ML022680489
| ML022680489 | |
| Person / Time | |
|---|---|
| Site: | Diablo Canyon  |
| Issue date: | 09/13/2002 |
| From: | Cole A Heller Ehrman White & McAuliffe, LLP, 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: ML022680489 (30) | |
Text
MARIE L. FIALA (No. 79676)
PETER J. BENVENUTTI (No. 60566)
ADAM M. COLE (No. 145344)
HELLER EHRMAN WHITE & McAULIFFE LLP 333 Bush Street San Francisco, California 94104-2878 Telephone: (415) 772-6000 Facsimile: (415) 772-6268 1
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10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 In re PACIFIC GAS AND ELECTRIC COMPANY, a California corporation, Dc Federal I.D. No. 94-0742640 ebtor.
Case No.: 01-30923 DM Chapter 11 Case Date:
Time:
Judge:
Dep't:
October 29, 2002 1:30 p.m.
Hon. Dennis Montali 235 Pine Street, 2 2 nd Floor San Francisco, California HELLER EHRMAN WHITE & McAULIFFE LLP'S FOURTH INTERIM FEE APPLICATION FOR ALLOWANCE AND PAYMENT OF COMPENSATION AND REIMBURSEMENT OF EXPENSES FOR THE PERIOD APRIL 1, 2002, THROUGH JULY 31, 2002 Pursuant to the Order Establishing Interim Fee Application and Expense Reimbursement Procedure, entered July 26, 2001, and amended November 8, 2001 ("Order re Fee Applications"), Heller Ehrman White & McAuliffe LLP ("Heller Ehrman," or the "Firm") files this Fourth Interim Fee Application (the "Application") for Allowance and Payment of Compensation and Reimbursement of Expenses for the Period April 1, 2002, Through July 31, 2002 (the "Application Period").
Heller 28 Ehrman White &
McAuliffe LLP HELLER EHRMAN WHITE & McAULIFFE LLP'S FOH INTERIM FEE APPLICATION CASE NO.: 0 1-30923 DM 49,,
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Special Counsel for Debtor in Possession PACIFIC GAS AND ELECTRIC COMPANY UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION
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McAuliffe LLP I.
RETENTION
- 1.
Heller Ehrman is Special Counsel to Pacific Gas and Electric Company, debtor and debtor-in-possession in the above-referenced bankruptcy case ("PG&E" or the "Debtor"). Heller Ehrman's retention as Special Counsel was authorized by this Court's Order Authorizing Debtor in Possession to Employ Heller Ehrman White & McAuliffe LLP as Special Counsel, entered June 4, 2001 (the "June 4, 2001, Order"), effective nuncpro tunc to April 6, 2001.
II.
SUMMARY
OF FEES AND EXPENSES REQUESTED
- 2.
The Firm billed a total of $3,127,452.34 in fees and expenses during the Application Period. The total fees represent 10,727.40 hours4.62963e-4 days <br />0.0111 hours <br />6.613757e-5 weeks <br />1.522e-5 months <br /> expended during the Application Period. Those fees and expenses break down as follows:
Period Fees Expenses Total 4/01/02 to 7/31/02
$2,939,674.20
$187,753.64
$3,127,427.84
- 3.
Pursuant to the Order re Fee Applications ¶ 6, Heller Ehrman seeks allowance of interim compensation in the total amount of $3,127,427.84.
- 4.
To date, the Firm is not owed any amounts except those identified in paragraphs 2 and 3 above.1 III.
PRIOR COMPENSATION
- 5.
As of the date of filing this Application, Heller Ehrman has received compensation for services rendered and reimbursement for expenses incurred since the date of petition (April 6, 2001) as follows:
1 As indicated in paragraph 5 below, of the $3,127,427.84 owed to Heller Ehrman for fees and expenses incurred during the Application Period, PG&E already has paid Heller Ehrman $2,059,317.05 (85% of fees and 100% of expenses for April 2002, May 2002 and June 2002; no payment has yet been received for July 2002. The amount still owing to Heller Ehrman is $1,068,135.29.
HELLER EHRMAN WHITE & McAULIFFE LLP'S FOURTH INTERIM FEE APPLICATION CASE NO.: 01-30923 DM 1
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McAuliffe LLP Application Period Amount Applied For Description Amount Paid 4/6/01-7/31/01 (first
$2,264,794.01 100% of fees and
$2,246,327.81 2 post-petition interim 100% of expenses fee application period) 8/1/01-11/30/01
$2,251,673.88 100% of fees and
$2,231,752.483 (second post-petition 100% of expenses interim fee application period) 12/1/01-3/31/02
$2,477,438.24 100% of fees and
$2,477,438.24 (third post-petition 100% of expenses interim fee application period) 4/1/02-5/30/02
$ 711,657.73 85% of fees and
$ 711,657.74 (Apr. CSA period) 100% of expenses 5/1/02-5/31/02
$ 818,698.97 85% of fees and
$ 818,698.97 (May CSA period) 100% of expenses 6/1/02-6/30/02
$ 528,960.34 85% of fees and
$ 528,960.34 (June CSA period) 100% of expenses 7/1/02-7/31/02
$ 629,515.16 85% of fees and
$0 (July CSA period) 100% of expenses Total
$9,682,738.33
$9,014,835.58
- 6.
, On December 19, 2000, PG&E paid a retainer to Heller Ehrman in the amount of $350,000. Pursuant to written agreement between the parties dated December 19, 2000, 2 The amount paid reflects a disallowance of $18,466.20 in fees. See Order Approving Heller Ehrman White & McAuliffe LLP's First Interim Fee Application for Allowance and Payment of Compensation and Reimbursement of Expenses for the Period April 6, 2001, Through July 31, 2001 (Nov. 21, 2001); Memorandum Decision Regarding Applications for Interim Compensation of Professionals (Dec. 12, 2001).
3 The amount paid reflects a disallowance of $19,921.40 in fees for certain paralegal charges. See Order Approving Heller Ehrman White & McAuliffe LLP's Second Interim Fee Application ¶ 1 (Feb. 27, 2002).
