ML020780408

Declaration of Kevin J. Dowd in Support of Motion for Order Authorizing Debtor to Pay Certain Categories of Pre-Petition Claims

ML020780408
Person / Time
Site:	Diablo Canyon
Issue date:	03/05/2002
From:	Dowd K Howard, Rice, Nemerovski, Canady, Falk & Rabkin, Pacific Gas & Electric Co
To:	Office of Nuclear Reactor Regulation, US Federal Judiciary, Bankruptcy Court, Northern District of California
References
01 30923 DM, 94-0742640
Download: ML020780408 (4)

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,.,.,C 15 16 17 18 In re PACIFIC GAS AND ELECTRIC COMPANY, a California corporation, Debtor.

Federal I.D. No. 94-0742640 Case No. 01 30923 DM Chapter 11 Case Date:

Time:

Place:

March 25, 2002 9:30 a.m.

235 Pine Street, 22nd Floor San Francisco, California DECLARATION OF KEVIN J. DOWD IN SUPPORT OF MOTION FOR ORDER AUTHORIZING DEBTOR TO PAY CERTAIN CATEGORIES OF PRE-PETITION CLAIMS DOWD DECL. ISO MOT. AUTH. DEBTOR TO PAY CERTAIN CATEGORIES OF PRE-PETITION CLAIMS WD 030502/1-1419913/974503/v3 JAMES L. LOPES (No. 63678)

JANET A. NEXON (No. 104747)

CEIDE ZAPPARONI (No. 200708)

HOWARD, RICE, NEMEROVSKI, CANADY, FALK & RABKIN A Professional Corporation Three Embarcadero Center, 7th Floor San Francisco, California 94111-4065 Telephone:

415/434-1600 Facsimile: 415/217-5910 Attorneys for Debtor and Debtor in Possession PACIFIC GAS AND ELECTRIC COMPANY UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION 19 20 21 22 23 24 25 26 27 28 4w

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.1. 15 16 17 18 19 20 21 22 23 24 25 26 27 28 I, Kevin J. Dowd, declare as follows:

1. I am one of the managers of the groups of employees dealing with the analysis and resolution of claims asserted against the Pacific Gas and Electric Company ("PG&E")

bankruptcy estate. I make this Declaration based upon my personal knowledge of PG&E's general operations, upon my review of PG&E's records concerning the matters stated herein, and upon information provided to me by consultants employed by PG&E to assist in the examination of proofs of claim filed in this case. If called as a witness, I could and would testify competently to the facts stated herein.

2. I make this Declaration in support of PG&E's Motion for an order authorizing PG&E to pay categories of pre-petition claims, namely (1) allowed claims in the amount of

$5,000 or less; (2) valid mechanics' lien claims; and (3) valid reclamation claims, on the grounds set forth herein (the "Motion").

3. Over 13,000 proofs of claim have been filed in PG&E's bankruptcy case, in an aggregate amount of approximately $44 billion.1 Almost a third of all proofs of claim filed in this case seek amounts equal to or less than $5,000 (the "Small Claims").2 PG&E estimates that 4,124 of the total filed claims are in this category. Many of the claimants who filed Small Claims are individuals or small businesses. Typical of the claimants in this category are trade creditors with claims for goods or services provided to PG&E and customers seeking reimbursement for damages suffered to personal property (such as appliances) due to, for example, power outages or surges.

4. While the Small Claims represent a relatively large number of filed claims, such claims represent only a small percentage of the total dollar amount of claims filed in the case. The Small Claims represent approximately $6.7 million, or about 0.02%, of the total 1The Court has previously disallowed the claims of Baldwin & Associates and Wayne Roberts filed herein, in the aggregate amount of $9 billion.

2pG&E has designated $5,000 as the threshold for claims to be paid on the basis that, at this dollar amount, the largest number of claims are resolved for the least total dollar cost to the estate. If the dollar threshold is raised to a higher amount, payment of the claims would result in diminishing returns to the estate-i.e., the number of claims resolved would not increase proportionately in relation to the cost.

