ML021580578
| ML021580578 | |
| Person / Time | |
|---|---|
| Site: | Diablo Canyon  |
| Issue date: | 05/23/2002 |
| From: | Landau J 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: ML021580578 (9) | |
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1 JAMES L. LOPES (No. 63678)
JANET A. NEXON (No. 104747) 2 JULIE B. LANDAU (No. 162038)
HOWARD, RICE, NEMEROVSKI, CANADY, 3 FALK & RABKIN A Professional Corporation 4 Three Embarcadero Center, 7th Floor San Francisco, California 94111-4065 5 Telephone: 415/434-1600 Facsimile: 415/217-5910 6
Attorneys for Debtor and Debtor in Possession 7 PACIFIC GAS AND ELECTRIC COMPANY 8
9 UNITED STATES BANKRUPTCY COURT 10 NORTHERN DISTRICT OF CALIFORNIA 11 SAN FRANCISCO DIVISION 12 In re Case No. 01-30923 DM 13 PACIFIC GAS AND ELECTRIC Chapter 11 Case HOWARD RICE NEMEROX XII COMPANY, a California corporation, Gc.ND 14 Date: June 13, 2002 FAIU(
&RAMIN Debtor. Time: 1:30 p.m.
AP4IC.C 15 Place: 235 Pine Street, 22nd Floor Federal I.D. No. 94-0742640 San Francisco, California 16 17 NOTICE OF MOTION AND MOTION FOR AUTHORIZATION TO INCUR 18 DATA MANAGEMENT EXPENSES; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF 19
[SUPPORTING DECLARATION OF STEPHANIE MAGGARD FILED 20 SEPARATELY]
21 22 23 24 25 26 /. Iv 27 28 MOTION FOR AUTHORIZATION TO INCUR DATA MANAGEMENT EXPENSES
1 NOTICE OF MOTION AND MOTION 2 PLEASE TAKE NOTICE that on June 13, 2002, at 1:30 p.m., or as soon 3 thereafter as the matter may be heard, in the Courtroom of the Honorable Dennis Montali, 4 located at 235 Pine Street, 22nd Floor, San Francisco, California, Pacific Gas and Electric 5 Company, the debtor and debtor in possession in the above-captioned Chapter 11 case 6 ("PG&E"), will and hereby does move the Court for entry of an Order Authorizing Data 7 Management Expenses (the "Motion").
8 This Motion is based on this Notice of Motion and Motion, the accompanying 9 Memorandum of Points and Authorities, the Declaration of Stephanie Maggard filed 10 concurrently herewith, the record of this case and any evidence presented at or prior to the 11 hearing on this Motion.
12 PLEASE TAKE FURTHER NOTICE that pursuant to Rule 9014-1(c)(2) of the 13 Bankruptcy Local Rules for the Northern District of California, any written opposition to the HOWARDRICE NEMI1BVN(I ca"'MALK 14 Motion and the relief requested herein must be filed with the Bankruptcy Court and served 15 upon appropriate parties (including counsel for PG&E, the Office of the United States 16 Trustee and the Official Committee of Unsecured Creditors) at least five (5) days prior to the 17 scheduled hearing date. If there is no timely objection to the requested relief, the Court may 18 enter an order granting such relief without further hearing.
19 20 21 22 23 24 25 26 27 28 MOTION FOR AUTHORIZATION TO INCUR DATA MANAGEMENT EXPENSES
-I-
1 MEMORANDUM OF POINTS AND AUTHORITIES 2 Pacific Gas and Electric Company, the debtor and debtor in possession in the 3 above-captioned Chapter 11 case ("PG&E"), requests an order authorizing PG&E to incur 4 and to pay data management expenses outside of the ordinary course of business pursuant to 5 Bankruptcy Code Section 363(b)(1).
6 7 I. FACTUAL BACKGROUND 1 8 PG&E filed a voluntary petition for relief under Chapter 11 of the Bankruptcy 9 Code on April 6, 2001. A trustee has not been appointed, and PG&E continues to function 10 as a debtor-in-possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code.
11 PG&E is an investor-owned utility providing gas and electric services to more 12 than 4.5 million customers in central and northern California serving a total population of in excess of 30,000 trade HOAM RICE 13 about 13 million. PG&E employs over 19,000 people and has "zVAa*
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14 creditors.