HELLER EHRMAN WHITE & McAULIFFE LLP'S FOURTH INTERIM FEE APPLICATION CASE NO.: 01-30923 DM 1
the retainer is not to apply to current billings in the ordinary course, but instead is to apply 2
to Heller Ehrman's unpaid fees and expenses in the event that PG&E fails to make payment 3
in the ordinary course. By written agreement dated April 5, 2001, the parties modified that 4
arrangement to authorize Heller Ehrman to apply the retainer to payment of unpaid pre 5
petition fees and expenses on matters that are subject to an hourly billing arrangement. The 6
foregoing arrangement was approved by this Court in its June 4, 2001 Order (approving 7
Application of Debtor in Possession for Authority to Employ Heller Ehrman White &
8 McAuliffe LLP as Special Counsel (Apr. 17, 2001)); see id. ¶¶ 9-10; Declaration of Marie 9
L. Fiala ¶ 9 (Apr. 8, 2001). As of the date of submission of this Application, Heller Ehrman 10 has applied $153,148.07 of the retainer to pay for a portion of its (i) pre-petition fees and 11 expenses on hourly rate engagements ($136,622.37) and (ii) fees and costs incurred on the 12 petition date on hourly rate engagements ($16,952.84). The current retainer balance is 13
$196,851.93.
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- 7.
PG&E and Heller Ehrman are parties to a contingent fee agreement (entered 15 into on January 1, 1993) (the "Contingent Fee Agreement") pertaining to Heller Ehrman's 16 representation of PG&E in pursuing insurance recoveries from a number of insurance 17 companies for losses incurred by PG&E as a result of environmental liabilities. The terms 18 of the Contingent Fee Agreement are described in the Supplemental Application of Debtor 19 in Possession for Authority to Employ Heller Ehrman White & McAuliffe LLP as Special 20 Counsel (Insurance Coverage -
Contingent Fee), filed May 18, 2001, and approved by this 21 Court in its June 4, 2001 Order. Heller Ehrman does not seek in this Application 22 compensation or expenses in connection with the contingent fee matter, but instead expects 23 to seek compensation and expenses with respect to that matter by a separate fee application 24 to be filed at an appropriate time.
25 IV.
CASE STATUS 26
- 8.
Heller Ehrman relies on the description of the status of the bankruptcy case 27 provided by PG&E's general bankruptcy counsel, Howard Rice Nemerovski Canady Falk &
Heller 28 Rabkin.
Ehrman White &
HELLER EHRMAN WHITE & McAULIFFE LLP'S FOURTH INTERIM FEE APPLICATION McAuliffe LLP CASE NO.: 01-30923 DM 1
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McAuliffe LLP V.
SUMMARY
OF SERVICES PERFORMED
- 9.
Heller Ehrman's services to PG&E during the Application Period are described in detail 4 in the billing statements attached to the accompanying Time Records Exhibit of Special Counsel Heller Ehrman White & McAuliffe LLP for the Period April 1, 2002, Through July 31, 2002 ("Time Records Exhibit").
- 10.
During the Application Period, Heller Ehrman has provided legal services to PG&E on a number of matters. The bulk of those services has continued to involve efforts to obtain rate relief for PG&E from governmental agencies or the courts in the wake of the California energy crisis that caused PG&E's financial condition to deteriorate and precipitated this bankruptcy filing. Heller Ehrnan's services have included advice, counseling, and representation regarding regulatory, rate setting and rate refund matters, and litigation related to those and related subject areas. Heller Ehrman has represented PG&E in connection with proceedings before the Federal Energy Regulatory Commission ("FERC")
addressing the California energy market and directly affecting PG&E. Heller Ehrman has pfovided counseling, representation and assistance to PG&E in connection with proceedings at the California Public Utilities Commission ("CPUC") involving PG&E. Heller Ehrman also has represented PG&E in connection with a lawsuit against the Commissioners of the CPUC, which seeks to require the CPUC to comply with federal law and allow PG&E to recover in its retail rates the wholesale electricity costs it incurred in meeting its state imposed obligation to serve its customers. If PG&E succeeds on its claims as pleaded, that 4 In accordance with Heller Ehrman's professional obligations to its client, Heller Ehrman's time records have been edited to prevent disclosure of confidential information, including information protected by the attorney-client privilege and the work product doctrine. Such information includes, but is not limited to, the specific subject matter of confidential attorney-client or attorney work product discussions; the identity and work product of nontestifying expert consultants; and the exact nature of the issues and theories that have been the subject of Heller Ehrman's legal research, analysis and advice to PG&E in written or oral form. Heller Ehrman submits these time records pursuant to order of the Bankruptcy Court and without any waiver of any privilege, confidentiality protection or privacy right that might apply to the information contained therein.
HELLER EHRMAN WHITE & McAULIFFE LLP'S FOURTH INTERIM FEE APPLICATION CASE NO.: 01-30923 DM 1
lawsuit ultimately could bring billions of dollars into PG&E's bankruptcy estate through 2
increased retail rate revenues. Heller Ehrman also has provided bankruptcy-related advice 3
and services to PG&E as an adjunct to its other services.5 4
- 11.
Consistent with the Court's Guidelines for Compensation of Professionals (the 5
"Fee Guidelines"), Heller Ehnrnan's services during the Application Period have been 6
recorded under 22 separate internal matter numbers. Billing statements for each of those 7
matters are attached to the accompanying Time Records Exhibit. For each matter, the 8
billing statements set forth, inter alia, the total number of hours recorded by each attorney 9
and paralegal, the timekeeper's hourly billing rate(s), and the fees requested. A narrative 10 description of each of those matters follows.
11 VI.
NARRATIVE DESCRIPTION OF SERVICES 12
- 12.
Matter No. 45: Utility General Insurance Advice. Hours spent: 32.80; 13 fees sought: $11,736.10; expenses sought: $182.78. This matter is used to record time 14 billed in connection with insurance advice and services provided by Heller Ehrman to 15 PG&E. This matter is separate from and independent of the PG&E v. Lexington Insurance 16 Company et al. insurance coverage action (Matter No. 11), which is subject to a separate 17 contingent fee agreement. See supra ¶ 7.
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During the Review Period, Heller Ehrman provided advice concerning 19 PG&E's self-insured workers' compensation program; assisted PG&E in responding to a 20 demand by the California Department of Toxic Substances Control ("DTSC") to meet 21 certain insurance requirements for insolvent operators of hazardous waste facilities; 22 provided advice regarding third-party surety bond issues; and assisted PG&E in responding 23 to a claim against PG&E by an employee benefit program.
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We anticipate providing additional services to PG&E in response to periodic
.25 requests for insurance-related advice.
26 27 See June 4, 2001, Order at p. 2 (authorizing Heller Ehrman to provide "bankruptcy related legal services as an adjunct to the other legal services to be performed by Heller Heller 28 Ehrman").
