ML022120114
| ML022120114 | |
| Person / Time | |
|---|---|
| Site: | Diablo Canyon  |
| Issue date: | 07/23/2002 |
| 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: ML022120114 (23) | |
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15 16 17 In re PACIFIC GAS AND ELECTRIC COMPANY, a California corporation, Debtor.
Federal I.D. No. 94-0742640 Case No. 0 1-30923 DM Chapter 11 Case Date:
Time:
Place:
August 12, 2002 9:30 a.m.
235 Pine Street, 22nd Floor San Francisco, California NOTICE OF MOTION AND MOTION FOR AUTHORITY TO INCUR INFORMATION TECHNOLOGY CONSULTING EXPENSES; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF
[SUPPORTING DECLARATIONS OF MARTIN HUNT, LANCE MAEDA, TERRENCE GOODELL AND STEPHANIE MAGGARD FILED SEPARATELY]
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MOTION FOR AUTHORITY TO INCUR INFORMATION TECHNOLOGY CONSULTING EXPENSES JAMES L. LOPES (No. 63678)
JANET A. NEXON (No. 104747)
JULIE B. LANDAU (No. 162038)
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 18 19 20 21 22 23 24 25 26 27 28
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NOTICE OF MOTION AND MOTION 1
4 MEMORANDUM OF POINTS AND AUTHORITIES 1
5 I.
FACTUAL BACKGROUND 2
6 A.
Summary of Information Technology Projects and Costs.
3 7
B.
Description of IT Equipment and IT Applications Project.
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- 1.
IT Equipment Project.
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- 2.
IT Applications Project: Applications to be Shared by the New Entities.
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- a.
Internet Applications.
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- b.
Intranet Applications.
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- c.
Human Resources Applications.
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- d.
Building & Land Services Applications.
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- e.
Safety, Health and Claims Applications.
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- f.
Capital Accounting Applications.
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- g.
Other Miscellaneous Applications.
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- 3.
Applications for Electric Generation LLC.
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- a.
Early Warning System Backup.
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- b.
Master Power Purchase and Sale Agreement.
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- 4.
Applications for ETrans LLC.
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- a.
Applications related to Billing & Settlements.
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- b.
Customer Service Applications.
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Applications for GTrans LLC.
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- a.
Gas Billing Systems.
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- b.
Gas Transactions Systems.
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- 6.
Applications for PG&E as Reorganized Debtor.
9 27 C.
Description of Consultants and Breakdown of Costs.
9 28 MOTION FOR AUTHORITY TO INCUR INFORMATION TECHNOLOGY CONSULTING EXPENSES
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1 1 Akll Ur AB.LiE OF JIiE 2
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- 1.
IT Equipment Project ($210,000).
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- 2.
IT Applications Project - Shared Applications.
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- a.
Business Analysts ($486,000).
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- b.
Content Coordinator and Content Migrators
($325,000).
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- c.
Content Developers ($258,000).
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- d.
Project Manager for Miscellaneous Applications 9
($125,000).
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- e.
Senior Project Manager and Project Support Analysts ($300,000).
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- f.
Systems Analysts ($1,229,000).
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- g.
Web Administrator and Security Specialists 13
($110,000).
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Technical Writer ($50,000).
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Administrative Assistant ($48,000).
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Business Analyst ($65,000).
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Project Manager ($120,000).
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Business Analysts ($350,000).
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IT Consultants for Gen Application Projects.
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- a.
Application Developers and Technical Writers
($649,000).
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- b.
Telecommunications Engineer ($25,000).
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IT Consultants for ETrans Application Projects 23
($928,000).
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IT Consultants for GTrans Application Projects.
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Systems Analysts/Programmers ($350,000).
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Business Analyst/Systems Analyst ($250,000).
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Systems Analyst ($100,000).
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- d.
Programmers ($200,000).
14 MOTION FOR AUTHORITY TO INCUR INFORMATION TECHNOLOGY CONSULTING EXPENSES
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- e.
Application Developers ($100,000).
- 6.
IT Consultants for PG&E Application Projects
($32,400).
D.
Leased Space for the IT Equipment and IT Applications Projects.
II.
