ML020440431

Second Interim Application of Saybrook Capital, LLC for Allowance and Payment of Compensation and Reimbursement of Expenses (August 1, 2001 Through November 30, 2001); Declaration of Jonathan Rosenthal in Support Thereof

ML020440431
Person / Time
Site:	Diablo Canyon
Issue date:	01/11/2002
From:	Rosenthal J Saybrook Capital
To:	Office of Nuclear Reactor Regulation, US Federal Judiciary, Bankruptcy Court, Northern District of California
References
SF 01-30923 DM
Download: ML020440431 (26)

Text

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9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 In re PACIFIC GAS AND ELECTRIC COMPANY, a California corporation, Debtor.

Case No. SF 01-30923 DM Chapter 11 SECOND INTERIM APPLICATION OF SAYBROOK CAPITAL, LLC FOR ALLOWANCE AND PAYMENT OF COMPENSATION AND REIMBURSEMENT OF EXPENSES (AUGUST 1, 2001 THROUGH NOVEMBER 30, 2001); DECLARATION OF JONATHAN ROSENTHAL IN SUPPORT THEREOF Hearing:

Date: February 26,2002 Time: 9:30 AM Place: 235 Pine Street, 2 2nd Floor San Francisco, CA 28 SAYL-RGc:: Cc

.-.. L7C.

SAYFeeapp 9-10 Aal JON P. SCHOTZ JONATHAN Y. THOMAS JONATHAN ROSENTHAL JEFFREY M. WILSON SAYBROOK CAPITAL, LLC 401 Wilshire Blvd, Suite 850 Santa Monica, CA 90401 Telephone:

310/899-9200 Facsimile:

310/899-9101 Financial Advisors for Official Committee of Unsecured Creditors UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION

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TO THE HONORABLE DENNIS MONTALI, UNITED STATES BANKRUPTCY JUDGE, THE OFFICE OF THE UNITED STATES TRUSTEE, THE.DEBTOR, AND OTHER PARTIES IN INTEREST:

Saybrook Capital, LLC ("Saybrook"), financial advisor to the Official Committee of Unsecured Creditors ("Committee" or "OCC") in the Pacific Gas and Electric ("PG&E" or "Company") bankruptcy case, hereby submits its second interim application for allowance and payment of compensation and reimbursement of costs and expenses (the "Second Interim Application") covering the period fromAugust 1, 2001 through November 30, 200] (the "Second Application Period"). In support of the Second Interim Application, Saybrook respectfully represents as follows:

I, INTRODUCTION This is Saybrook's second long-form interim application for approval of compensation and reimbursement of related expenses for services rendered on behalf of the Committee during PG&E's chapter 11 case. Saybrook submits this Second Interim Application in accordance with Bankruptcy Code sections 328, 330 and 331, Rule 2016 of the Federal Rules of Bankruptcy Procedure (the "Bankruptcy Rules"), the Office of the United.States Trustee for the Northern District of California Guidelines- (the "UST Guidelines") and the United States Bankruptcy Court Northern District of California Guidelines for Compensation and Expense Reimbursement of Professionals and Trustee ("Court Guidelines"). Through this Second Interim Application, Saybrook seeks interim approval and allowance of $925,000 in fees accrued and

$27,336.79 in expenses incurred for services rendered by Saybrook on behalf of the Committee during the period August 1, 2001 through. and including November 30, 2001.

During the Second Application Period, Saybrook professionals rendered services to the Committee in connection with the PG&E's bankruptcy case at the agreed upon monthly fee of $250,000 from August 1, 2001 through October 15, 2001. The monthly fee was reduced

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.23 24 25 26 "27 28 SAYBROOK CAPTAL. LLC to $200,000 beginning October 16, 2001. Saybrook also incuTred $27,336.19 in costs and expenses in connection with those services, for which Saybrook is requesting reimbursement.