Ehrman White &
HELLER EHRMAN WHITE & McAULIFFE LLP'S FOURTH INTERIM FEE APPLICATION McAuliffe LLP CASE NO.: 01-30923 DM II
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- 15.
Matter No. 54: Modesto Irrigation District v. Destec. Hours spent: 3.50; 2
fees sought: $1,687.00; expenses sought: $40.20. This matter is used to record time 3
billed in providing legal advice to PG&E in connection with a lawsuit filed against PG&E 4
by the Modesto Irrigation District ("MID"), alleging that PG&E violated the antitrust laws 5
by refusing to accede to MID's request for interconnection service between PG&E's 6
transmission system and MID's facilities. The case was filed on August 3, 1998, and was 7
dismissed with prejudice on August 20, 1999. Plaintiff appealed the dismissal to the Ninth 8
Circuit Court of Appeals. Appellate briefing was concluded on March 31, 2000, and oral 9
argument was heard on the appeal on March 15, 2001. Thus, at the time that PG&E filed 10 the instant bankruptcy petition, the appeal had been fully briefed and argued and awaited 11 resolution by the Ninth Circuit. As a result of the bankruptcy filing by PG&E, the MID 12 action was initially stayed pursuant to the automatic stay provisions of Section 362(a) of the 13 Bankruptcy Code. The parties thereafter stipulated that plaintiff would seek relief from the 14 automatic stay for the limited purpose of resolving the appeal under submission in the Ninth 15 Circuit, including any rehearing requests or certiorari petitions. This Court granted 16 plaintiff's motion for relief from the stay on those terms and the Ninth Circuit ordered that 17 the case be resubmitted on August 3, 2001.
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During the Application Period, PG&E asked Heller Ehrman to provide 19 occasional legal advice on issues pertaining to the legal proceedings and to PG&E's 20 business dealings in matters that relate to the legal proceedings. Heller Ehrman billed only a 21 small amount of time to this matter for such advice during the Application Period.
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- 17.
Matter No. 63: California Market Failures -
FERC Docket ELOO-95 23 and Related Dockets/Matters. Hours spent: 3,079.10; fees sought: $798,017.80; 24 expenses sought: $74,392.85.6 This matter is used to record time billed in connection with 25 26 6 As originally submitted to PG&E, Heller Ehrman's July bill for Matter No. 63 did 27 not include the following entry for H S Kim dated July 31, 2002: "Draft surrebuttal testimony" (8.00 hrs at $329/hr = $2,632.00), which originally was included on the July bill Helier 28 for Matter No. 86. Heller Ehrman subsequently prepared and provided to PG&E revised Ehrman (Footnote continued)
White &
HELLER EHRMAN WHITE & McAULIFFE LLP'S FOURTH INTERIM FEE APPLICATION McAuliffe LLP CASE NO.: 01-30923 DM
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1 the principal FERC proceeding addressing failures in the California electric market. That 2
proceeding, FERC Docket ELOO-95, was brought on August 2, 2000, by San Diego Gas and 3
Electric Company ("SDG&E") against all sellers in the California wholesale electric 4
markets, seeking FERC intervention in the markets. PG&E intervened in the proceeding, 5
seeking reform of those markets, and monetary relief and refunds based on overcharges by 6
sellers. Depending on the outcome of this litigation, it is expected that PG&E may receive 7
refunds of a billion dollars or more for overcharges in California electric markets.
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Heller Ehrman has been retained since prior to the petition date to provide 9
extensive legal services to PG&E in connection with this proceeding. Heller Ehrman has 10 provided legal advice, research and strategy input; prepared and filed numerous briefs and 11 other papers; and appeared at hearings on behalf of PG&E. Heller Ehrman prepared 12 extensive papers and advocated on PG&E's behalf concerning prospective price mitigation 13 relief affecting PG&E which has been the subject of FERC orders issued November 1, 2000, 14 December 15, 2000, April 26, 2001, June 19, 2001, December 19, 2001, and May 15, 2002.
15 Heller Ehrman has likewise represented PG&E in seeking refunds for overcharges by 16 sellers, submitting numerous pleadings which led to refund orders issued by the FERC on 17 July 25, 2001, December 19, 2001, and May 15, 2002. Refund issues have been set for 18 hearing at FERC, and Heller Ehrman is trial counsel for PG&E. Heller Ehrman has 19 managed extensive discovery on refund issues, and represented PG&E at a FERC trial on 20 refund issues in March 2002. During the Application Period, Heller Ehrman engaged in 21 extensive briefing of issues that arose in the March 2002 hearing, and managed extensive 22 discovery and testimony preparation to prepare for a second trial on refund issues held in 23 August 2002.
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PG&E has been and will continue to be an active participant in numerous 25 other proceedings related to FERC Docket EROO-95, in which Heller Ehrman has been 26 27 July bills for Matter Nos. 63 and 86 reflecting a transfer of the foregoing entry from Matter No. 86 to Matter No. 63. The figures above reflect the corrected hours and fees for Matter Heller 28
- 63. The accompanying Time Records Exhibit contains the corrected bills.
Ehrman White &
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McAuliffe LLP retained to provide legal services. For example, during the Application Period, Heller Ehrman represented PG&E in a FERC proceeding relating to the legality of several hundred million dollars in "neutrality adjustment charges" that were assessed against PG&E in conjunction with PG&E's electric power purchases, and represented PG&E in numerous FERC proceedings relating to the justness and reasonableness of charges for long-term power contracts entered into during 2000-2001.
- 20.
We anticipate providing extensive continuing legal services to PG&E in this matter.
- 21.
Matter No. 64: Federal Filed Rate Case. Hours spent: 3,978.60; fees sought: $1,113,815.20; expenses sought: $63,821.56.7 This matter is used to record time billed in providing legal advice and representation to PG&E in a lawsuit filed by PG&E against the Commissioners of the CPUC. The lawsuit seeks to require the CPUC to comply with federal law and allow PG&E to recover in its retail rates the wholesale electricity costs it incurred in meeting its state-imposed obligation to serve its customers. The lawsuit stems from the electricity market crisis that started in the summer of 2000, when the wholesale cost of the electricity that PG&E purchased for delivery to its retail customers experienced unanticipated and massive increases. Although PG&E's wholesale costs rose dramatically, PG&E's retail rate revenues were frozen pursuant to AB 1890, California's electricity market restructuring statute. Between June 2000 and March 31, 2001, PG&E's wholesale costs exceeded the amounts available in PG&E's frozen retail rates to pay for such costs by 7 The foregoing hours and fees reflect a reduction in amounts shown in the original May timesheet for Matter No. 64 (attached to the Time Records Exhibit), as follows:
" May 3, 2002, T E Reiber entry "return travel from [court hearing in] San Francisco to Los Angeles (2.4)" has been reduced to 2.0 hours0 days <br />0 hours <br />0 weeks <br />0 months <br /> to 'comply with the Court's December 12, 2001, Order, resulting in a reduction of $142.40.
