ML022350330
| ML022350330 | |
| Person / Time | |
|---|---|
| Site: | Diablo Canyon  |
| Issue date: | 08/15/2002 |
| 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: ML022350330 (21) | |
Text
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 1
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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. 01-30923 DM Chapter 11 Case
- Date:"
Time:
"Place-September 4, 2002 9:30 a.m.
235 Pine Street, 22nd Floor San Francisco, California NOTICE OF MOTION AND MOTION FOR AUTHORITY TO INCUR MISCELLANEOUS IMPLEMENTATION EXPENSES; "MEMORANDUM OFPOINTS AND AUTHORITIES IN SUPPORT THEREOF
[SUPPORTING DECLARATIONS'OF LANCE MAEDA, MY NGUYEN AND ERIC KIRKPATRICK FILED SEPARATELY]
K0 MOTION FOR AUTHORITY TO INCUR MISCELLANEOUS IMPLEMENTATION EXPENSES Attorneys for Debtor and Debtor in Possession PACIFIC GAS AND ELECTRIC COMPANY UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF CALIFORNIA SAN-FRANCISCO DIVISION 12-3 18 19 20 21 22 23 24 25 26 27 28 r
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"" 26 27 2 r 28 TABLE OF CONTENTS NOTICE OF MOTION AND MOTION
,MEMORANDUM OF POINTS AND AUTHORITIES j.- X ~FACTUAL BACKGROUND A.
Additional Information Technology ("IT") Expenses
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Intranet Development (Cost Estimate-$3 85,000).
- 2.
Application Integration (Cost Estimate-$266,600).
- 3.
Investor Relations Website (Cost Estimate-$ 105,000).
B.
Facilities, Fleet And Materials Expenses 1L Facilities (Cost Estimate-$305,780).
- a.
Floor Preparation Work.
- b.
Construction Work.
- c.
Office Furniture.
- d.
Telecommunications Equipment.
- 2.
Fleet Vehicle Transfer (Cost Estimate-$S54,800).
- a.
Project Management.
b.,
Administrative Resources.
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Materials Distribution Center (Cost, Estimate-$30,000).
C.
ETraris And GTrans Business Process Expenses (Cost Estimate-$250,000)
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Tangible Property List Databases.
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GTrans Business Processes.
- a.
Emergency Plan Manual.
- b.
Employee Training.
- c.
Service And Interconnection Requests.
- d.
Mapping.
'1 MOTION FOR AUTHORITY TO INCUR MISCELLANEOUS IMPLEMENTATION EXPENSES
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""A 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF CONTENTS P ag-e II.
THE MISCELLANEOUS IMPLEMENTATION EXPENSES SHOULD BE APPROVED PURSUANT TO SECTION 363(B)(1)
OF THE BANKRUPTCY CODE CONCLUSION 15 17 MOTION FOR AUTHORITY TO INCUR MISCELLANEOUS IMPLEMENTATION EXPENSES
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Cases Committee of Equity Sec. Holders v. Lionel Corp. (In re Lionel Corp.), 722 F.2d 1063 (2d Cir. 1983)
In re Montgomery Ward Holding Corp., 242 B.R. 147 (D. Del. 1999)
Official Comm. of Subordinated Bondholders v. Integrated Res., Inc. (In re Integrated Res., Inc.), 147 B.R. 650 (S.D.N.Y. 1992)
Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985)
Stephens Indus., Inc. v. McClung, 789 F.2d 386 (6th Cir. 1986)
Statutes Bankruptcy Code
§1107
§1108
§327(a)
§363(b)(1)
Rule 9014-1 (c)(2) Bankruptcy Local Rules Other Authorities 3 Lawrence P. King, Collier on Bankruptcy ¶363.02[1][g] (15th ed. rev.