Accordingly, Saybrook seeks allowance and payment of a total of $952,336.79 for services rendered and reimbursement of cpsts and expenses incurred during the Second Application Period. Saybrook has received payment of fees in the amount of $798,750 and expenses in the amount of $27,336.79 on account of the Monthly.Cover Sheet Applications for the period of August 1, 2001 through November 30,, 2001. Saybrook is seeking the balance due for services provided during the. Second Application Period of $126,250. The services and costs for the Second Application.Period are described below and are detailed in the exhibits filed concurrently herewith.

S~II.

SUMMARY

OF.DEVELOPMENTS IN THE CASE The Second Applicaffon Period commenced shortly after the filing of the Company's Plan of Reorganization (the "Plan") and Disclosure Statement (the "Disclosure Statement"). On the eve before the Company's filing, the Committee voted to support a Plan of Reorganization that reflected a variety of economic terms. Approximately 70 objections to the Disclosure Statement were filed and the Committee and the Company have been working in conicert t& satisfy objectors where pos8sibl* "*'

Many of the objectf6hý that were filed were based upon a misunderstanding of a Plan temii or the need for further clarification. Some objectors voiced substantive concerns that

reqtftired substantial time and effort to negotiate satisfactory r'esolution. The Committee and the Committee prrofessionals took the ~ogition "that th6 letter and spirit of the Support Agreement required we take affirmitive steps t6 iasfycredltr concers about this Plan"i It would not be enough to merely execute the Support Agreement and allow the Company to proceed without our help.

Although it is too early to tell definitively, we have been assured by a number of 2

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/O SA'\\BRco:. CA.:.7AL. LLC substantive objectors that our collective efforts have resulted in amendments to the Plan that satisfy their objections and will cause them to withdraw iheir objections. In a few instances, despite our collective efforts, we have been unable to satisfy objectors. The Company has regularly conferred with the Committee and the Committee professionals and on a number of occasions has askel Saybrook to help mediate a creditor objection.

During the Second Application Period, there was a great deal of effort by the Governor's office and the State legislature to craft a solution to the SCE crisis. Saybrook attended many meetings in Sacramento and had many phone calls with members of the legislature and their staffs giving input on proposed plans (in particular SB 78xx) and voicing concerns pertinent to the PG & E creditors (no DRC for generators, proposed PWC reallocation of DWR costs from SCE to PG& E, etc.). In addition, Saybrook spent a considerable amount of time explaining the elements of the Plan to members of the legislature and their staffs following the filing of the Plan in September. Finally, Saybrook carefully monitored all developments related to the State Treasurer's efforts to get the ABIx deal to market.

The Company has begun the process of structuring and rating the issuance of new debt. A key component of the Support Agreement is that the Committee will closely observe the ratings and marketing process. The Support Agreement specifically provides that the creditor notes shall be investment grade. Consistent with the letter and spirit of this agreement, the Company has been working with Saybrook to establish an appropriate scope of inquiry so that as the ratings process progresses, the Committee can carefully follow its evolution. This process is expected to culminate in the issuance of investment grade securities to the public and Unsecured Creditors.

III.

SUMMARY

OF SERVICES RENDERED BY SAYBROOK During the Second Application Period, Saybrook represented and advised the Committee with respect to a wide range of issues and challenges. Due to the comprehensive SAYfeeapp# 1l

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10 11 12 13 14 15 16 17 18, 19 20 21 22 23 24 25 26 27 28 SAwBOO:K CAPITAL, LLC nature of the services rendered by Saybrook during the Second Application Periift,&, no attempt is made herein to detail the totality of suchservices. The full scope.of the service,rendered by Saybrook is set forth in detail in Exhibit.1 of the Cover Sheet Applications for. the Pe od August 1, 2001 tpoNovember 30, 2001" (thej,,'Btl3ting-Reports"). HoWever, in order to assist the Court, the United States Trustee, PG&E, and other parties in interest in reviewing this Second Interim Application, a brief summary of Saybrook's billing procedures and the services rendered by Saybrook during the Second Application Period with regard to each activity code category, including certain undertakings within each category, is set forth below.