THE IT CONSULTING AND LEASE COSTS SHOULD BE APPROVED PURSUANT TO SECTION 363(b)(1) OF THE BANKRUPTCY CODE CONCLUSION MOTION FOR AUTHORITY TO INCUR INFORMATION TECHNOLOGY CONSULTING EXPENSES
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TABLE OF AUTHORITIES Page(s) 1 2
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9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 RKIE NaEMfchw RANY
&_AdH"N 1-cK Cases Committee of Equity Sec. Holders v. Lionel Corp. (In re Lionel Corp.), 722 F.2d 1063 (2d Cir. 1983) 16 In re Montgomery Ward Holding Corp., 242 B.R. 147 (D. Del. 1999) 16 Official Comm. of Subordinated Bondholders v. Integrated Res., Inc. (In re Integrated Res., Inc.), 147 B.R. 650 (S.D.N.Y. 1992) 17 Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985) 17 Stephens Indus., Inc. v. McClung, 789 F.2d 386 (6th Cir. 1986) 16 Statutes Bankruptcy Code
§327(a) 16
§363(b)(1) 1, 16
§1107 2
§1108 2
Bankruptcy Local Rules, Rule 9014-1 (c)(2) 1 MOTION FOR AUTHORITY TO INCUR INFORMATION TECHNOLOGY CONSULTING EXPENSES
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,A,, O =. 15 16 17 18 19 20 21 22 23 24 25 26 27 28 NOTICE OF MOTION AND MOTION PLEASE TAKE NOTICE that on August 12, 2002 at 9:30 a.m., or as soon thereafter as the matter may be heard in the Courtroom of the Honorable Dennis Montali, located at 235 Pine Street, 22nd Floor, San Francisco, California, Pacific Gas and Electric Company, the debtor and debtor in possession in the above-captioned Chapter 11 case
("PG&E"), will and hereby does move the Court for entry of an Order Authorizing Expenses related to Information Technology Consulting Work (the "Motion").
This Motion is based on this Notice of Motion and Motion, the accompanying Memorandum of Points and Authorities, the Declarations of Martin Hunt, Lance Maeda, Terrence Goodell and Stephanie Maggard, filed concurrently herewith, the record of this case and any evidence presented at or prior to the hearing on this Motion.
PLEASE TAKE FURTHER NOTICE that pursuant to Rule 9014-1 (c)(2) of the Bankruptcy Local Rules for the Northern District of California, any written opposition to the Motion and the relief requested herein must be filed with the Bankruptcy Court and served upon appropriate parties (including counsel for PG&E, the Office of the United States Trustee and the Official Committee of Unsecured Creditors) at least five (5) days prior to the scheduled hearing date. If there is no timely objection to the requested relief, the Court may enter an order granting such relief without further hearing.
MEMORANDUM OF POINTS AND AUTHORITIES Pacific Gas and Electric Company, the debtor and debtor in possession in the above-captioned Chapter 11 case ("PG&E"), requests an order authorizing PG&E to incur expenses related to information technology consulting work, outside of the ordinary course of business pursuant to Bankruptcy Code Section 363(b)(1).
MOTION FOR AUTHORITY TO INCUR INFORMATION TECHNOLOGY CONSULTING EXPENSES 1
- 1.
2 FACTUAL BACKGROUND 1 3
PG&E filed a voluntary petition for relief under Chapter 11 of the Bankruptcy 4
Code on April 6, 2001. A trustee has not been appointed, and PG&E continues to function 5
as a debtor-in-possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code.
6 PG&E, together with its parent corporation, PG&E Corporation, has proposed a 7
Plan of Reorganization (as amended from time to time, the "Plan"), which has been sent to 8
creditors for voting along with the Court-approved Disclosure Statement for the Plan. A 9
Plan confirmation status conference has been set for August 1, 2002.
10 The Plan generally provides for the creation of three new companies, ETrans 11 LLC, GTrans LLC and Electric Generation LLC (collectively, the "New Entities"), whereby 12 PG&E will separate its operations into four lines of business based on PG&E's historical HCARD 13 functions. Accordingly, the Reorganized Debtor will continue the retail gas and electric 14 distribution business, ETrans LLC will operate the electric transmission business, GTrans
&RUMO 15 LLC will operate the interstate gas transmission business, and Electric Generation LLC will 16 operate the electric generation business.
17 As a result of the separation of the lines of business contemplated by the Plan, 18 PG&E has been identifying various projects that require long lead-time for completion, such 19 as the transfer of land rights, permits and franchises, human resources planning and 20 information technology planning for the New Entities. Attached as Exhibit A to the 21 Declaration of Stephanie Maggard ("Maggard Declaration"), filed herewith, is a summary of 22 the motions filed by PG&E over the last several months in connection with these various 23 Plan implementation projects, as well as a summary of anticipated Plan implementation 24 motions that have not yet been filed. A description of the anticipated Plan implementation 25 motions is also set forth in the Maggard Declaration at ¶5.
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'The evidentiary basis and support for the facts set forth in this Motion are contained in 27 the Declarations of Martin Hunt (the "Hunt Declaration"), Lance Maeda ("Maeda 28 Declaration") and Terry Goodell ("Goodell Declaration"), filed concurrently herewith.
MOTION FOR AUTHORITY TO INCUR INFORMATION TECHNOLOGY CONSULTING EXPENSES T
1 A.
Summary of Information Technology Projects and Costs.
2 As indicated in PG&E's Motion for Authority to Acquire Information 3
Technology Equipment, filed on June 12, 2002, the New Entities will require various 4
information technology ("IT") computer and network hardware, software and miscellaneous 5
components (collectively, the "IT Equipment") in order to support their business operations.
