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
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 12-3 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 Chapter 11 Case 13 PACIFIC GAS AND ELECTRIC, 14 COMPANY, a California corporation, wC'AlOV4"
- Date:" September 4, 2002 Time: 9:30 a.m. I PJK Debtor. "Place- 235 Pine Street, 22nd Floor
~o*,,A* 15 San Francisco, California 16 Federal I.D. No. 94-0742640 17 18 NOTICE OF MOTION AND MOTION FOR AUTHORITY TO INCUR MISCELLANEOUS IMPLEMENTATION EXPENSES; 19 "MEMORANDUM OFPOINTS AND AUTHORITIES IN SUPPORT THEREOF 20
[SUPPORTING DECLARATIONS'OF LANCE MAEDA, MY NGUYEN 21 AND ERIC KIRKPATRICK FILED SEPARATELY]
22 23 24 r
25 26 K0 .
27 28 MOTION FOR AUTHORITY TO INCUR MISCELLANEOUS IMPLEMENTATION EXPENSES
1 TABLE OF CONTENTS 2 Page 3 NOTICE OF MOTION AND MOTION 1 4 ,MEMORANDUM OF POINTS AND AUTHORITIES 2 5 j.- X ~FACTUAL BACKGROUND 2 6 A. Additional Information Technology ("IT") Expenses 3 7 1. Intranet Development (Cost Estimate-$3 85,000). 3 8 2. Application Integration (Cost Estimate-$266,600). 5 9 3. Investor Relations Website (Cost Estimate-$ 105,000). 6 10 B. Facilities, Fleet And Materials Expenses 7 11 1L Facilities (Cost Estimate-$305,780). 7 12 a. Floor Preparation Work. 8 HOWARD 13 b. Construction Work. 8 RKIE cvN;.D 14 c. Office Furniture. 8 AhO-, ... 15 d. Telecommunications Equipment. 8 16 2. Fleet Vehicle Transfer (Cost Estimate-$S54,800). 8 17 a. Project Management. 9 18 b., Administrative Resources. 9 19 3. Materials Distribution Center (Cost,Estimate-$30,000). 9 20 C. ETraris And GTrans Business Process Expenses (Cost Estimate-$250,000) 11 21
- 1. Tangible Property List Databases. 11 22
- 2. GTrans Business Processes. 12 23
- a. Emergency Plan Manual. 12 24
- b. Employee Training. 13 25
- c. Service And Interconnection Requests. 14
"" 26
- d. Mapping. 14 27 2 r
'1 28 MOTION FOR AUTHORITY TO INCUR MISCELLANEOUS IMPLEMENTATION EXPENSES
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1 TABLE OF CONTENTS 2 Pag-e 3 II. THE MISCELLANEOUS IMPLEMENTATION EXPENSES SHOULD BE APPROVED PURSUANT TO SECTION 363(B)(1) 4 OF THE BANKRUPTCY CODE 15 17 5 CONCLUSION 6
7 8
9 10 11 12 HOWARD 13 RXI
""A 14
- . 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MOTION FOR AUTHORITY TO INCUR MISCELLANEOUS IMPLEMENTATION EXPENSES
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1 TABLE OF AUTHORITIES 2 Page(s) 3 4 Cases 5 Committee of Equity Sec. Holders v. Lionel Corp. (In re Lionel Corp.), 722 F.2d 1063 (2d Cir. 1983) 16 6
In re Montgomery Ward Holding Corp., 242 B.R. 147 (D. Del. 1999) 16 7
Official Comm. of Subordinated Bondholders v. Integrated Res., Inc. (In re 8 Integrated Res., Inc.), 147 B.R. 650 (S.D.N.Y. 1992) 16 9 Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985) 16 10 Stephens Indus., Inc. v. McClung, 789 F.2d 386 (6th Cir. 1986) 16 11 12 Statutes 13 Bankruptcy Code HOM.RKa §1107 2 cvNwD 14 §1108 2
]IA
&RAM(IN §327(a) 15 i,*~ .* 15 §363(b)(1) 2, 15, 16 16 Rule 9014-1 (c)(2) Bankruptcy Local Rules 1 17 18 Other Authorities 19 3 Lawrence P. King, Collier on Bankruptcy ¶363.02[1][g] (15th ed. rev.