A.

Summary Of Saybrook's BillingsProcedures.!

It is Saybrook's normal business practice to charge its clients in full for services rendered and atactual and ne'ess-ary out-of-pocket costs and expenses incurred by Saybrook in providing those services.

In the ordinary course of its practice, Saybrook assigns the proper personnel necessary to complete the scope of work outlined at the beginning of the engagement' Saybrook will typically assign Partners, Managing Directors, a Vice Presidents and/or Associates to a project to advise the client on any financing issues and strategic options related to the: financing and to participate in the daily management process of a reorganization plan. Other Saybrook staff rembers will Llso assist with the administrative duties for the engagement. Records are made substantially contemporaneously with the rendition of these professional services and are prepared by the Say-brook staffmembers who have rendered the services.

Due to the size and complexity of this case, the assistance of various Saybrook professionals has been called upon. As a full service investment bank, Saybrook has been able to advise the Committee efficiently on a variety of financing issues without assistance from outside firms. This capacity saves Saybrook's clients, including the Committee, substantial sums and provides the highest quality integrated representation possible in the most efficient manner.

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9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 SAYB ROOK CAFM-.L, LLC As is the case with most investment banking firms, Saybrook's resources are dedicated on a monthly basis and are not organized around hourly fees. In this case, Saybrook has expended considerably more resources than initially reflected in its professionals' declaration in the Saybrook's approved Employment Application. This is due in part to the unprecedented scope and complexity of the Plan, the diversity of the Committee and the Company's receptivity to the Committee's participation in the Plan process.

B.

Summary Of Exhibits Regarding Services Rendered By Saybrook.

Attached as Exhibit "1" to the Declaration of Jonathan Rosenthal ("Rosenthal Declaration") is a summary of the services rendered by Saybrook professionals, as well as a categorical summary of expenses incurred during the Second Application Period.

Pursuant to its normal practice when representing committees, Saybrook has broken down'its services rendered into the separate and distinct activity code categories. Each category provides an overview of the topics addressed during the Second Application Period.

The summary of services reports set forth a chronological, detailed description of the services rendered by Saybrook professionals on behalf of the Committee during the Second Application Period for each of the activity code categories described below.

Attached as Exhibit "2" of the Rosenthal Declaration is a summary setting forth the name of each Saybrook professional who expended time on this case and an approximation of his/her total working time expended in this matter on a weekly basis during the Second Application Period.

C.

Narrative Summary Of Seivices Provided By Saybrook.

1.

Reorganization Plan Analysis (Category 01)

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a)

Participated in conference calls with Lehman to understand the proposed financing scheme in order to evaluate the feasibility of th* Plin.

b)

Engaged in conversations with Debtor and other Committee professionals in redesigning material portions of the Plan.

c)

Reviewed the draft Plan and Disclosure Statement.

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Participated in confererice calls WithC~nrimittee professionals and working group to diseihs§ the Plan and Disclosure Statement.

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Participated in conference calls with the Company and Committee professionals to discuss roll out of the Plan.

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Participated in conference calls with various ad hoc creditors to explain termr of the Plan..

h)

Participated in various calls With press: to p-ovide background on Committee support.

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Discussions with legislators, their staffs.and representatives of the Governor's office explaining the elements of the Plan.

j)

Participated in calls-with Company creditors looking for additional explanation of the Plan and several press calls to discuss the Plan and Support Agreement.

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Participated in a variety of conference calls with the Committee's working group and the fill Committee to update them on reorganization plan 7

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Prepared comments to the Plan draft.

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Participated in conference calls with the Company to keep then, briefed as to what questions are arising from the Plan and how Committee professionals are responding to same.

iii) :Reviewed the filing of objections to the Disclosure Statement and Committee member concerns regarding the Disclosure Statement.