6 As described in Sections B and C below, PG&E seeks approval to utilize an IT consultant to 7
provide project management for the design, installation, configuration and testing of the IT 8
Equipment that will be necessary for the New Entities (collectively referred to as the "IT 9
Equipment Project"). In addition, as described in Sections B and C below, IT consultants 10 are required to implement (including installation, configuration and testing, among other II tasks) various IT applications 2 that will be necessary for the business operations of the New 12 Entities (collectively referred to as the "IT Applications Project"). The IT Applications 13 Project includes the process of replicating existing IT applications in use by PG&E for the RICE 14 benefit of the New Entities and creating new IT applications where necessary.
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&JRAHM 15 While PG&E will utilize internal resources for the IT Equipment Project and IT 16 Applications Project, numerous outside consultants are required due to the volume of work 17 to be performed, the special expertise required and the short time period within which the 18 work must be completed.
19 The total estimated cost for the consulting work related to the IT Equipment 20 Project and the IT Applications Project is $6,310,400 (the "Estimated Cost"). A breakdown 21 of the Estimated Cost is set forth in Section C below. The process by which PG&E has 22 estimated these costs is described in the Maeda Declaration at ¶8. The actual resources 23 required to complete each project may differ from the current estimates; therefore, to 24 effectively manage these projects, PG&E requires the flexibility to transfer resources 25 between the various projects described below. For example, certain projects may ultimately 26 27 2"IT Applications" generally means specialized business software that performs 28 customized functions.
MOTION FOR AUTHORITY TO INCUR INFORMATION TECHNOLOGY CONSULTING EXPENSES -L-
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15 16 17 18 19 20 21 22 23 24 25 26 27 28 require fewer resources than currently anticipated while other projects may require more resources; thus, while this Motion may describe "four programmers" PG&E may ultimately require only three programmers but need an additional technical writer, or a particular consultant's fee may exceed the estimate based on a project requiring more time than currently estimated. Therefore, PG&E requests approval to incur up to (but not to exceed) the Estimated Cost for the various projects described below provided that PG&E retains the flexibility to adjust the consultant resources between and among the various projects.
In addition to the IT consulting expenses, PG&E also seeks authority to lease office space on a month-to-month basis at a cost of $76,700 per month (as described in Section D below), to be utilized for the IT Equipment Project and IT Applications Project.
B.
Description of IT Equipment and IT Applications Project.
This Section B describes the types of projects to be completed with the assistance of IT consultants. Section C below describes the IT consultants who will perform the work described in this Section B and a breakdown of costs related to the various consultants.
- 1.
IT Equipment Project.
The IT Equipment Project includes the design, programming, configuration, installation, and testing of the IT Equipment. An IT consultant will provide project management for the IT Equipment Project, which requires a high level of both project management and IT experience, in order to manage cost, schedule and risks associated with this project. See Hunt Declaration, ¶¶3 and 4.
- 2.
IT Applications Project:
Applications to be Shared by the New Entities. 3 Numerous IT consultants will work on different aspects of the IT Applications Project. This section describes the work related to applications that will be shared by the New Entities (Sections B.3 through B.6 below describe applications work that is specific to a single New Entity or to the Reorganized Debtor).
3The facts set forth in this Section B.2. are supported by the Maeda Declaration, ¶3.
MOTION FOR AUTHORITY TO INCUR INFORMATION TECHNOLOGY CONSULTING EXPENSES 1
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- a. Internet Applications. IT consultants will design and implement an Internet site to support the business needs of the New Entities and will integrate all content and applications for the Internet site. The site will enable customers of PG&E's gas pipelines to continue to schedule and nominate gas online, allow the financial community and investors easy access to financial and operational data, and provide the public with information on important events involving the New Entities.
- b.
Intranet Applications. IT consultants will design and establish a single Intranet for the New Entities. The Intranet will function as a centralized portal and repository for accessing web-enabled applications and will provide employees with tools, services and information needed for daily business operations, (
timesheets; job bidding; electric control systems; safety, health and claims information; and regulatory and compliance information).
- c.
Human Resources Applications. IT consultants will create applications that are critical to the human resource needs of the New Entities, and which are not covered by the contract with PeopleSoft for implementation of the human resources management system.4 In some cases, these applications will be replicated from existing PG&E applications and the IT consultants will make any appropriate or necessary modifications in order to adapt the applications for use by the New Entities. Examples of such applications include Employee Assistance Program Tracking, Salary Planning/Market Data and the Test Results Tracking Database.
- d.
Building & Land Services Applications. IT consultants will create applications necessary to support building and land management for the New Entities; in some cases, the consultants will replicate existing PG&E applications with appropriate modifications. Examples of such applications include the Building and Land Inventory System, the Building Department Job Tracking Database System and the Geographic 4PG&E previously obtained authority to incur expenses in connection with a consulting contract with PeopleSoft, covering implementation of a human resources management system for the New Entities.
MOTION FOR AUTHORITY TO INCUR INFORMATION TECHNOLOGY CONSULTING EXPENSES -I-
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9 10 11 12 HMAR~D 13 RIM cewx 14 AP,,O.d 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Information System ("GIS"). GIS is currently used extensively throughout PG&E. It is a complex, multi-layered application that utilizes maps and data from a variety of sources.