1998) 16 20 21 22 23 24 25 26 27 28 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 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 miscellaneous expenses related to implementation of PG&E's proposed Plan of 5 Reorganization, pursuant to Bankruptcy Code Section 363(b)(1).
6 7 I.
.8 FACTUAL BACKGROUND1 9 PG&E filed a voluntary petition for relief under Chapter 11 of the Bankruptcy 10 Code on April 6, 2001. A trustee has not been appointed,, and PG&E continues to function 11 as a debtor-in-possession pursuant to Sections 1107 and 1108 of the Bankruptcy Code.
12 PG&E, together with its parent corporation, PG&E Corporation, has proposed a 13 Plan of Reorganization (as amended from time to time, the "Plan"), which has recently been HOWAM RICE N 14 voted on by creditors, along with the competing plan of reorganization proposed by the 6PRAMIN
, 15 California Public Utilities Commission. The confirmation hearing has been scheduled to 16 commence on November 12, 2002.
17 The Plan generally provides for the creation of three new companies, ETrans 18 LLC, GTrans LLC and Electric Generation LLC (collectively, the "New Entities"), whereby 19 PG&E will separate its operations into four lines of business based on PG&E's historical 20 functions. Accordingly, the Reorganized Debtor will continue the retail gas and electric 21 distribution business, ETrans LLC will operate the electric transmission business, GTrans 22 LLC will operate the interstate gas transmission business, and Electric Generation LLC will 23 operate the electric generation business.
24 PG&E has previously filed ten motions requesting approval for expenses related 25 to implementation of the Plan; nine of these motions have been approved and the hearing on 26
'The evidentiary basis and support for the facts set forth in this Motion are contained 27 in the Declarations of Lance Maeda ("Maeda Declaration"), My Nguyen ("Nguyen Declaration") and Eric Kirkpatrick ("Kirkpatrick Declaration"), filed concurrently herewith.
28 MOTION FOR AUTHORITY TO INCUR MISCELLANEOUS IMPLEMENTATION EXPENSES 1 the tenth motion, the Motion for Authority to Incuri Ififormation Technology Consulting 2 Expenses ("IT Consulting Motion"), is scheduled for August 19, 2002. As'PG&E indicated 3 in the IT Consulting Motion and the accompanying Declaration of Stephanie Maggard (the 4 "Maggard Declaration"), PG&E has identified additional implementation expenses that will 5 need to be incurred before the Plan is confirmed. The Maggard Declaration and Exhibit A 6 thereto described seven categories of such anticipated expenses. The instant Motion covers 7 a portion of the expenses described in four of these seven categories for a total estimated 8 cost of $1,397,180.2 9 ' Set forth in Sections A through C below are descriptions of the various 10 implementation projects covered by this Motion, the-work to be performed by the' 11 consultants and the estimated costs to be incurred. The cost estimates are based on PG&E's 12 initial scoping of the project requirements and negotiations with the consultants who have 13' 'been selected to perform the woik.
~ 14 For each of the staffinig agencies and consulting firms described below, PG&E's 15 standard contractual provisions in place with these agencies and firms (or to be included in 16 any contracts to be executed hereafter) do 'not guarantee future work or any minimum 17 amount of revenue. PG&E will also maintain the right to terminate the work at anry time 18 without cause, in which case PG&E is liable only for work performed to the date of 19 termination plus costs reasonably~incurred by the consultant in terminating any,work in 20 progress.
21 3
22 A. Additional Information Technology ("IT") Expenses 23 1. , Intranet Development (Cost Estimate-$385,000).'
24 As indicated in the'IT Consulting Motion, PG&E will use IT consultants to create 25 2Over the next few weeks, PG&E anticipates filing one or more motions to cover 26 additional expenses described in the Maggard Declaration, which are not covered in this 27 Motion.
3The factual support for this Section is set forth in the Maeda Declaration.