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Spoke with the Company and the Company's professionals about how to avoid or mitigate some of the creditor concerns.

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Reviewed Plan draft and prepared for Committee meeting.

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Participated in calls with affected Committee members to discuss potential alternative solutions to filing objections to the Disclosure Statement.

q)

Participated in calls with Rothchild to review list of objectors and discuss how objections might be satisfied and what real underlying objections are driving constituents.

2.

Committee and Subcemmittee Meetings (Category 02)

Services rendered by Saybrook professionals in this category included:

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Briefed the Committee,.the legislative/regulatory subcommittee, as well as a subgroup. of the bank creditors on developments in Sacramento related to SB 78xx and on the prQposed PUC.reallocation of DWR costs from SCE toPG&E,..

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Contacted creditor constituencies beyond the Committee to discuss the pro.'ressthe Committep professionals had made since April.

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Met with representatives of various ad hoc creditor groups and reached out to members the Official PX Creditors Committee.

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Briefed the Plan Working Group on where SB 78xx was headed once members of the'legislature reconvened after recess, based on discussions with key staff members.

"f)

Participated in conference calls with Kent Harvey regarding specific creditor issues and conference calls regarding Rothschild revised consideration schedules.

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Continuing calls with individual Committee members to discuss various aspects of the Plan, Disclosure Statement, Support Agreement, Consideration Schedule and process leading to these documents.

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Prepared for and paiticipated in a full Committee conference call and several working group sessions with the Company to discuss the Plan draft.

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Attended meetings/conference calls with the debtor and its advisors regarding ad hoc creditor groups and individual constituents.

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Preparation for full Committee meeting on creditor consideration issues and worked on an agenda with Committee professionals and the Company.

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Reviewed ad hoc committee issues and met with the Company to discuss ad hoc committee issues and more detail on consideration.

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Participated in conference calls on ad hoc issues and attempt to head off growing concern by ad hoc members.

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Met with Reliant and Dynegy in advance of Committee meeting to discuss the status of the Plan.

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Followed up on Committee meeting and many conversations with Rothchild and the Company regarding additional concessions that might be practical to offer to hold out constituents.

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Procurement of Energy (Category 03)

Services rendered by Saybrook professionals in this category included:

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Followed up on meeting between municipal generators and the Company.

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Legislative Matters (Category 04)

Services rendered by Saybrook professionals in this category included:

a)

Participated in conference calls with legislators and key legislative staff dealing with the Assembly deliberations on SB 78xx.

b)

Participated in discussions with legislators on SB 78xx and on the proposed PUC reallocation of DWR costs from SCE to PG&E.

c)

Attended hearings in Sacramento and participated in numerous meetings or phone calls on SB 78xx with representatives from the Governor's office, the State Treasurer's office, legislators and staff members.

d)

Attended numerous hearings and meetings in Sacramento after recess as SB 78xx worked its way through the various Assembly committees.

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Participated in conversations with legislative leaders and their staffs regarding the continuing efforts to fashion a bailout bill for SCE.

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Provided the perspective of the PG&E creditors in conversations with legislative leaders.

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Placed calls to legislators, Assembly leadership and their staffs concerning the SCE bailout.

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Continued conversations with the Assembly leadership about SCE and potential new legislation that might be considered when the extraordinary SAYfeeap#i-1 10

session convened.

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Analyzed the SCE deal announced by the PUC.

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Monitored the actions of the CPUC with regard to the Rate Agreement and the State bond deal.

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Participated in discussions with the State Treasurer's office and State underwriters regarding status of the AB Ix bond deal.

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Assessed-the cash flow and capital market impact of CDWR's changing Revenue Requirement on the Plan.

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Financial Issue Analysis (Category 05)

Services rendered by Saybrook -professionals in this category included:

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Discussed how the Creditor bonds can be designed to insure that Creditors will receive par in a secondary market trade.

