A federal judge upheld Maryland's right to regulate the disposal of PCBs yesterday, a ruling that could leave the Potomac Electric Power Co. facing a indictment by a state grand jury on charges of violating the state's hazardous waste disposal laws.

Judge Walter E. Black Jr. of the U.S. District Court in Baltimore said that Maryland's laws regulating the disposal of PCBs are not preempted by federal toxic substance control laws, as Pepco had contended in its suit against state Attorney General Stephen Sachs and the state Department of Health and Mental Hygiene.

A grand jury in Prince George's County has been investigating since last May whether the state's hazardous waste disposal laws were violated at United Rigging and Hauling Inc., a 15-acre site in Beltsville where more than 100 electrical transformers -- including 75 of Pepco's -- were found to contain dangerous levels of PCBs.

PCBs, or polychlorinated biphenyls, are chemicals used for insulating equipment to prevent electrical fires. Manufacture of PCBs was banned in 1977 because the chemicals were found to cause cancer and birth defects in laboratory animals.

In his ruling, Black said, "There is little question from the record . . . that an indictment of Pepco for alleged responsibility for or participation in the United Rigging contamination is imminent."

Pepco, which will appeal Black's decision, maintains that it has complied with federal regulations on disposal of PCBs, spokeswoman Nancy Moses said yesterday.

"We feel we have a full defense if criminal charges are placed against us in Maryland," she said. "We still contend that Maryland regulations conflict with federal regulations."

In his ruling, Black acknowledged that Congress intended to preempt certain state activities related to PCBs, such as manufacturing and transportation. "With respect to disposal, however, Congress intended a result that would allow for both the states and the federal agencies to regulate the disposal of toxic substances in a cooperative effort."

State Assistant Attorney General Ralph S. Tyler said yesterday that eight states and the U.S. Environmental Protection Agency filed briefs on behalf of Maryland in this case, showing the importance of Black's decision.

The decision "goes way beyond whether Pepco gets indicted for what went on in Beltsville," according to Tyler. "It supports the strongly held view among the states that they do have the right to regulate PCBs. It's an important victory for environmental protection, certainly in Maryland."

Both Pepco and United Rigging and Hauling, which bought the transformers from the utility, signed an agreement with the EPA and state officials to clean up the contaminated sight after the EPA authorized $50,000 to start the project.

According to Moses, Pepco paid most of the $3 million cost for the cleanup, which was completed in December.