not require state approval. Constellation was highly critical of state officials saying the decision violates "both the letter and spirit" of the agreement with state lawmakers last year.

"Last year, the governor and chairman of the PSC signed an agreement specifically allowing a minority investment of this kind in our business in exchange for more than $2 billion in BGE customer benefits. Then, they challenged the very agreement they negotiated and signed," the statement said. "As such, we felt compelled to protect our legal rights, which is what any business or individual would do under the circumstances."

Gov. Martin O'Malley, who has made rising electric rates a key part of his administration and has been critical of Constellation, said he was pleased with the decision.

"We look forward to continuing with the Public Service Commission review and we remain 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," O'Malley said.

A telephone call by The Associated Press seeking comment from the Public Service Commission was not immediately returned Thursday afternoon.

Constellation said the deal is highly time-sensitive and is crucial to plans to build a much-needed third nuclear reactor at Calvert Cliffs in southern Maryland. PSCChairman Doug Nazarian has said the commission would work to complete the review by the deal's Sept. 17 closing date.

Constellation said in its statement that there was a "real danger that justice delayed could be justice denied," adding it was reviewing its options.

"Furthermore, 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," the statement said. "For the state of Maryland to be attractive to business now and into the future, it must honor its agreements. What could be more fundamental for representatives of state government than to honor the laws they adopt?"

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July 03, 2009 12:32 AM EDT

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