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Participated in meetings with the Debtor and the Committee professionals to discuss alternative proposals for the Creditor bonds, including various hedge mechanisms, equity instruments, credit enhancement vehicles, puts and calls, contingent interest rights and other strategies to backstop the value and liquidity of these instruments.

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Analyzed the marketing and tax considerations to downside protection for

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Discussed the creditors consideration of the net present value hf cash received when deciding whether to vote for the Debtor's Plan or some alternative approach.

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Analyzed alternative plans to determine whether or not they would produce either more absolute dollars and/or would retum.dolla'rs to the creditors sooner.

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Reviewed DWR revenue requirements and related analysis prepared by PWC.

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Analyzed the QF issues better understand the issues and'to move forward on a number of specific creditor concerns.

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Worked on LC bank pollution control bond controversy and provided suggestions to the undrawn banks on how ithey might solve the problem.

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Met with Jim Lopes, Steve Ledoux and Alan Gover to discussindividual creditor claims.

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Reviewed in detail the status of each creditor constituent group to compare notes on positions taken -and possible solutions.

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Discussed the imperative nature of the investment grade rating on the long-term creditor notes and also spent a time analyzing the allocation of long-term creditor notes to the disaggregated entities.

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Advised on how the Company might solve the undrawn bank PC bond issue.

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Participated in calls with Commercial Paper representatives.

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Suggested terms of proposal to Commercial Paper representatives and reviewed draft letter.

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Participated in several conference calls on drawn LC's on Pollution Control bonds.

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Followed up with both drawn and undrawn LC group to discuss Pollution Control bonds.

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Spoke with the attorney for the QF's to understand status of negotiations with the.Company.

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Participated in conference call with Company to discuss status of rating agency discussion.

6.

Southern California Edison Issue Analysis (Category 07)

.Services rendered by Saybrook professionals in this category included:

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Analyzed the deal that the PUC made with SCE to keep SCE out of bankruptcy.

b)

Spoke with State representatives, as well as with officials at PG&E to obtain their opinion on the PUC/SCE deal.

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Worked with other Committee professionals to analyze the PUC/SCE deal and discussed what a similar deal would have to look like to address SAYfeea:p~l

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QUID Issues (Category 08)

Services rendered by Saybrook professionals in this category included:

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Participated in discussions With QUIDS and suggested how they can fix their subordination issue.

b)

Participated in conference calls with indentured trustee for QUIDS on response of the Company to proposal.

c)

Prepared for meetings with the Company to discuss the QUIDS and reviewed the underlying disclosure documents supporting the QUIDS.

d)

Reviewed and commented on draft ofletter to the Company from QUIDS and discussed content with the Company in advance of receipt.

e)

Participated in calls with Catherine Krug, the indentured trustee for the QUIDS to make sure that the Committee professionals were proceeding in a direction that was consistent with their interest.

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Continued detailed discussions with the Trustee for the QUIDS, which

-ultimately resulted in the Trustee putting forth a written proposal to the Company.

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Reviewed QUID documents to determine what type of subordination SAYfeeapp#1

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Organized internal discussions on what could be proposed to solve QUID problem.

9.

Support Agreement (Category 09)

Services rendered by Saybrook professionals in this category included:

a)

Met several times with Debtor to discuss the terms of a Support Agreement.

b)

Attended meetings with Debtor and Committee to identify critical issues and to suggest solutions that might be embraced by the parties.

c)

Conferred with Committee Members, in small groups and individually, to describe the details of the Support Agreement, the impact of our support on the feasibility of the Plan, and to field inquiries and suggestions regarding specific changes that Members wanted to see in order to vote in favor of the Plan.

d)

Worked with. the Debtor on issues related to -he Support Agreement and continued research on how to maintain a par market for the Creditor Bonds beyond the initial issuance.

c)

Discussed the interest rate treatment for pre-effective date interest for the Support Agreement.