.15 On April 19, 2002, PG&E, together with its parent corporation, PG&E 16 Corporation, filed its amended Plan of Reorganization (as amended from time to time, the 17 "Plan"). The Court-approved Disclosure Statement for the Plan, along with the Plan, will be 18 mailed to creditors for voting on June 17, 2002.
19 The Plan generally provides for the creation of three new companies, ETrans LLC, GTrans LLC and Electric Generation LLC (collectively, the "New Entities"),
2 20 21 whereby PG&E will separate its operations into four lines of business based on PG&E's gas and 22 historical functions. Accordingly, the Reorganized Debtor will continue the retail GTrans 23 electric distribution business, ETrans will operate the electric transmission business, the 24 will operate the interstate gas transmission business, and Electric Generation will operate 25 26 The evidentiary basis and support for the facts set forth in this Motion are contained in the Declaration of Stephanie Maggard filed concurrently herewith.
27 2 The reference to "Electric Generation LLC" herein includes the subsidiaries and 28 affiliates of Electric Generation LLC that will hold certain generation assets.
MOTION FOR AUTHORIZATION TO INCUR DATA MANAGEMENT EXPENSES 1 electric generation business.
2 A. Description of Data Management Work to be Completed by ZIA.
3 ZIA Information Analysis Group, Inc. ("ZIA") is an information management 4 company that provides assistance with document and electronic data management, including 5 creating and maintaining electronic databases and document repositories. ZIA has 6 performed and continues to perform data management services for PG&E in the ordinary 7 course of business. For a company as large as PG&E, with numerous business departments 8 and complex business information and records, the development and maintenance of 9 databases to track, store and retrieve document information is a substantial and necessary 10 task. ZIA has the expertise and resources to handle complex data management and also has 11 a proven track record with PG&E.
12 PG&E has decided that certain data management services are required in HOWARD 13 connection with the Plan and its implementation. The following is a description of the three NFE'I 14 Plan-related projects for which PG&E requires ZIA's services:
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Ah ..IdCý 15 1. Records, Maps and Drawings Database.
16 In connection with implementation of the Plan, it will be necessary for the New 17 Entities to possess certain records, maps and drawings ("RMD") that relate to their line of 18 business. Examples of such RMD include: engineering and construction records, customer 19 records, facility maps and drawings and financial records. ZIA will provide data 20 management services with respect to the RMD to enable PG&E to identify the various RMD 21 documents needed by the New Entities. ZIA will assist PG&E in identifying and compiling 22 the anticipated millions of RMD documents, and will develop and maintain a database with 23 the RMD data. As part of the database work, ZIA will assist PG&E in determining the type 24 and level of information required, will solicit the information from the various lines of 25 business, and will review all information for accuracy and completeness in order to develop 26 an accurate and usable database. ZIA will also continue to maintain and update the 27 database.
28 PG&E requests authority to pay ZIA approximately $436,000 in connection with MOTION FOR AUTHORIZATION TO INCUR DATA MANAGEMENT EXPENSES 1 the RMD project. Limited work began on this project in January 2002 and the work is 2 expected to continue to the Effective Date (as defined in the Plan).
3 2. Asset Database.
4 The implementation of the Plan will involve extensive asset transfers from PG&E 5 to the New Entities. PG&E requires ZIA's data management services in order to prepare the 6 asset schedules and documentation required for these transfers. This work will include the 7 compilation of information from various PG&E sources in order to create a centralized 8 database, and ongoing maintenance and updating of the database as necessary. As part of 9 the database work, ZIA will assist PG&E in determining the type and level of information 10 required, will solicit the information needed from PG&E sources, and will review all 11 information for accuracy and completion. ZIA will also continue to maintain and update the 12 database. The primary purpose of this work is to assist PG&E in preparing the schedules of Plan, including the RICE 13 assets that will be required for the transactions contemplated by the
""c"AvEAU< 14 preparation of the asset transfer assignment and assumption documentation.
&dRA(IN" S15 PG&E requests authority to pay ZIA approximately $395,000 in connection with 16 the services described above. Limited work began on this project in April 2002 and the 17 work is expected to continue to the Effective Date.
18 3. Generation-Related Permit Database.