" Fees for the time recorded by three Heller Ehrman associates in attending a May 24, 2002, hearing on cross-motions for summary judgment -
C E Gould (3.3 hours3.472222e-5 days <br />8.333333e-4 hours <br />4.960317e-6 weeks <br />1.1415e-6 months <br /> = $729.30); H E Ware (4 hours4.62963e-5 days <br />0.00111 hours <br />6.613757e-6 weeks <br />1.522e-6 months <br /> = $1,260.00); and W Lee (3.3 hours3.472222e-5 days <br />8.333333e-4 hours <br />4.960317e-6 weeks <br />1.1415e-6 months <br /> =
$610.50) -
are not being requested, resulting in a reduction of $2,599.80.
HELLER EHRMAN WHITE & McAULIFFE LLP'S FOURTH INTERIM FEE APPLICATION CASE NO.: 01-30923 DM 1 approximately $9.2 billion. As a result of the CPUC's refusal to allow PG&E to recover its 2
wholesale costs in retail rates, PG&E amassed crippling debt, ultimately leading PG&E to 3
file the instant bankruptcy petition on April 6, 2001.
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PG&E retained Heller Ehrman in the summer of 2000 to analyze the legal 5
issues and prepare litigation to challenge the CPUC's actions denying recovery to PG&E of 6
its ever-mounting wholesale electricity costs. In November 2000, Heller Ehrman filed a 7
lawsuit on PG&E's behalf in the United States District Court for the Northern District of 8
California alleging that under well-established principles of federal preemption, including 9
the "filed rate doctrine," 8 and other legal theories PG&E is entitled to recover its wholesale 10 transmission and power purchase costs in its retail rate revenues. That case, PG&E v. Lynch 11 et al., Civil Action No. C 00 4128 (SBA) (N.D. Cal.), subsequently was transferred to the 12 United States District Court for the Central District of California, where a virtually identical 13 lawsuit by Southern California Edison Company was pending. PG&E filed an amended 14 complaint in the United States District Court for the Central District of California on 15 February 15, 2001, entitled PG&E v. Lynch et al., Civil Action No. CV 01-1083-RSWL 16 (SHx) (C.D. Cal.).
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Heller Ehrman provided legal representation to PG&E in prosecuting that 18 lawsuit, including consultation and advice, preparing and filing pleadings and motion 19 papers, appearances at court hearings and preparing for potential discovery.
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On May 2, 2001, the court dismissed PG&E's lawsuit on ripeness grounds 21 without prejudice to refiling. On August 6, 2001, Heller Ehrman refiled PG&E's lawsuit 22 against the CPUC Commissioners in the United States District Court for the Northern 23 District of California. That lawsuit, PG&E v. Lynch, et al., Case No. C 01-03023 VRW 24 25 26 s Under the "filed rate doctrine," a wholesale rate paid by a utility pursuant to a 27 federally-approved tariff is binding on a state utilities commission for retail rate-setting purposes, and a state must allow 'a utility to recover in its retail rates the wholesale costs Heller 28 paid by the utility pursuant to the federally-approved tariff.
Ehrman White &
HELLER EHRMAN WHITE & McAULIFFE LLP'S FOURTH INTERIM FEE APPLICATION McAuliffe LLP CASE NO : 01-30923 DM 1
(N.D. Cal.) (the "Filed Rate Lawsuit"), currently is pending before the Hon. Vaughn R.
2 Walker.
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During the Application Period, Heller Ehrman provided a wide range of legal 4
services to PG&E in its role as outside counsel representing PG&E in litigating its claims 5
against the CPUC Commissioners in the Filed Rate Lawsuit. Heller Ehrman conducted 6
extensive legal research and analysis regarding PG&E's claims; engaged in discovery 7
activities, including preparation of Initial Disclosures, affirmative discovery and responses 8
to defendants' discovery requests, and review of documents for production; prepared 9
extensive briefing and declarations for and participated in a hearing on cross-motions for 10 summary judgment; engaged in meet and confer activities and prepared opposition briefing 11 in connection with motions to quash a subpoena of audit materials served by PG&E; 12 communicated extensively with PG&E regarding strategy issues; and monitored 13 developments in other cases and in the energy industry bearing on PG&E's claims.
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On July 25, 2002, the Court entered an order denying motions to dismiss filed 15 by defendants and intervenor The Utility Reform Network ("TURN"), as well as motions 16 for summary judgment that had been filed by all parties (the "July 25 Order"). In the July 17 25 Order, the Court also set a case management conference for August 16, 2002, at which it 18 adopted a pretrial and trial schedule stipulated to by the parties. Pursuant to that schedule, 19 the current fact discovery cutoff is December 20, 2002, and trial is scheduled for June 9, 20 2003.
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On August 23, 2002, defendants filed a notice of appeal of the July 25 Order 22 based on the Eleventh Amendment and the Johnson Act, 28 U.S.C. § 1342. On September 23 4, 2002, defendants filed a motion to stay proceedings before Judge Walker pending their 24 appeal, and PG&E filed a motion for certification that defendants' appeal is frivolous and 25 that no stay should be imposed. A hearing on the foregoing motions is scheduled for 26 September 19, 2002.
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Heller Ehrman anticipates performing substantial additional work for PG&E Heller 28 on the Filed Rate Lawsuit in the coming months, including continuing extensive trial Ehrman White &
HELLER EHRMAN WHITE & McAULIFFE LLP'S FOURTH INTERIM FEE APPLICATION McAuliffe LLP CASE NO: 01-30923 DM 1
preparations; representing PG&E in discovery activities, including depositions and 2
document production; representing PG&E in connection with defendants' appeal of the July 3
25 Order, including motions and briefing in the Ninth Circuit; continuing to conduct legal 4
research and analysis regarding PG&E'c claims; and continuing to provide sustained advice 5
and counseling to PG&E with respect to the litigation.