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Interacted with various creditors to consider their perspective on pre effective date interest issue so that Saybrook could arrive at a resolution that would;be uniforml3yapplied across the dlass.

e)

Negotiated the terms of the Support Agreement.

f)

Attended a Committee professionals-only meeting to discuss interest rate on creditor claims and followed with several conference calls. Generator claims were also discussed at length and whether the ISO tariff established a contract rate or whether these claims should accrue interest at the Federal Judgment rate.

g)

Participated in conference calls and meetings with the Company and the Company's advisors regarding the Support Agreement.

h)

Prepared for full Committee meeting on September 19 to discuss final terms of the Support Agreement.

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Meetings and conference callswith the Company to finalize the Support Agreement and to understand the terms of the Plan.

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Participated in Full Committee meeting to vote on Support Agreement.

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Initiated conversations with members of the Committee to brief them on the terms of the Support Agreement and the negotiations.

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Addressed managing Committee member concerns about certain elements of the Support Agreement not being clearly stated in the Plan and 16 li i:

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10.

Fee Application (Category 09)

Services rendered by Saybrook professionals listed in this category included:

a)

Drafting the Saybrook monthly cover sheet applications and Second "Interim Application in accordance with the requirements established by the United States Bankruptcy'Code, the Court and the U.S. Trustee.

b)

Delivered a revised declaration to the court related to Saybrook's fee application.

11.

Non-Working Travel (Category 10)

Services rendered by Saybrook professionals listed in this category included:

a)

Travel to and from San Francisco for meetings with Committee members, PG&E and its counsel, other Company professionals, PWC and for Court appearances.

b)

Travel to and from Sacramento for meetings with the Governor's office, members of the legislature and their staffs and the State Treasurer's office.

IV.

SUMMARY

OF ACTUAL AND NECESSARY EXPENSES INCURRED BY SAYBROOK Saybrook maintains detailed records of all actual and necessary out-of-pocket expenses incurred and typically charged in connection with rendering professional services to its clients in the ordinary course of its business practice. A brief explanation of certain costs incurred and charged to the estate is set forth below:

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Saybrook does not charge its clients for photocopying done in-house; copying done by outside services is charged at cost; (b)

Saybrook charges its clients for document retrieval services and specialized searches and services, such as messengers and conferencecalling, at cost; (c)

Saybrook charges its clients for mileage ($0.325 per mile, if sought) and parking costs incurred by its Patners, Managing Directors, Vice Presidents and Associates in connection with-services rendered at cost; (d)

Saybrook charges its clients for cab fares or other transportation costs incurred by its Partners,- Managilg Direct6rs,"Vice Presidents and Associates when working on specific client matters, at cost; (e)

Saybrook does not charge its clients for word processing services rendered by a specialized operator and by the secretary assigned to each Partner. Saybrook does not charge for the use of its computer system based on the amount of time utilized to prepare documents. In-order to comply with the UST Guidelines and the Court Guidelines, no such charges are included in this Second Interim Application; (f)

Saybrook does not charge its clients for the cost of overtime and weekend meals when pressing: client matters reque the banker to work during the meal; however, in

accordance with-the UST Guidelines and the Court Guidelines, no such charges are included in this Second Interim Application; (g) in accordance wi e lIT Guidelines ýnd the Court Guidelines, Saybrook is seeking reimbursement for long distance telephone, calls at cost.

COMPENSATION REQUESTE ApD RE LEVANT LEGAL STANDARD To grant a request for compensation pursuant to Bankruptcy Code sections 328, I C SAYfeeapp# 1

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9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 SAYBROOK CAP!TAL. LLC 330 and 331, the Court must find that such request is reasonable.

Saybrook's fees are reasonable given the size and complexity of the bankruptcy case and are commensurate with the fees that Saybrook has been awarded in comparable chapter 11 cases and that fnancial advisors of comparable experience and expertise charge on a regular basis to represent creditor committees in comparable chapter 1 cases. Saybrook's fee structure was disclosed in the original employment application.

VI.