The IT consultants will determine what data is needed by each of the New Entities, replicate GIS for the New Entities and migrate the appropriate data from the existing GIS to the new GIS for the New Entities.
- e.
Safety, Health and Claims Applications. PG&E's Safety, Health and Claims department ("SH&C") uses a number of custom and packaged applications. The New Entities will use an Application Service Provider ("ASP") 5 to provide and host the necessary SH&C applications.. An IT consultant will assist the New Entities in selecting the ASP based on expertise, cost and ability to meet business requirements. In some cases, the SH&C applications may need to be designed by the ASP or by IT consultants working with the ASP.
- f. Capital Accounting Applications. The New Entities will have substantial capital assets after implementation of the Plan. IT consultants will implement applications (including installation, customization and testing as needed) to manage the capital accounting systems for the New Entities. Examples of the types of applications that may be replicated and/or modified for use by the New Entities are: Accufile: AS 109 Depreciation, Ratemaking Deferred Tax Reserve, Tax Accrual and Tax Depreciation.
- g. Other Miscellaneous Applications. IT consultants will implement (including installation, customization and testing as needed) non-capital accounting, environmental and other miscellaneous applications needed by the New Entities, including applications related to credit verification, federal, state and local taxes, and risk management.
- 3.
Applications for Electric Generation LLC.
The following applications are specific to Electric Generation LLC ("Gen"), the New Entity that will carry on the electric generation line of business. See Maeda Declaration, ¶4.
5The ASP will be an external provider that will host the SH&C applications.
MOTION FOR AUTHORITY TO INCUR INFORMATION TECHNOLOGY CONSULTING EXPENSES 1
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- a. Early Warning System Backup. The Early Warning System ("EWS")
provides public notification of a nuclear event at the Diablo Canyon Power Plant. The EWS Backup Control Station is used in the event that the Primary EWS Control Station, located at the Emergency Operations Facility in San Luis Obispo, becomes inoperable. The EWS is a key part of both the Diablo Canyon and San Luis Obispo County Emergency Plans. An IT consultant will provide engineering support for the transfer of the existing EWS Backup System to Gen.
- b. Master Power Purchase and Sale Agreement. In connection with implementation of the Plan, Gen and PG&E will enter into a long-term power sales agreement, the Master Power Purchase and Sale Agreement.6 Under this agreement, new settlement and billing systems must be developed, in order to meet Gen's needs and to comply with FERC rules. These new systems will require revisions to existing IT applications and development of new IT applications related to electric generation and billing, including applications related to data and information sharing, revisions to PG&E's existing systems and development of new business processes for scheduling and billing. IT consultants will install, modify and test the business systems necessary for this project.
- 4.
Applications for ETrans LLC.
The following applications are specific to ETrans LLC ("ETrans"), the New Entity that will carry on the electric transmission line of business. See Goodell Declaration,
¶3.
- a. Applications related to Billing & Settlements. In connection with implementation of the Plan, ETrans and PG&E will enter into an Electric Energy Determination and Billing Agreement to handle billing and settlements for electric transmission service provided by ETrans to PG&E. Implementing this agreement will require revisions to existing IT applications and development of new IT applications related to electric transmission service, including applications related to the transfer of meter data.
6This agreement is described in Section VI.F. 1. of the Disclosure Statement.
MOTION FOR AUTHORITY TO INCUR INFORMATION TECHNOLOGY CONSULTING EXPENSES 1
IT consultants will design, develop, install and test the systems necessary to implement this 2
agreement.
3
- b. Customer Service Applications. ETrans will need to implement a customer 4
information system to facilitate serving its customers. IT consultants will design, develop, 5
install and test the systems necessary to support ETrans' customer service requirements.
6
- 5.
Applications for GTrans LLC.
7 The following applications are specific to GTrans LLC ("GTrans"), the New 8
Entity that will carry on the gas transmission line of business. See Maeda Declaration, ¶5.
9
- a. Gas Billing Systems. Currently, PG&E bills and records the payments of 10 certain large gas customers and gas shippers as part of its portfolio of gas accounts. The bill 11 calculation is completed by the Advanced Billing Solutions ("ABS") system, a stand-alone 12 billing system for large industrial and commercial accounts, and transmitted to PG&E's HARD 13 customer information system to produce a bill and record receivables. Upon separation of "PACE14 the lines of business under the Plan, GTrans will acquire these large gas customers and gas
&PANGN 15 shippers. However, the ABS system will be retained by PG&E so that PG&E can continue 16 to bill complex distribution accounts. While GTrans will develop its own system for 17 performing the billing functions currently performed by ABS, this process may take up to 18 two years to complete. Theref6re, in connection with implementation of the Plan, PG&E 19 and GTrans will enter into a Measure, Bill and Collect Agreement (the "GTrans 20 Agreement") to accommodate the billing needs of GTrans post-separation while GTrans 21 completes the development of an independent billing system.