1998)
MOTION FOR AUTHORITY TO INCUR MISCELLANEOUS IMPLEMENTATION EXPENSES
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1 NOTICE OF MOTION AND MOTION 2
PLEASE TAKE NOTICE that on September 4, 2002 at 9:30 a.m., or as soon 3
thereafter as the miatter may be heaid in the Courtroom of the Honorable Dennis Montali, 4
located at 235 Pine Street, 22rid Floor, San Francisco, California, Pacific Gas aind Electric 5
Company, the debtor'and debior in possession in the above-captioned Chapter 1 case 6
("PG&E"), will and hereby does move the Court for entry of an Order Authorizing, 7
Miscellaneous Implementation Expenses (the "Motion").
8 This Motion is based on this Notice of Motion and Motion, the accompanying
- "9 :Memoiandum of Points and Authorifies, the Declaiatiohs 0fLance Maeda, My Nguyen and 10 Eric Kirkpatrick', filed concurrently herewith, the record of this case and any evidence I1I presented at or prior to the h6'nrifng 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 14 Motion and the relief requested herein must be filed with the Bankiupt6y Court and'served 15 upon appropriate parties (including counsel for PG&E, the Office of th& 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 ftirher hearing.
19 20 21 22 23 24 25 26 27 28 MOTION FOR AUTHORITY TO INCUR MISCELLANEOUS IMPLEMENTATION EXPENSES 1
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14 6PRAMIN 15 16 17 18 19 20 21 22 23 24 25 26 27 28 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 miscellaneous expenses related to implementation of PG&E's proposed Plan of Reorganization, pursuant to Bankruptcy Code Section 363(b)(1).
I.
FACTUAL BACKGROUND1 PG&E filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code on April 6, 2001. A trustee has not been appointed,, and PG&E continues to function as a debtor-in-possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code.
PG&E, together with its parent corporation, PG&E Corporation, has proposed a Plan of Reorganization (as amended from time to time, the "Plan"), which has recently been voted on by creditors, along with the competing plan of reorganization proposed by the California Public Utilities Commission. The confirmation hearing has been scheduled to commence on November 12, 2002.
The Plan generally provides for the creation of three new companies, ETrans LLC, GTrans LLC and Electric Generation LLC (collectively, the "New Entities"), whereby PG&E will separate its operations into four lines of business based on PG&E's historical functions. Accordingly, the Reorganized Debtor will continue the retail gas and electric distribution business, ETrans LLC will operate the electric transmission business, GTrans LLC will operate the interstate gas transmission business, and Electric Generation LLC will operate the electric generation business.
PG&E has previously filed ten motions requesting approval for expenses related to implementation of the Plan; nine of these motions have been approved and the hearing on
'The evidentiary basis and support for the facts set forth in this Motion are contained in the Declarations of Lance Maeda ("Maeda Declaration"), My Nguyen ("Nguyen Declaration") and Eric Kirkpatrick ("Kirkpatrick Declaration"), filed concurrently herewith.
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14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 the tenth motion, the Motion for Authority to Incuri Ififormation Technology Consulting Expenses ("IT Consulting Motion"), is scheduled for August 19, 2002. As'PG&E indicated in the IT Consulting Motion and the accompanying Declaration of Stephanie Maggard (the "Maggard Declaration"), PG&E has identified additional implementation expenses that will need to be incurred before the Plan is confirmed. The Maggard Declaration and Exhibit A thereto described seven categories of such anticipated expenses. The instant Motion covers a portion of the expenses described in four of these seven categories for a total estimated cost of $1,397,180.2
' Set forth in Sections A through C below are descriptions of the various implementation projects covered by this Motion, the-work to be performed by the' consultants and the estimated costs to be incurred. The cost estimates are based on PG&E's initial scoping of the project requirements and negotiations with the consultants who have
'been selected to perform the woik.
For each of the staffinig agencies and consulting firms described below, PG&E's standard contractual provisions in place with these agencies and firms (or to be included in any contracts to be executed hereafter) do 'not guarantee future work or any minimum amount of revenue. PG&E will also maintain the right to terminate the work at anry time without cause, in which case PG&E is liable only for work performed to the date of termination plus costs reasonably~incurred by the consultant in terminating any,work in progress.
A.
Additional Information Technology ("IT") Expenses 3
- 1., Intranet Development (Cost Estimate-$385,000).'