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Matter No. 66: Claims re Missing London Markets. Hours spent:
7 133.20; fees sought: $17,746.90; expenses sought: $531.72. This matter is an offshoot of 8
the PG&E v. Lexington Insurance Company insurance coverage case, Matter No. 11.
9 Matter No. 11, itself, is subject to a separate contingent fee agreement. See supra ¶ 7.
10 Matter No. 66 is used to record time billed in assisting PG&E in an ongoing effort to obtain 11 recovery from its London broker for certain missing London market insurance policies that 12 PG&E was unable to prove in the litigation. English law requires London market brokers to 13 retain evidence of the material terms of the policies they secure for a policyholder, including 14 the original of a document that is referred to as the "placing slip." In this instance, the 15 broker failed to provide this and other records with the result that PG&E was not able to 16 collect from the unknown providers of this missing coverage. Heller Ehrman coordinates 17 with English counsel retained by PG&E to pursue this claim. During the Application 18 Period, Heller Ehrman continued to search for and review missing broker documents, as 19 well as prepare documents to be forwarded to London.
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Matter No. 67: Creditworthiness Docket -
FERC Docket ER01-889.
21 Hours spent: 56.20; fees sought: $18,775.70; expenses sought: $1,273.50. This docket 22 addresses, among other things, the issue of whether PG&E may be held liable for electricity 23 procured for PG&E's customers after PG&E no longer had the financial resources to assure 24 that it could pay for such power. In January 2001, PG&E became uncreditworthy under 25 existing tariffs, necessitating that an alternative buyer be found to procure power for 26 PG&E's customers. At about the same time, the California Department of Water Resources 27
("DWR") was empowered to purchase power on behalf of California's cash-deprived Heller 28 utilities. This proceeding specifically involves a January 4, 2001, filing by the ISO to Ehrman White &
HELLER EHRMAN WHITE & McAULIFFE LLP'S FOURTH INTERIM FEE APPLICATION McAuliffe LLP CASE NO.: 01-30923 DM 1
amend its FERC tariff to relax the creditworthiness pr'visions so that certain entities, 2
including PG&E, could continue buying electric power from third parties despite the fact 3
that those entities do not meet the tariffs creditworthiness requirements. FERC refused to 4
amend the tariff, leaving in place a requirement that power purchases must be made by a 5
creditworthy entity. In a series of subsequent orders, culminating in an order on 6
November 7, 2001, FERC ordered that DWR, not PG&E, should be billed for any third 7
party power transactions on or after January 17, 2001. The November 7, 2001 Order was 8
affirmed on rehearing on March 27, 2002.
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Heller Ehrman has been retained since prior to the petition date to represent 10 PG&E in connection with the FERC creditworthiness proceedings. During the Application 11 Period, Heller Ehrman has provided continuing legal representation at FERC on 12 creditworthiness issues, and has provided advice to PG&E concerning the interpretation of 13 the orders in the FERC creditworthiness docket and the impact of the FERC orders on 14 orders issued by the California Public Utilities Commission. Additionally, Heller Ehrman 15 has assisted in negotiations with DWR concerning these payment issues. Heller Ehrman's 16 efforts are intended, inter alia, to prevent PG&E from being forced to spend money that 17 otherwise would accrue to the estate.
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We anticipate performing additional work for PG&E as these matters proceed.
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Matter No. 68: Qualifying Facility ("QF") Proceedings/Issues. Hours 20 spent: 38.40; fees sought: $12,320.10; expenses sought: $378.40. PG&E obtains a 21 certain amount of its wholesale electricity from so-called qualifying facilities ("QFs"),
22 companies with which PG&E has legally-mandated and regulated long-term power purchase 23 contracts. Since December 2000, FERC has issued a number of orders relating to QF 24 contracts in light of the California electricity crisis.
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Heller Ehrman has been retained since prior to the petition date to provide 26 legal advice and representation to PG&E regarding QF matters pending at FERC, with the 27 aim of protecting PG&E's rights vis-A-vis QFs to ensure maximum availability of electricity Heller 28 for delivery to retail customers.
Ehrman White &
HELLER EHRMAN WHITE & McAULIFFE LLP'S FOURTH INTERIM FEE APPLICATION McAuhffe LLP CASE NO.: 01-30923 DM 1
2 3
4 5
6 7
8 9
10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Heller 28 Ehrman White &
McAuhffe LLP
- 35.
Heller Elirman has provided broad assistance to PG&E on QF matters. For example, Heller Ehrman has represented PG&E in connection with a FERC order granting waivers to QFs, potentially affecting the operation of QFs that had contracted to sell their output to PG&E; filings by certain QFs for authorization to sell power t6 parties other than PG&E in derogation of existing contracts; motions brought at FERC by QFs seeking relief from California Public Utility Commission decisions concerning the rates to be paid to QFs by utilities such as PG&E; a FERC Notice of Opportunity for Comment on Motions for Emergency Relief and Institution of a Section 210(d) Proceeding; a FERC order granting in part QFs' motions for emergency relief; and interconnection issues raised by FERC; and research and advice regarding the impact of PG&E's bankruptcy case on certain of its QF relationships and clients. Heller Ehrman also has been retained to represent PG&E in litigation and negotiation with QFs in other fora, including the CPUC and this Court.
During the Application Period, Heller Ehrman continued to monitor and report to PG&E on FERC issuances related to QFs, and provided advice to PG&E on various proceedings relating to QFs.
- 36.
We anticipate providing further assistance to PG&E in the coming months in connection with various proceedings involving QF issues.
- 37.
Matter No. 69: CPUC v. El Paso -
FERC Docket RPOO-241. Hours spent: 235.70; fees sought: $82,135.10; expenses sought: $4,344.70. This matter is used to record time billed in representing PG&E in a complex FERC proceeding commenced by the CPUC against El Paso Natural Gas Company and its affiliate, El Paso Merchant Energy, alleging that their exercise of market power improperly increased natural gas prices at the California border. Natural gas is used to power a significant amount of electricity generation in California, and high natural gas prices were one cause of the increase in wholesale electricity prices starting in the summer of 2000. As a purchaser of wholesale electricity and as a direct purchaser of natural gas, PG&E has been affected by high natural gas prices and therefore participates in this proceeding.
HELLER EHRMAN WHITE & McAULIFFE LLP'S FOURTH INTERIM FEE APPLICATION CASE NO.: 01-30923 DM 1
- 38.