22 Under the GTrans Agreement, PG&E will provide the following services to 23 GTrans: measure customer usage (i.e., meter reading), calculate customer bills, issue the 24 bills, process payments, provide information on customers whose accounts are delinquent, 25 and report revenues to meet regulatory and other requirements. In order for PG&E to 26 provide these services to GTrans, separate IT applications will need to be developed to 27 support data retrieval, bill calculation, bill presentment, collection efforts, Electronic Data 28 Interchange protocols for billing and payment processing, and revenue reporting. IT MOTION FOR AUTHORITY TO INCUR INFORMATION TECHNOLOGY CONSULTING EXPENSES 1
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_ 15 16 17 18 19 20 21 22 23 24 25 26 27 28 consultants will analyze GTrans' business needs and will develop applications that will perform the billing functions for GTrans that are currently performed by the ABS system.
- b. Gas Transactions Systems. Currently, the scheduling process for the gas pipeline system is managed in a single computer application, the Gas Transactions System
("GTS"). GTS tracks the amount of gas entering PG&E's system from different sources and schedules it for delivery at various points in the system for ultimate use by customers. Upon separation of the lines of business under the Plan, the GTS will be transferred to GTrans.
However, PG&E will still require certain functions of the GTS for gas distribution purposes until such time as PG&E is able to develop a new system that meets its scheduling requirements post-separation. The GTrans Agreement, in addition to the billing services outlined above, provides for GTrans to perform tracking and scheduling services for PG&E.
IT consultants will analyze the business needs of both PG&E and GTrans in their use of GTS, and then modify the GTS so that it can track PG&E's and GTrans' gas information separately, create separate gas delivery schedules, and prepare separate reports. The IT consultants will also modify the interfaces between GTS and other systems that rely on the information collected by GTS, so that these systems can receive the appropriate information from GTS post-separation.
- 6.
Applications for PG&E as Reorganized Debtor.
After implementation of the Plan, PG&E will require approximately 16 applications that are now provided by PG&E's parent corporation, PG&E Corporation, including applications related to banking and money management, tax and legal compliance and business ethics. IT consultants will install, modify as necessary and test the applications needed by PG&E after implementation of the Plan. See Maeda Declaration, ¶6.
C.
Description of Consultants and Breakdown of Costs.
PG&E intends to utilize various types of IT consultants on a temporary basis through the following staffing agencies and consulting firms: Corestaff Services, Inc.; Tom Walsh, Inc.; Churchill Benefit, dba Yurcor; AG Consulting, a division of ADP, Inc.;
MOTION FOR AUTHORITY TO INCUR INFORMATION TECHNOLOGY CONSULTING EXPENSES I
Millennium Consulting; Federal Signal Corporation; Blackstone Technology Group; TMP, 2
Worldwide; Resource Connection; Thinknicity; and Software Consulting Group. PG&E's 3
standard contractual provisions in place with these agencies and firms do not guarantee 4
future work or any minimum amount of revenue. PG&E also maintains the right to 5
terminate the work at any time without cause, in which case PG&E is liable only for work 6
performed to the date of termination plus costs reasonably incurred by the consultant in 7
terminating any work in progress.
8 Included parenthetically in each heading below is the cost estimate for each 9
category of consultants to be used for the various projects.
10
- 1.
IT Equipment Project ($210,000).
11 A senior project manager will be hired through Millennium Consulting, a 12 consulting firm specializing in IT projects, to coordinate, supervise, and track the IT HCVRD 13 Equipment Project. Specifically, the senior project manager will (i) monitor all aspects of RKE 14 the IT Equipment Project for adherence to cost, schedule and technical performance criteria; BUJK
&RAEM<I 15 (ii) ensure consistency in the reporting, work product and processes of the IT Equipment 16 Project; and (iii) facilitate and coordinate the IT Equipment Project to ensure that the project 17 is successful in meeting the New Entities' requirements. See Hunt Declaration, ¶¶5 and 6.
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- 2.
IT Applications Project - Shared Applications. 7 19
- a. Business Analysts ($486,000). Seven business analysts will be hired through 20 Corestaff Services, Inc. ("Corestaff'), a staffing agency, to study and define the New 21 Entities' business requirements and to describe the computer codes and business rules that 22 will be necessary to meet these requirements.
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- b. Content Coordinator and Content Migrators ($325,000). A content 24 coordinator and six content migrators will be hired through Corestaff to help provide the 25 content for the New Entities' Internet site and Intranet. These consultants will study 26 PG&E's existing Internet site and Intranet, determine what portions of the existing content 27 7The facts set forth in this Section C.2. are supported by the Maeda Declaration, ¶9.
28 MOTION FOR AUTHORITY TO INCUR INFORMATION TECHNOLOGY CONSULTING EXPENSES 1
can be used by the New Entities, arrange for migration of data to the New Entities and 2
document remaining content to be obtained.