As indicated in the'IT Consulting Motion, PG&E will use IT consultants to create 2Over the next few weeks, PG&E anticipates filing one or more motions to cover additional expenses described in the Maggard Declaration, which are not covered in this Motion.
3The factual support for this Section is set forth in the Maeda Declaration.
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&RAHCIN d*.. 15 16 17 18 19 20 21 22 23 24 25 26 27 28 an Intranet for the New Entities. The existing PG&E Intranet is an essential tool for employees, functioning as a centralized portal and repository for accessing web-enabled applications and providing employees with tools, services and information needed for daily business operations, (e.+/-, timesheets; job bidding; electric control systems; safety, health and claims policies and procedures; employee benefits and payroll information; and regulatory and compliance information). To enable the employees of the New Entities to create, maintain and publish Intranet content for all of the foregoing purposes, PG&E will obtain software licenses for TeamSite and Open Deploy. TeamSite is document management software that allows for construction of document templates and storage of Internet content. Open Deploy is software that allows for content updating to an Internet Sserver. PG&E will also require the services of IT consultants to configure and install this software. The IT consultants will also develop content templates (to ensure consistency of format used for data entry onto Internet-enabled forms), migrate approximately 200 pages of content from PG&E's, existing Intranet to the New Entities' Intranet, and provide training materials.
The software licenses will be obtained from Interwoven, Inc., a software vendor, at a cost of approximately $85,000. For the consulting work, PG&E will utilize approximately 10 technical consultants to be hired through Sapient, a firm specializing in application development and software package integration, at an estimated cost of $300,000.
Because the Intranet will provide critical information and functions for employees of the New Entities, PG&E believes that the new Intranet must be operational in advance of the Effective Date under the Plan (the "Plan Effective Date"). The work to be performed by Sapient is expected to take two months for completion. In addition, PG&E anticipates that the software products will not be delivered for at least one month after PG&E places its order, following approval of this Motion. Finally, after completion of the Iwork to be performed by Sapient, PG&E will require additional time to complete the content development process for the new Intranet.
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- 2.
Application Integration (Cost Estimaie--$266,600).
One of the key business systems utilized throughout PG&E today is the SAP system, which includes accounting and purchasing functions. PG&E intends to build a second copy of the SAP system to manage the operations and accounting functions for the New Entities. The New Entities will also be using two other key business systems: (i) the human resources management system("HRMS"), a human resources and payroll management system (PG&E previously obtained the Court's -approval to pay consulting fees in connection with the implementation of the HRMS); and (ii) the Plant Information Management System ("PIMS") currently used by the Diablo Canyon Power Plant. These three critical business' systems must all be integrated (i.e., "connected so that information can be shared and distributed between and among the three systems) in order for the Newv Entities to effectively utilize theseý systems.
The integration of these systems requires certain integration technology, as described below, without which PG&E would need to develop custom interfaces to`
accomplish the data sharing at a higher cost and without the level of flexibility provided by the integration technology.
In order to accomplish the systems integration, PG&E will purchase software licenses from BEA Systems, Inc., a software applications colisulting firm, for a cost of approximately $66,600. The software includes.BEA WebLogic JCA Adapter for Mainframe and BEA WebLogic Utility Adapter Package as well as maintenance support for these products. 'The software licenses will be'transferable to the New Entities.
In addition, a technical consultant will be needed to assist with the integration (including design, set-up and testing of the various software products), and the design, buildinig, testing'and implementation of th5 interfaces :between SAP, HRMS and PIMS. The consultant will also provide on-site'training. The consultant will be hired from'BEA Systems, Inc. at an estimated cost of $200,000.
The New Entities will require the integration of these three key systems in' advance of the Plan Effective Date in order to commence business operations. The work to MOTION FOR AUTHORITY TO INCUR MISCELLANEOUS IMPLEMENTATION EXPENSES 1
be performed by BEA is expected to take two months for completion and will begin within 2
one month following approval of this Motion. Finally, after completion of the work to be 3
performed by BEA, PG&E will require additional time, in advance of the Plan Effective 4
Date, to ensure that the systems integration is fully functional.