Heller Ehrman was retained before the petition date to provide a full range of 2
legal services to PG&E in this matter, including acting as trial counsel. Hearings and 3
briefing in this matter were conducted during 2001. Additional hearings were conducted in 4
this proceeding in March and April 2002. Initial and reply briefs were filed in May and 5
June 2002; an initial decision is expected in September 2002. Heller Ehrman anticipates 6
that work on this matter will continue through 2002.
7
- 39.
Matter No. 71: Order 637 Compliance Filing and Related Complaints 8
FERC Dockets RP99-507, RPOO-139, RPOO-336. Hours spent: 100.00; fees sought:
9
$30,151.50; expenses sought: $734.28. This matter reflects legal advice to and 10 representation of PG&E in connection with proceedings at FERC to address El Paso Natural 11 Gas Company's Order No. 637 compliance filing and related complaints. El Paso's 12 compliance filing bears on El Paso's deliveries of natural gas on its pipeline system and 13 affects PG&E's interests. In May 2002, the FERC required El Paso and its customers to 14 engage in negotiations to rationalize customrers'capacity holdings on the El Paso system.
15
- 40.
During the Application Period, Heller Ehrman provided legal advice to 16 PG&E, prepared pleadings, and represented PG&E in technical conference proceedings 17 before the FERC. Heller Ehrman was retained to represent PG&E in these proceedings 18 prior to the petition date, although our involvement became active only with the 19 commencement of technical conference proceedings in July 2001. Heller Ehrman 20 anticipates that its work on this matter will continue through 2002.
21
- 41.
Matter No. 73: Other FERC Gas Dockets/latters. Hours spent: 2.0; 22 fees sought: $702.00; expenses sought: $46.50. This matter is used to record time billed 23 in providing advice and assistance on natural gas-related proceedings at FERC not 24 accounted for in other matters. Heller Ehrman has been retained since prior to the petition 25 date to act as regulatory counsel for PG&E on a range of issues relating to natural gas 26 proceedings at FERC. Under this matter, Heller Ehrman provides PG&E with general 27 FERC-related advice, including advice as to whether PG&E should intervene, comment on, Heller 28 Ehrman White &
HELLER EHRMAN WHITE & McAULIFFE LLP'S FOURTH INTERIM FEE APPLICATION McAuliffe LLP CASE NO.: 01-30923 DM 1
or otherwise participate in FERC proceedings affecting its interests. During the Application 2
Period, Heller Ehrman performed only occasional services on this matter.
3
- 42.
Matter No. 74: Seller/Generator Issues. Hours spent: 3.70; fees sought:
4 S1,450.40; expenses sought: $0.00. This matter is used to record time billed in providing 5
advice to PG&E concerning the role of third parties in the California electricity market 6
crisis, including potential claims for recovery of money or other relief that might be brought 7
against such third parties. Heller Ehrman has been retained to provide such services since 8
prior to PG&E's bankruptcy filing. This engagement arises in part in connection with the 9
instant bankruptcy case and also includes issues that currently do not pertain to any 10 particular lawsuit or regulatory docket.
11
- 43.
Heller Ehrman's work on such matters has ranged from participation in 12 meetings with consultants and other counsel, to providing ongoing legal advice and 13 counseling on various issues. For example, Heller Ehrman has engaged in extensive 14 discussions with PG&E attorneys and other counsel for PG&E regarding potential claims 15 that might be brought against third parties in connection with the California electric power 16 market crisis. Heller Ehrman also has analyzed and provided advice regarding the 17 relationship of such potential claims to PG&E's Filed Rate Lawsuit (see narrative 18 description of Matter No. 64, supra) and to PG&E's bankruptcy case. Heller Ehrman has 19 worked extensively with consultants retained by PG&E in connection with such potential 20 claims. Heller Ehrman also has assisted PG&E in its efforts to obtain discovery relating to 21 participation by generators and marketers in California's PX and ISO markets. Heller 22 Ehrman billed only a small amount of time to this matter for such advice during the 23 Application Period.
24
- 44.
We anticipate that PG&E will continue to rely on Heller Ehrman for advice on 25 these matters, and, if appropriate, to represent it or consult with other counsel in connection 26 with lawsuits or other actions involving third parties.
27
- 45.
Matter No. 75: General Corporate Issues. Hours spent: 2.0; fees sought:
Heller 28 S918.00; expenses sought: $0.00. This matter records time billed in providing general Ehrman White &
HELLER EHRMAN WHITE & McAULIFFE LLP'S FOURTH INTERIM FEE APPLICATION McAuliffe LLP CASE NO.: 01-30923 DM 1
2 3
4 5
6 7
8 9
10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Heller 28 Ehrman White &
McAuliffe LLP corporate advice to PG&E. Heller Ehrman has been retained to provide such services since prior to PG&E's bankruptcy filing. This matter does not correspond to any particular lawsuit or regulatory docket. Rather, it encompasses legal advice and counseling on a wide range of corporate issues, typically episodic and discrete.
- 46.
Heller Ehrman's work on such matters both prior to and after the filing of PG&E's bankruptcy petition has ranged from oral advice in response to specific questions posed by PG&E, to providing revisions and comments on documents or preparing more formal memoranda. For example, before and during the Application Period, Heller Ehrman has been asked to review various public disclosure filings made with the Securities Exchange Commission and to comment on portions of such filings that describe litigation or regulatory matters in which Heller Ehrman provides legal representation to PG&E; to review and revise PG&E's antitrust compliance policies; and to provide general legal guidance in connection with various securities litigation filings naming PG&E as a defendant, including coordinating with counsel for co-defendants and implementing the bankruptcy stay with respect to such litigation. From time to time, Heller Ehrman also assists PG&E in identifying other types of new litigation filings naming PG&E as a defendant and implementing the bankruptcy stay in those lawsuits. During the Application Period, Heller Ehrman billed only a small amount of time to this matter for such advice.
- 47.
We anticipate that PG&E will continue to call on Heller Ehrman for such episodic representation as general corporate issues arise, although it is impossible to predict in advance the nature or extent 6f such future matters.
- 48.
AMatter No. 76: CPUC Docket 01-03-082. Hours spent: 10.40; fees sought: $4,032.20; expenses sought: $1.08. This matter is used to record time billed in analyzing, performing legal research, preparing memoranda, and providing advice to PG&E regarding Decision 01-03-082 issued by the California Public Utilities Commission on March 27, 2001. That decision adopted certain retroactive regulatory accounting changes HELLER EHRMAN WHITE & McAULIFFE LLP'S FOURTH INTERIM FEE APPLICATION CASE NO.: 01-30923 DM proposed by The Utility Reform Network ("TURN"), a consumer advocacy group.9 PG&E 2 11 filed for bankruptcy protection shortly after the decision was issued.