28 MOTION FOR AUTHORITY TO INCUR MISCELLANEOUS IMPLEMENTATION EXPENSES 1 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
,3 applications and providing employees with tools, services and information needed for daily 4 business operations, (e.+/-, timesheets; job bidding; electric control systems; safety, health 5 and claims policies and procedures; employee benefits and payroll information; and 6 regulatory and compliance information). To enable the employees of the New Entities to 7 create, maintain and publish Intranet content for all of the foregoing purposes, PG&E will 8 obtain software licenses for TeamSite and Open Deploy. TeamSite is document 9 management software that allows for construction of document templates and storage of 10 Internet content. Open Deploy is software that allows for content updating to an Internet 11 Sserver. PG&E will also require the services of IT consultants to configure and install this 12 software. The IT consultants will also develop content templates (to ensure consistency of H~kVA 13 format used for data entry onto Internet-enabled forms), migrate approximately 200 pages of EANV 14 content from PG&E's, existing Intranet to the New Entities' Intranet, and provide training
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, . d*..15 materials.
16 The software licenses will be obtained from Interwoven, Inc., a software vendor, 17 at a cost of approximately $85,000. For the consulting work, PG&E will utilize 18 approximately 10 technical consultants to be hired through Sapient, a firm specializing in 19 application development and software package integration, at an estimated cost of $300,000.
20 Because the Intranet will provide critical information and functions for 21 employees of the New Entities, PG&E believes that the new Intranet must be operational in 22 advance of the Effective Date under the Plan (the "Plan Effective Date"). The work to be 23 performed by Sapient is expected to take two months for completion. In addition, PG&E 24 anticipates that the software products will not be delivered for at least one month after 25 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 26 27 development process for the new Intranet.
28 MOTION FOR AUTHORITY TO INCUR MISCELLANEOUS IMPLEMENTATION EXPENSES 1 2. Application Integration (Cost Estimaie--$266,600).
2 One of the key business systems utilized throughout PG&E today is the SAP 3 system, which includes accounting and purchasing functions. PG&E intends to build a 4 second copy of the SAP system to manage the operations and accounting functions for the 5 New Entities. The New Entities will also be using two other key business systems: (i) the 6 human resources management system("HRMS"), a human resources and payroll 7 management system (PG&E previously obtained the Court's -approvalto pay consulting fees 8 in connection with the implementation of the HRMS); and (ii) the Plant Information 9 Management System ("PIMS") currently used by the Diablo Canyon Power Plant. These 10 three critical business' systems must all be integrated (i.e., "connected so that information can 11 be shared and distributed between and among the three systems) in order for the Newv 12 Entities to effectively utilize theseý systems.
13 The integration of these systems requires certain integration technology, as RICE "A
14 described below, without which PG&E would need to develop custom interfaces to`
by accomplish the data sharing at a higher cost and without the level of flexibility provided
- RANGIN Ah,*,-dmb. 15 16 the integration technology.
17 In order to accomplish the systems integration, PG&E will purchase software 18 licenses from BEA Systems, Inc., a software applications colisulting firm, for a cost of 19 approximately $66,600. The software includes.BEA WebLogic JCA Adapter for Mainframe 20 and BEA WebLogic Utility Adapter Package as well as maintenance support for these 21 products. 'The software licenses will be'transferable to the New Entities.
22 In addition, a technical consultant will be needed to assist with the integration 23 (including design, set-up and testing of the various software products), and the design, 24 buildinig, testing'and implementation of th5 interfaces :between SAP, HRMS and PIMS. The 25 consultant will also provide on-site'training. The consultant will be hired from'BEA 26 Systems, Inc. at an estimated cost of $200,000.
27 The New Entities will require the integration of these three key systems in' 28 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.
5 6 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 RICE 13 holding stock in PG&E Corporation. Since the stock will be freely traded, there will be two cGu,-
&'RA.NGN 14 different groups of shareholders in the two corporations, as well as distinct groups of 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 website. The total estimated cost for this work is $105,000.
2 In order for the investor relations portion of PG&E's'website to be fully 3 operational by the Plan Effective Date and to begin providing information to investors 4 following confirmation of the Plan, it is necessary that the work begin promptly. It is 5 expected that the project will take approximately three months for completion.
6 7 B. Facilities, Fleet And Materials Expenses 4 8 1. Facilities (Cost Estimate-$305,780).