3
- c. Content Developers ($258,000). Three content developers will be hired 4
through Corestaff to work with the content coordinator and migrators (described in 5
paragraph b above) to develop the necessary content structure for the New Entities' Internet 6
site and intranet, using such programming tools as HTML (hypertext markup language) and 7
java script. These consultants will also be responsible for data migration and intranet testing 8
and support.
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- d. Project Manager for Miscellaneous Applications ($125,000). A project 10 manager will be hired through Corestaff to manage the replication, development and 11 implementation of the accounting, environmental and other shared applications needed by 12 the New Entities, including business and technical analysis related thereto.
HcM 13
- e. Senior Project Manager and Project Support Analysts ($300,000). A senior NCamt 14 project manager and two project support analysts will be hired through Corestaff. The
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- -15 senior project manager will coordinate, track and report with respect to the following 16 applications
- Internet, Intranet, human resources, building and land services, and SH&C.
17 The project support analysts will support the senior project manager.
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- f. Systems Analysts ($1,229,000). 14 systems analysts will be hired through 19 Corestaff to perform a variety of tasks needed as part of the IT Applications Project, 20 including designing technical solutions, developing computer interfaces, replicating 21 applications as needed by the New Entities, migrating data to the New Entities and 22 modifying and testing applications. The systems analysts will also develop web-based 23 applications and computer interfaces for the SAP system (the system that includes 24 accounting and purchasing functions). The systems analysts will also develop a new 25 franchise fee system for the New Entities.
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- g. Web Administrator and Security Specialists ($1 10,000). Three specialists in 27 web administration and web security will be hired through Corestaff and will work on the 28 Internet site and Intranet, in the specific areas of hardware and software analysis, setup and MOTION FOR AUTHORITY TO INCUR INFORMATION TECHNOLOGY CONSULTING EXPENSES 1
configuration, web security and graphic and multimedia design.
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- h. Technical Writer ($50,000). A technical writer will be hired through 3
Corestaff and will provide the technical documentation for the IT Applications Project.
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- i. Administrative Assistant ($48,000). An administrative assistant will be hired 5
through Corestaff to provide administrative assistance in the area of human resources, 6
including the PeopleSoft-related work.
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- j. Business Analyst ($65,000). A business analyst will be hired through Tom 8
Walsh, Inc., a staffing agency that specializes in SH&C work, to provide support specifically 9
with the SH&C application project, including research regarding SH&C requirements and 10 ASPs available to provide SH&C applications to the New Entities, and assistance with the 11 selection of a SH&C vendor.
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Project Manager ($120,000). A project manager will be hired through 13 Yurcor, a staffing agency specializing in accounting applications, to manage the work RKE "RMI14 related to the capital accounting applications, including: (i) monitoring all aspects of the 1RA.H*N 15 capital accounting applications work for adherence to cost, schedule and technical 16 performance criteria; (ii) ensuring consistency in the reporting, work product and processes 17 of the capital accounting applications work; and (iii) ensuring that the capital accounting 18 applications will meet the needs of the New Entities.
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Business Analysts ($350,000). Five business analysts will be hired through 20 AG Consulting, a staffing agency specializing in human resource work, to gather, define and 21 document specific human resources applications requirements for the New Entities. These 22 consultants will prepare reports on job bidding and bargaining unit requirements as well as 23 requirements for the Benefits Service Center.8 24
- 3.
IT Consultants for Gen Application Projects.
25 The following IT consultants will provide assistance related to the Gen 26 27 8The Benefits Service Center operates as a resource for PG&E employees for all 28 benefit-related matters, including, e.g., insurance, health and retirement benefits.
MOTION FOR AUTHORITY TO INCUR INFORMATION TECHNOLOGY CONSULTING EXPENSES 1
application projects described in Section B.3. above. See Maeda Declaration, ¶10.
2
- a. Application Developers and Technical Writers ($649,OO0). Six application 3
developers and/or technical writers will be hired through Corestaff to develop applications, 4
develop test plans, perform quality assurance, document programming codes and prepare 5
user manuals related to the Master Power Purchase and Sale Agreement.
6
- b. Telecommunications Engineer ($25,000). A telecommunications engineer 7
will be hired through Federal Signal Corporation, a company specializing in emergency 8
warning siren control systems, to provide engineering support for the EWS Backup System.
9
- 4.
IT Consultants for ETrans Application Projects ($928,000).
10 The following IT consultants will provide assistance related to the ETrans 11 application projects described in Section B.4. above. See Goodell Declaration, ¶¶4 and 5.
12 PG&E will hire seven application and/or database developers and an associate HOWARD 13 director who will supervise their work through Blackstone Technology Group, an IT maCAW 14 consulting firm specializing in the utility business. The application and database developers 15 will design and develop customer information, billing and settlement systems. The scope of 16 work includes developing system designs, applications, and test plans; performing quality 17 assurance; documenting programming codes; and preparing user manuals. The associate 18 director will act as supervisor; he or she will perform such supervisory tasks as monitoring 19 the quality of the work, keeping it on schedule, and making regular reports on the status of 20 the work.9 21
- 5.
IT Consultants for GTrans Application Projects.