19 As discussed in more detail in the Motion to Approve Additional Expenses 20 related to Permits, filed concurrently herewith, PG&E holds tens of thousands of operating 21 and land occupancy permits, licenses and related governmental entitlements (collectively, 22 "Permits") from local, state and federal government agencies. Over 1,600 of these Permits 23 relate to the electric generation line of business and must therefore be transferred or reissued 24 to Electric Generation, LLC ("Gen") to enable Gen to conduct business operations in 25 accordance with the law. ZIA previously developed a database for PG&E that included 26 certain permits and licenses related to the electric generation line of business. PG&E has 27 requested that ZIA update and manage this database. This work will also include over 2,700 28 water rights documents related to the generation line of business, for which ZIA will develop MOTION FOR AUTHORIZATION TO INCUR DATA MANAGEMENT EXPENSES 1 and maintain a separate database.
2 The purpose of this work is to provide PG&E with an accurate and complete 3 Permits inventory along with a usable database to facilitate the process of applying to 4 government agencies for the transfer or reissuance of the generation-related Permits to Gen.
5 ZIA's primary tasks will include: assisting PG&E in identifying the Permits that 6 will be needed by Gen, updating the existing database (including adjusting the type and level 7 of information to be included, collecting new and/or missing information, and identifying 8 expired records), maintaining hard copy documentation for all relevant Permits, and with the database. 3 9 continuing to update and maintain the document repository along 10 PG&E requests authority to pay ZIA approximately $234,000 in connection with 11 the services described above. Limited work on this project began in May 2002 and the work 12 is expected to continue to the Effective Date.
13 For each of the foregoing ZIA projects (collectively, the "Data Management RCE 14 Work"), PG&E will pay ZIA on a monthly basis as work is completed, based on monthly
&RAMN AP*f,.C 15 billings by ZIA. All work will be performed at the direction of and under the supervision of 16 PG&E.
17 18 B. Current Need for Approval of Data Management Work.
19 The Data Management Work is essential to the implementation of the Plan. This 20 work is needed to prepare for substantial transactions to be completed in connection with 21 Plan implementation. A substantial portion of the data management work must be 22 completed in order to move forward with the underlying projects (including the preparation 23 of necessary documentation in connection therewith), including the transfer of RMD and all 24 assets to the New Entities, and the transfer of Permits to Gen. Therefore, it is critical that 25 26 3 Similar Permits database work will be performed by Celerity Consulting Group, Inc.
for the Permits related to the other lines of business. Celerity was previously approved as a 27 professional under Bankruptcy Code Section 327(a), based on their information management 28 and related services in connection with the claims process and other bankruptcy matters.
MOTION FOR AUTHORIZATION TO INCUR DATA MANAGEMENT EXPENSES 1 this work begin well in advance of Plan confirmation.
2 PG&E believes that the Data Management Work will be beneficial even if the 3 separation of the business lines does not occur, as PG&E's records and data will be 4 centralized for better organization and access, and updated for accuracy and completion.
5 Finally, to the extent that subsequent events demonstrate that the Data 6 Management Work will not be necessary, the work can be terminated immediately. PG&E's 7 standard contractual provisions in place with ZIA do not guarantee future work or any 8 minimum amount of revenue. PG&E also maintains the right to terminate the ZIA contracts 9 at any time without cause, in which case PG&E is liable only for work performed to the date 10 of termination plus costs reasonably incurred by ZIA in terminating any work in progress.
11 12 II.
13 THE DATA MANAGEMENT EXPENSES SHOULD BE RKE APPROVED PURSUANT TO SECTION 363(b)(1) OF THE
' 14 BANKRUPTCY CODE A*4,.d. 15 PG&E seeks approval to pay ZIA in accordance with the budgets set forth above 16 for the Data Management Work (the "Data Management Expenses") as a use of estate 17 property that is outside of the ordinary course of business under Bankruptcy Code Section 18 363(b)(1). Since the services are related to implementation of the Plan, PG&E believes that 19 the purpose and scope of this expenditure may be characterized as outside of the ordinary 20 course of business and therefore requires Court approval.
21 PG&E believes that ZIA should not be considered a "professional person" and is due 22 therefore does not require any approval under Bankruptcy Code Section 327(a). This with 23 both to the nature of the services to be provided and to ZIA's limited role in connection Inc., 168 24 PG&E's reorganization proceeding. See In re That's Entertainment Mktg. Group, 366, 368 25 B.R. 226, 230 (N.D. Cal. 1994); see also In re Saybrook Mfg. Co., Inc., 108 B.R.
purposes 26 369 (Bankr. M.D. Ga. 1989) (in determining whether a person is a professional for 27 of Section 327, courts consider not only the nature of the services provided but also how 28 central the services are to the reorganization proceeding). Although the Data Management MOTION FOR AUTHORIZATION TO INCUR DATA MANAGEMENT EXPENSES 1 Work is related to implementation of the Plan, PG&E believes that these services should not 2 be considered "central" to the Chapter 11 case or the Plan proceedings.