9 Immediately after the Plan is implemented, many of the New Entities' operations 10 will be carried out in space obtained, on a temporary basis, from PG&E, while more 11 permanent space for the New Entities is located and made ready for occupancy. In many 12 cases, employees of both PG&E and the New Entities may work on the same floor or within HaVARD 13 the same work area. However, due to the confidential a'nid sensitive nature of certain work RIM "CAMI 14 and work materials (e._., financial planning and work involving confidential customer ICK
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. . 15 information or attorney-client privileged material), certain groiips of employees of PG&E 16 and the New Entities cannot be located within the same floor or work area. PG&E has 17 identified suitable space for these employees, one of several floors leased by PG&E at 123 18 Mission Street, San Francisco, which is not currently in use by PG&E as office space.
19 At present; this floor is'not ready for 6ccupancy and requires tenant 20 improvements. PG&E estimates'that it wili take approximately four months to-prepare the 21 floor for occupancy; each of the projects described below are incremental steps in this 22 process, listed in the order in which the work will be performed. PG&E employees will 23 perform the necessary design Work, but outside consultants are needed to complete the 24 preparation of this floor for occupancy.,
25 26 27 4The factual support for this Section is set forth in the Nguyen Declaration.
28 MOTION FOR AUTHORITY TO INCUR MISCELLANEOUS IMPLEMENTATION EXPENSES 1 a. Floor Preparation Work.
2, ML Office Services will clear the floor and prepare it for the construction work 3 described below, for an estimated cost of $1,200.
4 5 b. Construction Work.
6 Paradigm General Contractors, a construction firm, will adjust the interior spaces 7 to allow for furniture placement, construct partitions and make other necessary tenant 8 improvements to prepare the space for occupancy by the time of separation. The estimated 9 cost for the construction work is $115,000.
10 11 c. Office Furniture.
12 Contract Office Group, an office furniture representative, will provide and install 13 office furniture at an estimated cost of $175,500.
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- d. Telecommunications Equipment.
16 PG&E intends to purchase telecommunications equipment from Anixter, Inc. at a 17 total cost not to exceed $14,080. PG&E employees will install the equipment after the 18 furniture has been installed.
19 In the event that the Plan is not confirmed, PG&E anticipates that it will be able 20 to use the space, office furniture and telecommunications equipment for its own business 21 purposes.
22 23 2. Fleet Vehicle Transfer (Cost Estimate-$54,800).
24 PG&E estimates that approximately 2,500 of PG&E's vehicles will be transferred 25 to the New Entities. The process of transferring title to these vehicles must begin soon due 26 to the volume of transfers. The transfers involve pulling title records, preparing title transfer 27 documents, correcting any errors in registrations or other documents, preparing bills of sale, 28 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:
'5 6 -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
10 b. -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 HOWARD 13 registrations, prepare bills of sale, and prepare lien holder release documentation. The total RIME oN-.r 14 estimated cost for this work is $19,200.
- IRA3ON Ai.do15 16 3. Materials Distribution Center (Cost Estimate-$30,000).
17 The New Entities will require a centralized materials distribution center
-48 ("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.
23*. 5Mr. 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.
MOTION FOR AUTHORITY TO INCUR MISCELLANEOUS IMPLEMENTATION EXPENSES F Currently, PG&E's materials distribution centers use a customized inventory 2 system, the Warehouse Management System ("WMS"), which interfaces with SAP (the 3 system that includes accounting and purchasing functions). During the period in which the 4 New Entities will be served out of the same centers as PG&E, the New Entities will not use 5 the WMS, which has been customized specifically for PG&E and would be costly and 6 difficult to adapt for use by the New Entities. Rather, the New Entities will use the SAP 7 Materials Management System, a standardized part of the SAP system.7 8 PG&E requires the assistance of consultant Stan,Miyamoto to provide project 9 management services related to materials distribution, including the management, planning 10 and scheduling related to making arrangements for,the temporary use of PG&E's facilities
'11 by the New Entities, and the preliminary planning for locating and setting up a Distribution 12 Center for the New Entities. Specifically, Mr. Miyamoto will assist PG&E personnel with HOWARD 13 the following activities: (a) planhing the mechanics of moving goods and managing two RICE v 14 separate inventories; (b) providing information to the PG&E employees working on the DUK
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,_,qo.,b . 15 Materials Management System; (c) developing temporary work procedures for the 16 distribution centers; (d) testing the Materials Management System for use by the New 17 Entities; and (e) scheduling, tracking and reporting to PG&E on the progress of this project.