22 The following IT consultants will provide assistance related to the GTrans 23 application projects described in Section B.5. above. See Maeda Declaration, ¶11.
24
- a. Systems Analysts/Programmers ($350,000). Three systems analysts and 25 programmers will be hired through Corestaff to define and develop technical specifications 26 9Certain Blackstone consultants began work on this project in June 2002 to assist 27 PG&E in determining the scope of work to be performed. No payments have been made to Blackstone for this work pending Court approval.
28 MOTION FOR AUTHORITY TO INCUR INFORMATION TECHNOLOGY CONSULTING EXPENSES 1
for applications that support data retrieval, bill calculation, bill presentment, collection, 2
Electronic Data Interchange protocols for billing and payment processing and revenue 3
reporting. This work will enable PG&E to provide the gas billing services to GTrans (as 4
described in Section B.5. above) during the transition period while GTrans develops its 5
separate billing system.
6
- b. Business Analyst/Systems Analyst ($250,000). A business analyst and a 7
systems analyst will be hired through TMP, Worldwide, a staffing agency specializing in IT 8
functions. These analysts will define and document business requirements and describe 9
functional specifications for programming requirements related to gas billing services.
10 These analysts will also perform quality assurance and evaluate programming changes to 11 ensure that business specifications have been met.
12
- c. Systems Analyst ($100,000). A systems analyst will be hired through 13 Resource Connection, a staffing agency specializing in IT functions, to define the RKE RN 14 requirements for data interfaces (transmittal. of data between IT systems) used for gas billing EUX 15 and gas revenue reporting and to describe-and document the business rules that will be 16 necessary to meet these requirements:
17
- d. Programmers ($200,000). Two programmers will be hired, one through 18 Thinknicity, LLC and one through Software Consulting Group, both staffing agencies 19 specializing in IT functions. The programmers will develop, modify and test programming 20 changes to various systems to support revenue reporting by PG&E and GTrans. As 21 described in Section B.5. above, revenue reporting is one of the services that GTrans will 22 provide to PG&E pursuant to the GTrans Agreement.
23
- e. Application Developers ($100,000). Two application developers will be hired 24 through Blackstone Technology Group, an IT consulting firm specializing in the utility 25 business, to make modifications to the GTS in order to track PG&E and GTrans' gas 26 information and schedules separately. Additionally, the application developers will develop 27 new reports of gas volumes and programming modifications for the data interfaces between 28 GTS and other systems. This will enable GTrans to perform tracking and scheduling MOTION FOR AUTHORITY TO INCUR INFORMATION TECHNOLOGY CONSULTING EXPENSES 1
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,*Oi, 15 16 17 18 19 20 21 22 23 24 25 26 27 28 services for PG&E pursuant to the GTrans Agreement as described in Section B.5. above.
- 6.
IT Consultants for PG&E Application Projects ($32,400).
The following IT consultants will provide assistance related to the PG&E application projects described in Section B.6 above. These consultants will be hired through Corestaff and include two technical writers and two programmer analysts. The technical writers will update and prepare documentation for changes to software applications, backup and restore procedures, and user manuals. The programmer analysts will install, configure and test servers and computers to run the various applications that will be migrated to PG&E. See Maeda Declaration, ¶12.
D.
Leased Space for the IT Equipment and IT Applications Projects.
PG&E also seeks authority to sublease office space for the IT Equipment Project and IT Applications Project. This space will be sublet from PG&E's affiliate, PG&E National Energy Group ("NEG"), which has leased several floors at 345 California Street and no longer requires one of the floors. NEG will therefore sublet the 23rd floor (16,935 square feet) to PG&E at its cost on a month-to-month basis (the "Sublease"). The monthly cost for the Sublease will be $76,700, which includes utilities, taxes and office furniture.
PG&E believes that the sublease is reasonable, based on the following factors: (i) PG&E did not incur any expenses in locating the space and negotiating the Sublease; (ii) the space is completely built out with tenant improvements, including cabling, furniture, office equipment (e.g., copiers, fax machines and telephones) and conference space; (iii) the space is conveniently located near PG&E's other offices in downtown San Francisco; and (iv) PG&E retains the ability to terminate the Sublease at any time on 30 days' notice. See Maggard Declaration, ¶3.
The office space will be utilized by the various individuals working on the IT Equipment Project and IT Applications Project, and the IT Equipment will be installed in this space as well. PG&E seeks authority to incur the monthly Sublease expense beginning August 1, 2002 and continuing to the Effective Date under the Plan.
MOTION FOR AUTHORITY TO INCUR INFORMATION TECHNOLOGY CONSULTING EXPENSES 1
I.