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3..
Investor Relations Website (Cost Estimate-$105,000).
7 Currently, PG&E's parent corporation, PG&E Corporation, has a website with an 8
investor relations section that is used daily by large numbers of shareholders, bondholders 9
and other interested parties seeking accurate and current financial and other information 10 about PG&E Corporation and its subsidiaries, including PG&E.
11 By, the Plan EffectiveDate, PG&E and PG&E Corporation will be legally 12 separate. Under the Plan, separate shares of stock in PG&E will be distributed to all those MWAIM 13 holding stock in PG&E Corporation. Since the stock will be freely traded, there will be two RICE cGu,-
14 different groups of shareholders in the two corporations, as well as distinct groups of
&'RA.NGN 15 bondholders and other investors. PG&E's website will be independent of PG&E 16 Corporation's website, and each will need to have a separate investor relations section 17 containing current and accurate information for shareholders, investors and other interested 18 parties who rely on the websites for this information.
19 PG&E proposes to hire Everse Corporation ("Everse"), a web design and 20 development firm, to design a new investor relations section of its website. The number of 21 Everse employees who will work on this project will vary at different phases of the project, 22 but it is expected that two to four individuals will be working on the project at any given 23 time, including website designers, programmers, project leaders and production artists.
24 The Everse employees will gather information about business requirements, 25 design the new investor relations section of PG&E's website, code the applications and 26 content (including both text and graphics) for the site pages, integrate the content with the 27 current website content, train PG&E employees to use and update this section of the website, 28 and arrange for the site pages to be available to members of the public visiting PG&E's MOTION FOR AUTHORITY TO INCUR MISCELLANEOUS IMPLEMENTATION EXPENSES 1
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- lPANCN 15 16 17 18 19 20 21 22 23 24 25 26 27 28 website. The total estimated cost for this work is $105,000.
In order for the investor relations portion of PG&E's'website to be fully operational by the Plan Effective Date and to begin providing information to investors following confirmation of the Plan, it is necessary that the work begin promptly. It is expected that the project will take approximately three months for completion.
B.
Facilities, Fleet And Materials Expenses4
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Facilities (Cost Estimate-$305,780).
Immediately after the Plan is implemented, many of the New Entities' operations will be carried out in space obtained, on a temporary basis, from PG&E, while more permanent space for the New Entities is located and made ready for occupancy. In many cases, employees of both PG&E and the New Entities may work on the same floor or within the same work area. However, due to the confidential a'nid sensitive nature of certain work and work materials (e._., financial planning and work involving confidential customer information or attorney-client privileged material), certain groiips of employees of PG&E and the New Entities cannot be located within the same floor or work area. PG&E has identified suitable space for these employees, one of several floors leased by PG&E at 123 Mission Street, San Francisco, which is not currently in use by PG&E as office space.
At present; this floor is'not ready for 6ccupancy and requires tenant improvements. PG&E estimates'that it wili take approximately four months to-prepare the floor for occupancy; each of the projects described below are incremental steps in this process, listed in the order in which the work will be performed. PG&E employees will perform the necessary design Work, but outside consultants are needed to complete the preparation of this floor for occupancy.,
4The factual support for this Section is set forth in the Nguyen Declaration.
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Floor Preparation Work.
ML Office Services will clear the floor and prepare it for the construction work described below, for an estimated cost of $1,200.
- b.
Construction Work.
Paradigm General Contractors, a construction firm, will adjust the interior spaces to allow for furniture placement, construct partitions and make other necessary tenant improvements to prepare the space for occupancy by the time of separation. The estimated cost for the construction work is $115,000.
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Office Furniture.
Contract Office Group, an office furniture representative, will provide and install office furniture at an estimated cost of $175,500.
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Telecommunications Equipment.
PG&E intends to purchase telecommunications equipment from Anixter, Inc. at a total cost not to exceed $14,080. PG&E employees will install the equipment after the furniture has been installed.
In the event that the Plan is not confirmed, PG&E anticipates that it will be able to use the space, office furniture and telecommunications equipment for its own business purposes.