18 This work is expected to take up to 6 months to complete. PG&E seeks to employ Stan 19 Miyamoto for the services described above for a total estimated cost of $30,000.8 20 21 C. ETrans And GTrans Business Process Expenses (Cost Estimate-$250,000) 9 22 1. Tangible Property List Databases.
23 By the Plan Effective Date, both ETrans and GTrans will need to have accurate 24
'PG&E emlployees will perform the services necessary to configure the Materials 25 Manageinent System for use by the New Entities.
8Mr. Miyamnoto has'already begun limited work, 6n this project. As of August 15, 26 2002, PG&E has incurred $1,958 in expenses for Mr. Miyamoto' s services. The foregoing 27 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.
28 MOTION FOR AUTHORITY TO INCUR MISCELLANEOUS IMPLEMENTATION EXPENSES 1 Tangible Property List ("TPL") databases in place. The TPL-databases contain the mileage, 2 location, and other information about gas and electric facilities such as gas pipelines and 3 electric wires located in or along the public roads within local jurisdictions. PG&E and local 4 government (cities and counties) operate under franchise agreements, whereby PG&E 5 installs; operates and maintains electric and gas facilities in the public streets and roads, in 6 exchange for which PG&E pays franchise fees to local government. Under the Plan, ETrans 7 and GTrans will enter into' new franchise agreements with local government where 8 necessary. Franchise payment calculations are based on the miles of utility facilities in the 9 lo~al franchise -area,and local jurisdictions are entitled to audit the franchise mileage data for 10 accuracy. Therefore, as part of the Plan implementation process, it is necessary for ETrans 11 and GTrans to have separate TPL databases reflecting their respective electric and gas 12 facilities for purposes of calculating franchise payments.
PG&E's existing TPL database provides only limited information differentiating HOWAMRD 13
, I ' 14 between transmission facilities (which will be transferred to GTrans and ETrans) and
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- ., .15 distribution facilities (which will remain at PG&E). For many types of facilities, the 16 differentiation between transmission and distribution facilities is inadequate, since the 17 database&Iwas set up for one company handling both distribution and transmission. For 18 example, when both electric transmission lines and electric distribution lines exist together 19 on the same utility.pole, the TPL database simply lists the location and mileage of overhead 20 'electric Wires, without indicating whether'these lines :are related to transmission or 21 distribution.
22 A consultant will be hired from Structural Integrity, an engineering and 23 consulting firm, to: (i) develop a method to determine the correct franchise footage data to 24 be transferred into-new TPL databases for ETrans (for-electric transmissionassets) and 25 GTrans (for gas transmission assets),;(ii) design a step-by-step work process for accurately 26 updating the new TPL databases, and (iii) develop a work process for ETrans and GTrans to 27 handle "delineation requests" from local government authorities for Public Works projects 28 (i.e., requests that existing transmission assets be identified and located so that the Public MOTION FOR AUTHORITY TO INCUR MISCELLANEOUS IMPLEMENTATION EXPENSES 1 Works projects will not interfere with them). The total estimated cost for this work is 2 $40,000.
3 Once the foregoing work is completed, PG&E will require additional services to 4 separate the existing gas and electric TPL database into the separate portions that will be 5 needed for the new ETrans and GTrans TPL databases. An estimate for these services 6 cannot be developed until the preliminary work described above is completed; therefore, the 7 additional services will be the subject of a subsequent motion.
8 The services to be performed by the Structural Integrity consultant, combined 9 with the additional database work to follow, could take at least four months to complete.
10 11 2. GTrans Business Processes.
12 PG&E has identified four projects related to GTrans' business operations, as Hacm,,R 13 described below, that must be performed in advance of the Plan Effective Date.
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, , 15 a. 'Emergency Plan Manual.