CONCLUSION For the reasons set forth above and pursuant to Bankruptcy Code sections 328, 330 and 331, Bankruptcy Rule 2016, the Court Guidelines, the UST Guidelines and the standards adopted by courts in awarding investment banker's fees and costs, Saybrook submits that the fees for services rendered and costs and expenses incurred on behalf of the Committee during the Second Application Period in the total amount of $952,336.79 are reasonable and should be allowed on an interim basis and paid in full.

No agreement or understanding of any kind or nature exists between Saybrook and any other person or entity for the sharing, division, or payment of any portion of the compensation awarded to Saybrook for services rendered or expenses incurred in connection with Saybrook's representation of the Committee in the bankruptcy case, except as among the partners, associates and employees of Saybrook.

WHEREFORE Saybrook respectfully requests that this Court enter an order:

1.

Approving this Second Interim Application in its entirety;

2.

Approving an interim award of compensation in the amount of $925,000 for professional services rendered and reimbursement of costs and expenses incurred in the amount of $27,336.79, for a total amount of $952,336.79; SAYfe e a p 1 19

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9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Authorizing and directing PG&E to immediately pay to Saybrook the allowed amounts, less any such amounts already paid pursuant to the Order Establishing Interim Fee Application and Expense Reimbursement Procedure; and

4.

Granting such other and furth er relcif as the Court deems just and proper.

DATED: January 11, 2002 Respectfully submitted.

SAYBROOK CAPITAL LC "Jonathan Rosenthal Jon P. Schotz Jonathan Y. Thomas Jeffrey M. Wilson Financial Advisor to Official Committee of Unsecured Creditors SAYfeeapp#

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9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 SA'YBRC.GzK CAPITAL, LLC CERTIFICATION I, Jonathan Rosenthal, am the professional designated by Saybrook to ensure compliance with the United States Bankruptcy"Court Northern District of California Guidelines for Compensation and E*xpense Reimbursement of Professionals and Trustee ("Court Guidelines"). I certify that (a) I have read the Second Interim Application; (b) to the best of my knowledge, information and belief, formed after reasonable inquiry, the compensation and expense reimbursement sought is in conformity with the Court Guidelines, except as specifically noted in the Applicdtion; and (c) the compensation and expense reimbursement requested are billed at rates, in accordance with practices, no less favorable than those customarily employed by Saybrook and generally accepted by Saybrook's clients.

DATED:

SA feap:*#

Jonathan Rosenthal 21

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9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 SAY*CrK CA.'---AL LLC DECLARATION OF JONATHAN ROSENTHAL I, Jonathan Rosenthal, declare:

1.

1 am over eighteen years of age anid, if called upon, tcouldaand would testify competently to the matters set forth herein. I am a partner in the investrnent banking firm of Saybrook Capital, LLC.("Saybrook"); financial advisor for the Official Commrrittee of Unsecured Creditors ("Committee") in the Pacific Gas and Electrf6-Comrpany ("PG&E")

bankruptcy case. ani

.I am the~lead partner responsible for Saybrobk's represefitatlor' of the Committee in PG&E's chapter 11.case. In preparing -this declaration, I have relied on my personal knowledge and on my review of the; files maintained by Saybrook in the ordinary course of business and made by Saybrook's staff substantially contemporaneously with that person's performance of services or incurrence of costs on behalf of the.Committee.

2.

This declaration is submitted in support of the "Second Application of Saybrook Capital, LLC For Allowance and Payment of Compensation And Reimbursement of Expenses (August 1, 2001 Through November 30, 2001)" (the "Second Interim Application").

Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Second Interim Application. This Second Interim Application covers the period from August 1, 2001 through and including November 30, 2001 (the "Second Application Period"). I have read the Second Interim Application and reviewed the exhibits thereto, and each of the facts contained therein is true and correct.

3.