3 4
5 6
7 8
9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 Heller 28 Ehrman White &
McAuliffe LLP
- 49.
On April 19, 2001, PG&E (through counsel Howard Rice Nemerovski Canady Falk & Rabkin) filed an application in this Court for a preliminary injunction to stay enforcement of Decision 01-03-082.10 PG&E and the CPUC extensively briefed issues relating to Decision 01-03-082 to the Court. On June 1, 2001, the Court denied PG&E's preliminary injunction application, and PG&E appealed. The appeal currently is pending before the Hon. Vaughn Walker of the United States District Court for the Northern District of California.
- 50.
CPUC Decision 01-03-082 implicates numerous technical issues involving the interplay of regulatory accounts used to track PG&E's costs and revenues in buying 9 Specifically, the decision involves the interaction between the Transition Revenue Account ("TRA"), which was used to account for PG&E's revenues from the provision of retail electric service and associated costs, including wholesale power procurement costs as well as transmission and distribution costs, and the Transition Cost Balancing Account
("TCBA"), which was used to account for so-called "stranded costs" or "transition costs,"
which are PG&E's historic investments in generation facilities and other past generation related costs that might become unrecoverable as a result of the introduction of competition into the California retail market.
Decision 01-03-082 required PG&E to restate its TRA and TCBA balances by recording the net revenues from PG&E's wholesale sales of electricity generated by PG&E's retained generation facilities in the TRA rather than in the TCBA, as had previously been the case, and then transferring the net balance in PG&E's TRA to its TCBA on a monthly basis. The accounting changes are retroactive to January 1, 1998. The CPUC found that, based on these accounting changes, the conditions for meeting the end of the retail rate freeze had not been met, and refused to raise PG&E's retail rates sufficiently to allow PG&E to recover its undercollected wholesale costs.
10 PG&E alleged therein that the CPUC's Decision No. 01-03-082 was an attempt to interfere with PG&E's preemption and other claims which are the subject of the Filed Rate Lawsuit, and that the CPUC contended that Decision No. 01-03-082 would have the effect of preventing PG&E from recovering billions of dollars in undercollected wholesale power costs. PG&E further alleged that the CPUC's Decision No. 0 1-03-082 was automatically stayed pursuant to 11 U.S.C. § 362(a)(1) and (a)(3), and that implementation of Decision No. 01-03-082 threatened the assets of the bankruptcy estate and interfered with the bankruptcy court's jurisdiction and therefore should be enjoined.
HELLER EHRMAN WHITE & McAULIFFE LLP'S FOURTH INTERIM FEE APPLICATION CASE NO.: 01-30923 DM 1
1 wholesale electricity for its customers, selling electricity, lisposing of assets, and other 2
matters. During a prior Application Period, Heller Ehrman performed extensive legal 3
services in analyzing the implications of Decision 01-03-082. During the instant 4
Application Period, Heller Ehrman performed a relatively small amount of work on this 5
matter, principally advice and comment to PG&E regarding a petition for writ of review of 6
D.01-03-082 filed by PG&E in the Supreme Court of California, which was denied.
7
- 51.
Matter No. 77: CPUC OII Proceeding. Hours spent: 316.00; fees 8
sought: $91,913.90; expenses sought: $7,707.41. This matter is used to record time 9
billed in providing legal representation and advice to PG&E relating to an investigation 10 commenced by the CPUC regarding certain transactions between PG&E and its parent 11 company, PG&E Corporation. On April 3, 2001, the CPUC issued an "Order Instituting 12 Investigation" ("OI") directed to PG&E, PG&E Corporation, and other investor-owned 13 utilities and their holding companies, commencing an investigation to determine whether the 14 utilities and their respective holding companies "have complied with relevant statutes and 15 Commission decisions in the management and oversight of their companies," The OII 16 stems from the fact that the utilities, as part of the deregulation of the electric industry, 17 changed their corporate forms in the latter part of the 1990s to include a CPUC-regulated 18 utility company and an unregulated holding company.
19
- 52.
The OI1 purports to investigate the payment of dividends by the regulated 20 utilities to their respective corporate parents, the alleged failure of the corporate parents to 21 extend additional capital funding to their regulated utility subsidiaries, the parent 22 corporations' funding of unregulated subsidiaries, and other corporate transactions. The OI 23 claims to be investigating whether these actions have violated CPUC orders and policies, to 24 determine whether additional rules, conditions, or changes are required in the applicable 25 provisions governing these matters.
26
- 53.
During tlhe Application Period, Heller Ehrman provided advice and 27 consultation to PG&E, performed legal research, and assisted in PG&E's response to Heller 28 demands for production of documents and testimony. The principal work during the Ehrman White &
HELLER EHRMAN WHITE & McAULIFFE LLP'S FOURTH INTERIM FEE APPLICATION McAuliffe LLP CASE NO.: 01-30923 DM 1 Application Period involved the preparation of a petition for review in the California Court 2
of Appeal of the CPUC's Interim Decision in the OII. We anticipate further briefing in the 3
Court of Appeal and representing PG&E in possible additional proceedings before the 4
CPUC. We thus anticipate providing ongoing services to PG&E in this matter.
5
- 54.
Matter No. 78: Other CPUC and California State Law Matters. Hours 6
spent: 148.10; fees sought: $49,874.00; expenses sought: $2,060.81. This matter 7
records services in providing legal advice to PG&E in connection with CPUC regulatory 8
proceedings and orders other than those specified above, and California legislation affecting 9
PG&E's interests. Heller Ehrman has been retained to provide such services since prior to 10 PG&E's bankruptcy filing. This matter pertains to a number of specific CPUC dockets, and 11 also includes advice that does not correspond to any particular lawsuit or regulatory docket.
12
- 55.