3 The Court has considerable discretion in approving a request pursuant to Section 4 363(b)(1) of the Bankruptcy Code ("'[t]he trustee, after notice and a hearing, may use, sell, 5 or lease, other than in the ordinary course of business, property of the estate"). See In re 6 Montgomery Ward Holding Corp., 242 B.R. 147, 153 (D. Del. 1999) (affirming the 7 bankruptcy court's decision to approve expenditure for employee incentive programs, noting 8 that bankruptcy court has considerable discretion in approving a Section 363(b) motion).
9 In determining whether to authorize a transaction under Section 363(b)(1), courts 10 require a debtor to show that a sound business purpose justifies such actions, applying the 11 business judgment test. See, e.g*, Stephens Indus., Inc. v. McClung, 789 F.2d 386, 389-90 12 (6th Cir. 1986); Comm. of Equity Sec. Holders v. Lionel Corp. (In re Lionel Corp.), 722 RKE 13 F.2d 1063, 1071 (2d Cir. 1983); see also 3 Lawrence P. King, Collier on Bankruptcy c 14 ¶363.02[1][g] (15th ed. rev. 1998).
&RAN(IN 15 Once the debtor has articulated a rational business justification, a presumption 16 attaches that the decision was made "on an informed basis, in good faith and in the honest 17 belief that the action taken was in the best interest of the [debtor]." See, e.g., Official 18 Comm. of Subordinated Bondholders v. Integrated Res., Inc. (In re Integrated Res., Inc.),
19 147 B.R. 650, 656 (S.D.N.Y. 1992) (citing Smith v. Van Gorkom, 488 A.2d 858, 872 (Del.
20 1985)).
21 Here, sound business justifications exist for approval of the Data Management 22 Expenses. PG&E requires ZIA's expertise and resources in performing high-level data 23 management services. Delaying the work could jeopardize PG&E's ability to timely 24 implement the Plan, as the work forms an essential foundation for the necessary RMD 25 document transfers, the application process with respect to the transfer of Permits and the 26 asset transfer transactions to be completed under the Plan. The Data Management Work will 27 also be beneficial to PG&E whether or not the Plan is implemented by centralizing and 28 updating PG&E's extensive records relating to RMD and all assets including generation MOTION FOR AUTHORIZATION TO INCUR DATA MANAGEMENT EXPENSES 1 related Permits.
2 Also, PG&E is solvent and has sufficient cash to pay ZIA without causing any 3 detriment to its creditors. 4 Thus, while there is the possibility that the Plan will not be 4 confirmed and therefore some of the Data Management Work will become unnecessary, this 5 does not justify denial of the expenditure. See Montgomery Ward, 242 B.R. at 154 (no 6 requirement for debtor to show a successful prospect of reorganization in order to justify 7 expenditure request under Section 365(b)(1)). It is sufficient that PG&E currently has sound 8 business reasons for the expenditure. In a case of this size and complexity, it is simply not 9 possible to wait until Plan confirmation to begin all of the work necessary to implement the 10 Plan. In requesting approval for the Data Management Work, PG&E has attempted to strike 11 a balance between being prepared to implement the Plan and also retaining the right to 12 terminate its contracts with ZIA at any time.
13 HOWARD1 RIE
"" 14 CONCLUSION 15 For all of the foregoing reasons, PG&E respectfully requests that the Court 16 approve the Data Management Expenses as set forth herein and grant such other and further 17 relief as may be just and appropriate.
18 19 DATED: May 2 3', 2002 Respectfully, 20 HOWARD, RICE, NEMEROVSKI, CANADY, 21 FALK & RABKIN 22 A Professional Corporation 23 By._ _ _ _ _U Y*ýýe~LIE B -LN 24 24 Attorneys for Debtor and Debtor in Possession 25 PACIFIC GAS AND ELECTRIC COMPANY WD 050702/1-1419905/992865/v1 26 27 4 As reflected in PG&E's March 2002 Monthly Operating Report, PG&E held more 28 than $4.5 billion in cash reserves as of March 31, 2002.
MOTION FOR AUTHORIZATION TO INCUR DATA MANAGEMENT EXPENSES