16 PG&E currently has a number of local gas transmission Emergency Plan
.17 Manuals, which contain step by step guidelines, checklists, government agency contact 18 numbers and other information for use during earthquakes, gas leaks, failures of gas 19 regulators and other emergencies. After the Plan Effective Date, GTrans will require one 20 statewide Emergency Plan Manual. The new GTrans Emergency Plan Manual ("Emergency 21 Plan Manual") will contain the information that is currently contained in local manuals, but 22 will also provide uniform procedures, guidelines and checklists, and be set up in accordance 23 with the new GTrans organizational structure and facilities. For example, under the Plan, 24 over 2,000 District Gas Regulator Stations (the delivery points between GTrans' gas 25 transmission facilities and PG&E's gas distribution system) will be transferred from PG&E 26 to GTrans. The Emergency Plan Manual will reflect emergency procedures to be followed 27 for any emergency involving these Regulator Stations.
28 A consultant from Blue Flame (a consulting firm specializing in gas transmission MOTION FOR AUTHORITY TO INCUR MISCELLANEOUS IMPLEMENTATION EXPENSES 1 work) will be hired to gather and review the existing manuals, and to create a new statewide 2 Emergency Plan Manual as described above. For example, the consultant will ensure that 3 the Emergency Plan Manual has all of the city, county and public agency contact names and 4 telephone numbers that GTrans will need in the event of an emergency, as well as key 5 contact information for PG&E and other GTrans' "customers. Finally, the consultant will 6 review all aspects of the'Emergency'Plan Manual to verify that all necessary updates have 7 been made to reflect the separation between GTrans and PG&E. The total estimated cost for 8 this'w ork is $15,000.
9 This project is expected to take up to three'months.: PG&E believes it is 10 apilopriate to lbegin the work now as PG&E has identified a consultant with the necessary 11' eipertise and current availability to perform this critical project. Also, this work must be 12 cornmleted in advance of the Plan Effective Date to allow foir additional time to train the HOWAD 13 employees to use and implement the new Emergency Plan Manual.
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.15 b. Employee Training.
16 A donsultant froni Grinstead & Associates (a consulting firm specializing in gas 17 transmission work) will be hired to identify and gather training materials and develop a 18 targeted program to train GTrans field employees who may not be familiar with redefined 19 job iesponsibilities and/or revised work proiocols., These field employees will maintain and 20 operate the gas transnmission pipelines and be-responsible for emergency responses.vPG&E 21' must enisure that the GTrans, employees'are familiar with any new orreviis6d requirerments of 22 gas transmission work to be performed by GTrhns. -Theestimated cost for this work is 23 ?$50 000 ' "
24 "AftlrGringtead conpletes its training program development, which could take up 25 to two months, PG&E 'taff will imnplemeht Grinstead's recommendations and set up an 26 ,internal training program.' PG&E estimates that it could take up to -three months to set up
'27 and implemefit the necessary training for GTrans employees.-- This work must be completed 28 -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 first day that GTrans begins business operations.
2 3 c.- I Service And Interconnection Requests.
4 The personnel at PG&E who handle requests for new service and/or 5 interconnections will not be transferred to GTrans as PG&E will still perform these services.
6 Upon the Plan Effective Date, GTrans personnel must be prepared to respond to 7 transmission service requests as part of day-to-day business operations. Therefore, a
- 8. consultant will be hired from Blue Flame to develop new business procedures for GTrans to 9 handle requests for new service and/or interconnections. This work will include: a review 10 of current business procedures at PG&E; a review of tariff requirements applicable to 11 GTrans; designing new forms to record necessary information and setting up internal L
12 business procedures to be followed by GTrans for new transmission service and/or HOWARD 13 interconnection requests. The estimated cost for this work is $30,000.
RIKE cqNBZ 14 PG&E expects that this work will take up to three months to complete, following
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,*,*..- 15 which PG&E requires additional time to determine and plan for the required staffing and 16 organizational structures that will be needed by GTrans to handle new service requests.
17 18 d. Mapping.
