NEW YORK, Nov 4 (Reuters) - Constellation Energy ( CEG ) will

continue to pursue deals to develop data centers on the sites of

its U.S. power plants, days after federal regulators dealt a

blow to the so-called co-located arrangements, company

executives said on Monday.

The Federal Energy Regulatory Commission on Friday rejected

an agreement to increase the power capacity of an Amazon data

center connected directly to Talen Energy's ( TLN ) nuclear

power plant in Pennsylvania in a decision seen as chilling

similar deals.

Constellation said it is seeking guidance from regulators

after FERC's decision about co-location, which had become a

promising prospect for Big Tech's plans to quickly access large

amounts of power for its AI expansion instead of waiting for

years to connect to the grid.

"We will pursue this regular clarity while simultaneously

pursuing commercial strategies for co-location that are

permitted under our existing rules," Constellation CEO Joseph

Dominguez said on a company earnings call.

Dominguez outlined what future co-located agreements would

look like, including that nuclear energy directly fueling data

centers be required to switch over to powering the grid in times

of supply emergencies and that backup power for the centers

could be sold back to the regional market.

"There are multiple regulatory and commercial pathways to

resolve the co-location issues, and we will work quickly with

customers and other stakeholders to put these in place."

Constellation, which is the largest operator of U.S.

nuclear power plants, had backed Talen in the regulatory battle.

Shares of the nuclear power operators had shot up this year

partly on the prospect of developing co-located data centers.

Constellation stock was down about 10% on Monday.

The FERC fight was brought by electric utilities Exelon and

American Electric Power, which opposed the Talen-Amazon data

center interconnection agreement, saying that it threatened to

raise power bills for everyday customers and erode grid

reliability.

Talen's Susquehanna nuclear-powered data center campus, sold

to Amazon this year, would have the capacity of 960 megawatts,

or enough electricity for all of the homes in Philadelphia.

In a 2-1 vote, FERC shot down Talen's request to expand the

capacity of data center beyond 300 megawatts. The vote followed

a FERC technical conference to discuss broader concerns about

co-locating data centers.

Diverting that electricity, which currently flows from the

nuclear plant to the broader grid, could unfairly shift costs to

the public and worsen a supply-demand imbalance in the PJM

Interconnection regional power market, the majority of voting

commissioners said.

Talen Energy ( TLN ), in a statement posted to its website on

Sunday, said it would consider various methods to quickly power

up data centers.

"The data center economy will require an all-of-the-above

approach to satisfy the increased demand, including

co-location," the company said.