- 2.
Fleet Vehicle Transfer (Cost Estimate-$54,800).
PG&E estimates that approximately 2,500 of PG&E's vehicles will be transferred to the New Entities. The process of transferring title to these vehicles must begin soon due to the volume of transfers. The transfers involve pulling title records, preparing title transfer documents, correcting any errors in registrations or other documents, preparing bills of sale, preparing and submitting a request to the bank for lieni-holder releases for the vehicles, and MOTION FOR AUTHORITY TO INCUR MISCELLANEOUS IMPLEMENTATION EXPENSES 1
preparing a request to the Department of Motor Vehicles to transfer the titles. Although the 2
actual requests to transfer title will not be submitted to the DMV until after the Plan is "3
confirmed, the preparatory woik must begin promptly as it may take up to 3 months.
-4 Therefore, PG&E r'equests approval for the following expenditures:
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-a.
Project Management.
7 Stan Miyamoto will provide project planning, management and scheduling 8
services for this project.5 The total estimated bost for this work is $35,600.6 9
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-Administrative Resources.
11 PG&E will hire three consultants from Corestaff Services, Inc. ("Corestaff'), a 12 staffing agency, to pull title records, prepare title transfers,-clean up any errors in 13 registrations, prepare bills of sale, and prepare lien holder release documentation. The total HOWARD RIME oN-.r 14 estimated cost for this work is $19,200.
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Materials Distribution Center (Cost Estimate-$30,000).
17 The New Entities will require a centralized materials distribution center
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("Distribution Center") to maintain an inventory of necessary equipment, parts and supplies, 19 and to distribute equipment, parts and supplies as needed to field offices. -Immediately 20 following the Plan Effective Date, PG&E intends to provide materials distribution services 21 to the New Entities out of its three existing centers, pending completion of a separate 22 Distribution Center for the New Entities.
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5 Mr. Miyamroto currenily xvorks as 'an employee of Source One but intends to form a 24 consulting firm, Stan Miyamoto Consulting, effective August 31, 2002.__
6pursuant to the Motion for Authorization to Incur and Pay Certain Procurement 25 Expenses, approved by Order entered on May 20, 2002, the.Court previously appioved project management expenses for Mr. Miyamoto. Through a misunderstandihg of the 26 coverage of the prior Order, PG&E employees requested that Mrf: Miyamoto also begin project management services for the vehicle trarisferproject. As of August 15, 2002, PG&E 27 has incurred $12,200 in expenses for Mr. Miyamoto's services on'the vehicle transfer 28 project. The foregoing amount is included in the total estimate of $35,600 set forth above.
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,_,qo.,b 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Currently, PG&E's materials distribution centers use a customized inventory system, the Warehouse Management System ("WMS"), which interfaces with SAP (the system that includes accounting and purchasing functions). During the period in which the New Entities will be served out of the same centers as PG&E, the New Entities will not use the WMS, which has been customized specifically for PG&E and would be costly and difficult to adapt for use by the New Entities. Rather, the New Entities will use the SAP Materials Management System, a standardized part of the SAP system.7 PG&E requires the assistance of consultant Stan, Miyamoto to provide project management services related to materials distribution, including the management, planning and scheduling related to making arrangements for, the temporary use of PG&E's facilities by the New Entities, and the preliminary planning for locating and setting up a Distribution Center for the New Entities. Specifically, Mr. Miyamoto will assist PG&E personnel with the following activities: (a) planhing the mechanics of moving goods and managing two separate inventories; (b) providing information to the PG&E employees working on the Materials Management System; (c) developing temporary work procedures for the distribution centers; (d) testing the Materials Management System for use by the New Entities; and (e) scheduling, tracking and reporting to PG&E on the progress of this project.
This work is expected to take up to 6 months to complete. PG&E seeks to employ Stan Miyamoto for the services described above for a total estimated cost of $30,000.8 C.
ETrans And GTrans Business Process Expenses (Cost Estimate-$250,000)9
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Tangible Property List Databases.