2 THE IT CONSULTING AND LEASE COSTS SHOULD BE APPROVED PURSUANT TO SECTION 363(b)(1) OF THE 3
BANKRUPTCY CODE 4
PG&E seeks approval for the IT consulting expenses and Sublease costs set forth 5
above as a use of estate property that is outside of the ordinary course of business under 6
Bankruptcy Code Section 363(b)(1). Since the IT Equipment Project and IT Applications 7
Projects are related to the implementation of the Plan, PG&E believes that the purpose and 8
scope of the expenditure may be characterized as outside of the ordinary course of business 9
and therefore requires Court approval.' 0 10 The Court has considerable discretion in approving a request pursuant to Section II 363(b)(1) of the Bankruptcy Code ("[t]he trustee, after notice and a hearing, may use, sell or 12 lease, other than in the ordinary course of business, property of the estate"). See In re 13 Montgomery Ward Holding Corp., 242 B.R. 147, 153 (D. Del. 1999) (affirming the r
14 bankruptcy court's decision to approve expenditure for employee incentive programs, noting 15 that bankruptcy court has considerable discretion irý approving a Section 363(b) motion).
16 In determining whether to authorize a transaction under Section 363(b)(1), courts 17 require a debtor to show that a sound business purpose justifies such actions, applying the 18 business judgment test. -See, e.g*, Stephens Indus., Inc. v. McClung, 789 F.2d 386, 389-90 19 (6th Cir. 1986); Committee of Equity Sec. Holders v. Lionel Corp. (In re Lionel Corp.), 722 20 F.2d 1063, 1071 (2d Cir. 1983); see also 3 Lawrence P. King, Collier on Bankruptcy 21
¶363.02[1][g] (15th ed. rev. 1998).
22 Once the debtor has articulated a rational business justification, a presumption 23 attaches that the decision was made "on an informed basis, in good faith and in the honest 24 belief that the action taken was in the best interest of the [debtor]." See, e._., Official 25 26 10PG&E believes that the consultants described above should not be considered "professional persons" requiring approval under Bankruptcy Code Section 327(a). This is 27 due both to the nature of the services to be provided and to the consultants' limited role in 28 connection with PG&E's reorganization proceeding.
MOTION FOR AUTHORITY TO INCUR INFORMATION TECHNOLOGY CONSULTING EXPENSES 1
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14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Comm. of Subordinated Bondholders v. Integrated Res., Inc. (In re Integrated Res., Inc.),
147 B.R. 650, 656 (S.D.N.Y. 1992) (citing Smith v. Van Gorkom, 488 A.2d 858, 872 (Del.
1985)).
Here, sound business justifications exist for approval of the consulting work related to the IT Equipment Project and IT Applications Project and related lease costs.
PG&E does not have sufficient capacity or skills in-house to perform and complete the work without the assistance of the IT consultants. PG&E believes that the work is necessary and must be completed in advance of the Effective Date under the Plan in order for the New Entities to commence business operations. Also, PG&E is solvent and has sufficient cash to pay the expenses described herein without causing any detriment to its creditors.11 PG&E estimates that it could take up to six months to complete the work related to the IT Equipment Project and the IT Applications Project. Therefore, the work cannot be delayed until after confirmation of the Plan without jeopardizing PG&E's ability to timely implement the Plan.12 The Sublease expense is a necessary component of the IT Applications Project and IT Equipment Project and is reasonable under the circumstances, particularly since the Sublease is terminable on 30 days' notice. In addition, PG&E has already obtained a Court order authorizing this type of lease without further approval pursuant to the Order entered on October 15, 2001 (the "Order") approving PG&E's Motion for Authority... to Enter into Lease, License and Permit Agreements for the Use of Third-Party Property within Specified Parameters, filed on September 5, 2001.
"As reflected in PG&E's May 2002 Monthly Operating Report, PG&E held more than
$4.2 billion in cash reserves as of May 31, 2002.
12As set forth in the Maeda Declaration at ¶14, four consultants began limited work as of July 1, 2002 on projects relating to human resources and Gen applications. No payments have been made to these consultants for the work performed pending Court approval.
MOTION FOR AUTHORITY TO INCUR INFORMATION TECHNOLOGY CONSULTING EXPENSES 1
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15 16 17 18 19 20 21 22 23 24 25 26 27 28 The Sublease is well within the dollar parameters for leases authorized by the Order and therefore does not require any further Court approval.13 Nonetheless, out of an abundance of caution, PG&E is including the Sublease in this Motion because the office space will be used for the IT consulting work that is covered by this Motion.
CONCLUSION For all of the foregoing reasons, PG&E respectfully requests that the Court approve the costs described above related to consulting work and the lease, and grant such other and further relief as may be just and appropriate.
DATED: July 23, 2002 HOWARD, RICE, NEMEROVSKI, CANADY, FALK & RABKIN A Professional Corporation By: 2ZLJ-AU Attorneys for Debtor and Debtor in Possession PACIFIC GAS AND ELECTRIC COMPANY WD 072302/F-1419905/Y7/1011116/vl 13Under the Order, no notice or approval is required for PG&E to enter into real property lease transactions where the payment obligation is under $1 million annually and the aggregate obligations over the life of the lease are less than $10 million.
MOTION FOR AUTHORITY TO INCUR INFORMATION TECHNOLOGY CONSULTING EXPENSES