Pursuant to the Second Interim Application, Saybrook seeks allowance of compensation covering professional time devoted to representing the Committee in PG&E's bankruptcy case, resulting in the accumulation of $925,000 in fees for professional services rendered and $27,336.79 for expenses incurred, for a total amount of $952,336.79.

4.

Saybrook received no pre-petition retainer in connection with this bankruptcy case SAYfeeam*.. 1 22 I,

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9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 SAYCRCOK'CAI.-.L, LLC

5.

Saybrook has submitted monthly fee notices in accordance with the interim fee procedures that were established by the Court. Specifically, on or about September 27, 2001, October 30, 2001, November 29, 2001 and December 21, 2001, Saybrook filed and served its "Cover Sheet Application For Allowance and Payment of Interim Compensation and Reimbursement of Expenses for August 1, 2001 through August 3 1, 2001, September 1, 2001 through September 30, 2001, October 1, 2001 through October 31, 2001 and November 1, 2001 through November 30, 2001 ("Monthly Cover Sheet"). Saybrook has received a payment totaling $826,086.79 in connection with the Monthly Cover Sheet Applications, comprised of

$798,750 in fees and $27,336.79 in costs.

6.

No agreement or understanding of any kind or nature exists between Saybrook and any other person or entity for the sharing, division, or payment of any portion of the compensation awarded to Saybrook for services rendered or expenses incurred in connection with Saybrook's representation of the Committee in this chapter 11 proceeding, except as among the partners, associates and employees of Saybrook.

7.

I am one of the designated professionals responsible for overseeing the billing in this matter and for assuring compliance with the Guidelines of the Office of the United States Trustee for the Northern District of California relating to billing (the "Guidelines").

Based upon my review of the Second Interim Application submitted by Saybrook for the Second Application Period, I believe that the Second Interim Application complies with the Court Guidelines and the UST Guidelines.

8.

Attached hereto as Exhibit "1T is a summary of the weekly activities for Saybrook Capital, LLC, as well as a categorized summary of expenses incurred, during the Second Application Period.

9.

Attached hereto as Exhibit "2" is a summary setting forth the name of each professional who expended time on this case and an approximation of the percentage of his/her total working time expended in this matter on a weekly basis during the Second SAYieeapp# I

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9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 SA\\VI C-.KAPITAt. LTC Application Period.

I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct.

Executed this,

day of January, 2002! at Los Afgeles; California.

Jonathan Rosenthal SAY"eeacpp '2

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?A

SAYBROOK CAPITAL, LLC January 11, 2002 Clara Yang Strand Kenneth Smith Managing Director Senior Asset Manager Bank of America, N.A.

Delta Power Company, LLC CA 9-706-11-21 2100 Santiago Drive 555 South Flower Street, 1 1h Floor Newport Beach, CA 92660 Los Angeles, CA 90071-2385 Re:

Pacific Gas & Electric Company

Dear Clara and Ken:

Enclosed for your review is the (i) Second Interim Application of Saybrook Capital, LLC for Allowance and Payment of Compensation and Reimbursement of Expenses (August 1, 2001 through November 30, 2001); (ii) Declaration of Jonathan Rosenthal in support therof, (iii)

Saybrook Capital, LLC's detailed Summary of Weekly Activity During the Second Interim Application Period and Summary of Expenses; and (iv) Summary of Professionals Who Expended Time on This Case.

The Court's Guidelines for Compensation and Expense Reimbursement of Professionals and Trustees provide that a debtor in possession, a trustee or an official committee must exercise reasonable business judgment in monitoring fees and expenses of the estate's professionals.

We invite you to discuss any objections, concerns or questions you may have with us. The Office of the United States Trustee will also accept your comments. The Court will consider timely filed objections by any party in interest at the time of the hearing.

Very Truly Yours, Jonathan Roseta Partner cc:

Paul Aronzon Robert Moore 401 WILSHIRE BOULEVARD I 8TH FLOOR I SANTA MONICA, CA 90401 TELEPHONE: 310.899.9200 FACSIMILE: 310.899.9101