By the Plan Effective Date, both ETrans and GTrans will need to have accurate
'PG&E emlployees will perform the services necessary to configure the Materials Manageinent System for use by the New Entities.
8Mr. Miyamnoto has'already begun limited work, 6n this project. As of August 15, 2002, PG&E has incurred $1,958 in expenses for Mr. Miyamoto' s services. The foregoing amount is inicluded in tlie' total estimate of $30,000 set forth above.
9The factual support for this Section is set forth in the Kirkpatrick Declaration.
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- .,.15 16 17 18 19 20 21 22 23 24 25 26 27 28 Tangible Property List ("TPL") databases in place. The TPL-databases contain the mileage, location, and other information about gas and electric facilities such as gas pipelines and electric wires located in or along the public roads within local jurisdictions. PG&E and local government (cities and counties) operate under franchise agreements, whereby PG&E installs; operates and maintains electric and gas facilities in the public streets and roads, in exchange for which PG&E pays franchise fees to local government. Under the Plan, ETrans and GTrans will enter into' new franchise agreements with local government where necessary. Franchise payment calculations are based on the miles of utility facilities in the lo~al franchise -area, and local jurisdictions are entitled to audit the franchise mileage data for accuracy. Therefore, as part of the Plan implementation process, it is necessary for ETrans and GTrans to have separate TPL databases reflecting their respective electric and gas facilities for purposes of calculating franchise payments.
PG&E's existing TPL database provides only limited information differentiating between transmission facilities (which will be transferred to GTrans and ETrans) and distribution facilities (which will remain at PG&E). For many types of facilities, the differentiation between transmission and distribution facilities is inadequate, since the database&Iwas set up for one company handling both distribution and transmission. For example, when both electric transmission lines and electric distribution lines exist together on the same utility. pole, the TPL database simply lists the location and mileage of overhead
'electric Wires, without indicating whether'these lines :are related to transmission or distribution.
A consultant will be hired from Structural Integrity, an engineering and consulting firm, to: (i) develop a method to determine the correct franchise footage data to be transferred into-new TPL databases for ETrans (for-electric transmissionassets) and GTrans (for gas transmission assets),;(ii) design a step-by-step work process for accurately updating the new TPL databases, and (iii) develop a work process for ETrans and GTrans to handle "delineation requests" from local government authorities for Public Works projects (i.e., requests that existing transmission assets be identified and located so that the Public MOTION FOR AUTHORITY TO INCUR MISCELLANEOUS IMPLEMENTATION EXPENSES 1
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.17 18 19 20 21 22 23 24 25 26 27 28 Works projects will not interfere with them). The total estimated cost for this work is
$40,000.
Once the foregoing work is completed, PG&E will require additional services to separate the existing gas and electric TPL database into the separate portions that will be needed for the new ETrans and GTrans TPL databases. An estimate for these services cannot be developed until the preliminary work described above is completed; therefore, the additional services will be the subject of a subsequent motion.
The services to be performed by the Structural Integrity consultant, combined with the additional database work to follow, could take at least four months to complete.
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GTrans Business Processes.
PG&E has identified four projects related to GTrans' business operations, as described below, that must be performed in advance of the Plan Effective Date.
- a.
'Emergency Plan Manual.
PG&E currently has a number of local gas transmission Emergency Plan Manuals, which contain step by step guidelines, checklists, government agency contact numbers and other information for use during earthquakes, gas leaks, failures of gas regulators and other emergencies. After the Plan Effective Date, GTrans will require one statewide Emergency Plan Manual. The new GTrans Emergency Plan Manual ("Emergency Plan Manual") will contain the information that is currently contained in local manuals, but will also provide uniform procedures, guidelines and checklists, and be set up in accordance with the new GTrans organizational structure and facilities. For example, under the Plan, over 2,000 District Gas Regulator Stations (the delivery points between GTrans' gas transmission facilities and PG&E's gas distribution system) will be transferred from PG&E to GTrans. The Emergency Plan Manual will reflect emergency procedures to be followed for any emergency involving these Regulator Stations.