19 Two consultants will be hired from Corestaff to assist PG&E staff in the mapping 20 of GTrans transmission facilities onto the Gas Transmission Graphic Information System 21 ("GTGIS"), a system of computer-generated maps to be used by GTrans. Many of PG&E's 22 thousands of maps exist only in hard copy and will need to be retained by PG&E for its 23 distribution business. Therefore, this project is necessary to provide GTrans with its own 24 maps of all gas transmission facilities, to be used for both operational and emergency 25 response purposes, including: (i) to enable GTrans employees to maintain the transmission 26 facilities and respond in cases of emergency; and (ii) to establish correct routing of 27 underground service alert ("USA") tickets (requests by contractors and others to mark the 28 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. . .
10 ' . ..-
11 I1.
12 THE MISCELLANEOUS IMPLEMENTATION EXPENSES SHOULD BE APPROVED PURSUANT TO SECTION 363(B)(1) 13 OF THE BANKRUPTCY CODE RIM 14 "RE 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 0
18 outside of the ordinary course of business and therefore requires Court approval.1 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).
25 26 ' 0PG&E believes that the consultants described above should not be considered "professional persons" of requiring approval under Bankruptcy Code Section 327(a). This is 27 due both to the nature the services to be provided and to the consultants' limited role in proceeding.
28 connection with PG&E's reorganization' MOTION FOR AUTHORITY TO INCUR MISCELLANEOUS IMPLEMENTATION EXPENSES 1 In determining whether to authorize a transaction under Section 363(b)(1), courts 2 require a debtor to show that a sound business purpose justifies such actions, applying the 3 business judgment test. See, e._. Stephens Indus., Inc. v. McClung, 789 F.2d 386, 389-90 4 (6th Cir. 1986); Committee of Equity Sec. Holders v. Lionel Corp. (In re Lionel Corp.), 722 5 F.2d 1063, 1071 (2d Cir. 1983); see also 3 Lawrence P. King, Collier on Bankruptcy 6 ¶363.02[l][g] (15th ed. rev. 1998).
7 Once the debtor has articulated a rational business justification, a presumption 8 attaches that the decision was made "on an informed basis, in good faith and in the honest 9 belief that the action taken was in the best interest of the [debtor]." See, e.g., Official 10 Comm. of Subordinated Bondholders v. Integrated Res., Inc. (In re Integrated Res., Inc.),
11 147 B.R. 650, 656 (S.D.N.Y. 1992) (citing Smith v. Van Gorkom, 488 A.2d 858 (Del.
12 1985)).
HOWARD 13 1 Sound business justifications exist for approval of the various implementation RKE cq~x 14 costs described above. PG&E does not have sufficient capacity or skills in-house to perform
&R~tlON
, .,.. 15 and complete the work without the assistance of the outside consultants. Also, PG&E is 16 solvent and has sufficient cash to pay the expenses described herein without causing any 17 detriment to its creditors."I 18 Consistent with PG&E's previous implementation expense requests, PG&E 19 continues to enter into contracts with the various consulting firms that allow PG&E to 20 terminate without cause and without any penalty, so that in the event that the implementation 21 work is no longer necessary, PG&E can minimize its costs. Furthermore, PG&E has 22 included only those projects that have been identified as critical for completion by or in 23 advance of the Plan Effective Date, and which require long lead time or must be completed 24 before subsequent, related implementation work can be performed. On that basis, PG&E 25 believes that the implementation projects described herein are necessary and should be 26 27 "1'Asreflected 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..
28 MOTION FOR AUTHORITY TO INCUR MISCELLANEOUS IMPLEMENTATION EXPENSES 1 approved so that work can commence promptly.
2 3 CONCLUSION 4 For all of the foregoing reasons, PG&E respectfully requests that the Court 5 approve the costs described above and grant such other and further relief as may be just and 6 appropriate.
7 8 DATED: August 15, 2002.
Respectfully, 9
HOWARD, RICE, NEMEROVSKI, CANADY, 10 FALK & RABKIN A Professional Corporation 11 By:QU***-
12 By/ (-JULIE B. LANDAU HOWARD 13 RIM Attorneys for Debtor and Debtor in Possession CANUVN 14 PACIFIC GAS AND ELECTRIC COMPANY BUK
&PFaHN 15 16 17 18 19 20 21 22 23 24 25 26 27 28 WD 081502/F-14199051Y9/1016272/VI MOTION FOR AUTHORITY TO INCUR MISCELLANEOUS IMPLEMENTATION EXPENSES