DOWD DECL. ISO MOT. AUTH. DEBTOR TO PAY CERTAIN CATEGORIES OF PRE-PETITION CLAIMS WD 030502/1-1419913/974503/v3

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15 16 17 18 19 20 21 22 23 24 25 26 27 28 dollar amount of the remaining claims filed in this case.3

5. There are approximately 50 claims asserting mechanics' liens filed against the estate, totaling $10.2 million. These claims represent a relatively small percentage of the total claims filed against the estate. PG&E's examination of these claims is not yet complete. However, the amount that will be required to satisfy these claims is no more than (and probably less than) $10.2 million.

6. Certain sellers of goods have filed reclamation claims to seek return of goods delivered to PG&E immediately prior to or shortly after the filing of its Chapter 11 petition.

Approximately 50 such claims have been filed against the estate, aggregating approximately

$5.5 million.4 This category of claims represents less than 0.02% of the dollar amount of the remaining claims against the estate.

7. If the Court grants the Motion, PG&E intends to pay all undisputed claims of

$5,000 or less, as well as valid reclamation and mechanics' lien claims, on or before July 31, 2002, together with post-petition interest at the Federal Judgment Rate in effect on April 6, 2001 (the date of the filing of PG&E's Chapter 11 petition), or 4.19%, accrued on the allowed amount of such claims from April 6, 2001 through June 30, 2002. With respect to disputed claims, upon the resolution of such claims, either by Court order or settlement, PG&E intends to pay the allowed amount of those claims, plus interest accrued at the Federal Judgment Rate (4.19%) from April 6, 2001 through the date of payment. Such payments would be made on a monthly basis from and after August 1, 2002, with respect to those claims that have been resolved during the prior (i.e., claims that are resolved in July 2002 would be paid in August 2002; claims resolved in August 2002 would be paid in 3This Motion generally refers to claims that have been filed against the Debtor pursuant to proofs of claim. However, PG&E believes that the filed claims significantly overstate PG&E's liability. In fact, PG&E's analysis shows that, of the Small Claims filed against the estate, more than 10% are duplicate or late-filed claims. PG&E believes that its Amended Schedules filed herein present a far more accurate picture of PG&E's liability for pre-petition claims. Scheduled claims in amounts of $5,000 or less represent 70% of al scheduled claims. PG&E anticipates that, in reality, it will cost $4.7 million to satisfy the Small Claims.

4One claim for approximately $1 million has been withdrawn.

DOWD DECL. ISO MOT. AUTH. DEBTOR TO PAY CERTAIN CATEGORIES OF PRE-PETITION CLAIMS WD 030502/1-1419913/974503/v3

• 1 September 2002, and so on).

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PG&E will be able to resolve the Small Claims, the mechanics' lien claims 3

and the reclamation claims described above by paying no more than (and probably 4

substantially less than) $22.4 million in total. PG&E is solvent and has the cash on hand to 5

pay these claims.5 The authorization sought by PG&E in. this Motion provides significant 6

benefits to PG&E: it would reduce post-petition interest costs and streamline the 7

administration of the claims resolution process, thereby allowing PG&E to focus those 8

resources involved in the claims process on larger, more complex claims. Finally, to the 9

extent that the Court grants the Interest Payment Motion6, the estate would be subject to 10 administrative burden and costs associated with issuing thousands of small checks for 11 periodic interest payments to these claimants, which would be relieved by granting the 12 Motion herein.

13 I declare under penalty of perjury under the laws of the United States of America RK1 cv1wx 14 that the foregoing is true and correct. Executed this 5th day of March 2002, at San

&RRA4UN 15 Francisco, California.

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46 7 17 KEW-M. DOWD 18 19 20 21 22 23 24 5As reflected in PG&E's December Monthly Operating Report, PG&E had more than

$4.2 billion in cash reserves as of December 31, 2001.

25 6The "Motion by Debtor for Order (A) Approving Settlement and Support Agreement between Plan Proponents and Senior Debtholders, (B) Authorizing Payment of Pre-and 26 Post-Petition Interest to All Holders of Allowed Claims, (C) Authorizing Payment of Fees ahd Expenses of Indenture Trustees and Paying Agents and (D) Authorizing Debtor to Enter 27 Into Similar Settlements" (the "Interest Payment Motion") is set for hearing at the same date 28 and time as this Motion.

DOWD DECL. ISO MOT. AUTH. DEBTOR TO PAY CERTAIN CATEGORIES OF PRE-PETITION CLAIMS WD 030502/1-1419913/9745033 3-