A consultant from Blue Flame (a consulting firm specializing in gas transmission MOTION FOR AUTHORITY TO INCUR MISCELLANEOUS IMPLEMENTATION EXPENSES 1
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- Ct work) will be hired to gather and review the existing manuals, and to create a new statewide Emergency Plan Manual as described above. For example, the consultant will ensure that the Emergency Plan Manual has all of the city, county and public agency contact names and telephone numbers that GTrans will need in the event of an emergency, as well as key contact information for PG&E and other GTrans' "customers. Finally, the consultant will review all aspects of the'Emergency'Plan Manual to verify that all necessary updates have been made to reflect the separation between GTrans and PG&E. The total estimated cost for this'w ork is $15,000.
This project is expected to take up to three'months.: PG&E believes it is apilopriate to lbegin the work now as PG&E has identified a consultant with the necessary eipertise and current availability to perform this critical project. Also, this work must be cornmleted in advance of the Plan Effective Date to allow foir additional time to train the employees to use and implement the new Emergency Plan Manual.
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Employee Training.
A donsultant froni Grinstead & Associates (a consulting firm specializing in gas transmission work) will be hired to identify and gather training materials and develop a targeted program to train GTrans field employees who may not be familiar with redefined job iesponsibilities and/or revised work proiocols., These field employees will maintain and operate the gas transnmission pipelines and be-responsible for emergency responses.vPG&E must enisure that the GTrans, employees'are familiar with any new orreviis6d requirerments of gas transmission work to be performed by GTrhns. -The estimated cost for this work is
?$50 000 "Aftlr Gringtead conpletes its training program development, which could take up to two months, PG&E 'taff will imnplemeht Grinstead's recommendations and set up an
,internal training program.' PG&E estimates that it could take up to -three months to set up and implemefit the necessary training for GTrans employees.-- This work must be completed
-in advance of the Plan Effective Date so-thatGTrans can provide safe, reliable service on the MOTION FOR AUTHORITY TO INCUR MISCELLANEOUS IMPLEMENTATION EXPENSES 1
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&RAIN 15 16 17 18 19 20 21 22 23 24 25 26 27 28 first day that GTrans begins business operations.
c.- I Service And Interconnection Requests.
The personnel at PG&E who handle requests for new service and/or interconnections will not be transferred to GTrans as PG&E will still perform these services.
Upon the Plan Effective Date, GTrans personnel must be prepared to respond to transmission service requests as part of day-to-day business operations. Therefore, a consultant will be hired from Blue Flame to develop new business procedures for GTrans to handle requests for new service and/or interconnections. This work will include: a review of current business procedures at PG&E; a review of tariff requirements applicable to GTrans; designing new forms to record necessary information and setting up internal L
business procedures to be followed by GTrans for new transmission service and/or interconnection requests. The estimated cost for this work is $30,000.
PG&E expects that this work will take up to three months to complete, following which PG&E requires additional time to determine and plan for the required staffing and organizational structures that will be needed by GTrans to handle new service requests.
- d.
Mapping.
Two consultants will be hired from Corestaff to assist PG&E staff in the mapping of GTrans transmission facilities onto the Gas Transmission Graphic Information System
("GTGIS"), a system of computer-generated maps to be used by GTrans. Many of PG&E's thousands of maps exist only in hard copy and will need to be retained by PG&E for its distribution business. Therefore, this project is necessary to provide GTrans with its own maps of all gas transmission facilities, to be used for both operational and emergency response purposes, including: (i) to enable GTrans employees to maintain the transmission facilities and respond in cases of emergency; and (ii) to establish correct routing of underground service alert ("USA") tickets (requests by contractors and others to mark the locations of facilities in the field so that the facilities are not harmed during construction MOTION FOR AUTHORITY TO INCUR MISCELLANEOUS IMPLEMENTATION EXPENSES 1
projects).
2 Specifically, the consultants will ensure that all GTrans facilities, including the 3
District Gas Regulator Stations, hre included in the GTGIS and that the GTGIS contains
-4 sufficient detail to meet GTrans' requirements. The estimated cost for these services is 5
$115,000.
6 The mapping project is expected to take four months to complete. PG&E 7
believes that the mapping project must be completed in advance of the Plan Effective Date
'8 in order for GTrans to commence business operations and to be prepared for emergency 9
responses.
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12 THE MISCELLANEOUS IMPLEMENTATION EXPENSES SHOULD BE APPROVED PURSUANT TO SECTION 363(B)(1) 13 OF THE BANKRUPTCY CODE RIM "RE 14 PG&E seeks approval for the various implementation expenses set forth above as A,*,0.
15 a use of estate property that is outside of the ordinary course of business under Bankruptcy 16 Code Section 363(b)(1). Since these projects are related to the implementation of the Plan, 17 PG&E believes that the purpose and scope of the expenditure may be characterized as 18 outside of the ordinary course of business and therefore requires Court approval.10 19
-The Court has considerable discretion in approving a request pursuant to Section 20 363(b)(1) of the Bankruptcy Code ("[t]he trustee, after notice and a hearing, may use, sell or 21 lease, other than in the ordinary course of business, propertyof the estate"). See In re 22 Montgomery Ward Holding Corp., 242 B.R. 147, 153 (D. Del. 1999) (affirming the 23 bankruptcy court's decision to approve expenditure for employee incentive programs, noting 24 that bankruptcy court has considerable discretion in approving a Section 363(b) motion).
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'0PG&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 MISCELLANEOUS IMPLEMENTATION EXPENSES 1
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,.,.. 15 16 17 18 19 20 21 22 23 24 25 26 27 28 In determining whether to authorize a transaction under Section 363(b)(1), courts require a debtor to show that a sound business purpose justifies such actions, applying the business judgment test. See, e._. Stephens Indus., Inc. v. McClung, 789 F.2d 386, 389-90 (6th Cir. 1986); Committee of Equity Sec. Holders v. Lionel Corp. (In re Lionel Corp.), 722 F.2d 1063, 1071 (2d Cir. 1983); see also 3 Lawrence P. King, Collier on Bankruptcy
¶363.02[l][g] (15th ed. rev. 1998).
Once the debtor has articulated a rational business justification, a presumption attaches that the decision was made "on an informed basis, in good faith and in the honest belief that the action taken was in the best interest of the [debtor]." See, e.g., Official 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 (Del.
1985)).
Sound business justifications exist for approval of the various implementation costs described above. PG&E does not have sufficient capacity or skills in-house to perform and complete the work without the assistance of the outside consultants. Also, PG&E is solvent and has sufficient cash to pay the expenses described herein without causing any detriment to its creditors." I Consistent with PG&E's previous implementation expense requests, PG&E continues to enter into contracts with the various consulting firms that allow PG&E to terminate without cause and without any penalty, so that in the event that the implementation work is no longer necessary, PG&E can minimize its costs. Furthermore, PG&E has included only those projects that have been identified as critical for completion by or in advance of the Plan Effective Date, and which require long lead time or must be completed before subsequent, related implementation work can be performed. On that basis, PG&E believes that the implementation projects described herein are necessary and should be "1'As reflected in PG&E's June 2002 Monthly Operating Report, PG&E held more than $3.7 billion in cash reserves as of June 30, 2002..
MOTION FOR AUTHORITY TO INCUR MISCELLANEOUS IMPLEMENTATION EXPENSES approved so that work can commence promptly.
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9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 DATED: August 15, 2002.
Respectfully, HOWARD, RICE, NEMEROVSKI, CANADY, FALK & RABKIN A Professional Corporation By:QU***-
By/
(-JULIE B. LANDAU Attorneys for Debtor and Debtor in Possession PACIFIC GAS AND ELECTRIC COMPANY WD 081502/F-14199051Y9/1016272/VI MOTION FOR AUTHORITY TO INCUR MISCELLANEOUS IMPLEMENTATION EXPENSES HOWARD RIM CANUVN BUK
&PFaHN CONCLUSION For all of the foregoing reasons, PG&E respectfully requests that the Court approve the costs described above and grant such other and further relief as may be just and appropriate.