Heller Ehrman's work on such matters has encompassed legal advice and 13 counseling on a wide range of issues, most of which are ongoing; consulting on tactical and 14 strategic approaches in proceedings before the CPUC; and providing revisions and 15 comments on court and CPUC pleadings and other documents. For example, Heller Ehrman 16 was asked to prepare an extensive analysis of ABX-6, a California statute that affects the 17 regulatory and rate treatment of the electric generation assets owned by PG&E. Heller 18 Ehrman also was asked to review and comment on a number of draft regulatory and judicial 19 filings that in part address ABX-6 and its potential impact on PG&E. On other occasions, 20 Heller Ehrman has been asked to provide advice related to CPUC regulatory proceedings 21 involving the so-called California Procurement Adjustment ("CPA"). In general terms, the 22 CPA is a component of PG&E's rates added by the California Legislature in response to the 23 energy crisis to recover the costs of the State's purchases of power on behalf of PG&E's 24 customers. As with ABX-6, Heller Ehrman has been asked to review and comment on a 25 number of draft regulatory and judicial filings that in part address CPA. Heller Ehrman also 26 has been asked to provide advice and to review and comment on draft regulatory filings 27 regarding the CPUC's ratemaking for PG&E's Utility Retained Generation ("URG") assets.
Heller 28 From time to time, Heller Ehrman also has assisted PG&E with regard to other state Ehrman White &
HELLER EHRMAN WHITE & McAULIFFE LLP'S FOURTH INTERIM FEE APPLICATION McAuliffe LLP CASE NO.: 01-30923 DM 1
legislative and regulatory issues, including: Other potential state legislation affecting 2
PG&E's interests, CPUC proceedings pertaining to the planned construction of proposed 3
new transmission facilities by PG&E; DWR's procurement of electric power on behalf of 4
PG&E's retail customers; and CPUC proceedings pertaining to the mechanisms by which 5
DWR's costs are quantified and recovered through PG&E's billings to its retail customers.
6 During the Application Period, Heller Ehrman provided advice and consultation to PG&E 7
related to proposed legislation, performed legal research and provided legal advice relevant 8
to various state regulatory proceedings, and assisted in PG&E's response to demands for 9
production of documents and testimony before a legislative committee.
10
- 56.
We anticipate that PG&E will continue to call on Heller Ehrman for advice in 11 connection with the foregoing matters, as well as future regulatory or legislative actions, 12 although we cannot predict in advance the nature or extent of such future matters or 13 services.
14
- 57.
Matter No. 79: Other Advice, Consultation, Research re Energy Issues.
15 Hours spent: 111.60; fees sought: $39,048.50; expenses sought: $2,607.19. This matter 16 is used to record time billed for advice, consultation and research on energy issues not 17 covered by other matters. Prior to the Application Period, for example, Heller Ehrman's 18 work on this matter included consulting with PG&E regarding preparation of responses to 19 requests for information from California legislators.
20
- 58.
During the Application Period, a variety of projects arose relating to the 21 bankruptcy proceeding of the California Power Exchange ("PX") and related FERC 22 proceedings. Until January 2001, PG&E purchased virtually all of its electric power 23 through the PX. Currently, the PX is holding in trust hundreds of millions of dollars in 24 collateral of many power sellers, as well as over $1 billion in funds that were paid by buyers 25 of power such as PG&E and that are awaiting potential distribution to sellers. The PX has 26 filed claims against PG&E for over $2 billion in allegedly unpaid bills. Heller Ehrman has 27 represented PG&E in various FERC proceedings relating to the governance of the PX, the Heller 28 continued funding of the PX, and the disposition of funds and collateral held by the PX.
Ehrman White &
HELLER EHRMAN WHITE & McAULIFFE LLP'S FOURTH INTERIM FEE APPLICATION McAuliffe LLP CASE NO.: 01-30923 DM 1
Various sellers have sought to eliminate their collateral held by the PX, or have sought 2
disbursement of PX funds, and Heller Ehrman has assisted PG&E in keeping those funds 3
and collateral available at the PX until the FERC refund proceedings are resolved. Heller 4
Ehrman has likewise counseled PG&E on numerous energy-related questions concerning 5
regulatory and other issues relating to the PX bankruptcy proceeding. The goal of those 6
efforts has been to oppose unfounded claims against PG&E, and to protect PG&E's rights to 7
funds to which it is entitled.
8
- 59.
We anticipate periodically being called upon to continue to provide advice and 9
consultation to PG&E on various energy-related issues such as these questions relating to 10 the PX.
11
- 60.
Matter No. 80: CPUC Prudence Review. Hours spent: 413.20; fees 12 sought: $105,780.40; expenses sought: $1,009.73. This matter is used to record time 13 billed in providing legal services to PG&E in connection PG&E's 2001 Annual Transition 14 Cost Proceeding ("ATCP") currently ongoing before the CPUC, as well as other anticipated 15 future CPUC proceedings, which address the reasonableness of PG&E's generation and 16 procurement practices and PG&E's ability to recover billions of dollars in procurement and 17 generation-related costs.
18
- 61.
During the Application Period, Heller Ehrman provided oral and written 19 advice to PG&E regarding the factual and legal issues that have arisen in the CPUC 20 proceedings described above, and assisted with responses to data requests.
21
- 62.
The ATCP proceeding was scheduled for additional presentation of testimony, 22 hearing and briefing in 2002; that schedule has been superseded. Heller Ehrman will 23 continue to assist PG&E in those activities. We thus anticipate providing extensive ongoing 24 services to PG&E in connection with the foregoing proceedings.
25
- 63.
Matter No. 81: Ancillary Bankruptcy Services Related to Other Matters, 26 and Administration. Hours spent: 19.80; fees sought: $4,200.40; expenses sought:
27
$0.00. The fees reflected in this matter encompass services relating to PG&E's Chapter 11 Heller 28 case, typically involving the interrelationship between the bankruptcy case or bankruptcy Ehrman White &
HELLER EHRMAN WHITE & McAULIFFE LLP'S FOURTH INTERIM FEE APPLICATION McAuliffe LtP CASE NO.: 01-30923 DM 1
law and Heller Ehrman's services or expertise in the primary areas for which it was engaged 2
as Special Counsel. More specifically, services recorded in this matter include:
3
- a.
Advice and consultation to PG&E or its other counsel pursuant to 4
specific request by PG&E regarding pending or contemplated litigation in the Chapter 11 5
case, particularly litigation involving claims or subject matters related to the other matters 6
for which Heller Ehrman is or may be retained; 7
- b.
Advice and consultation to PG&E or its other counsel pursuant to 8
specific request by PG&E regarding litigation or bankruptcy strategy affecting other matters 9
for which Heller Ehrman is or may be retained, or as to which Heller Ehrman's litigation, 10 regulatory or transactional expertise enables it to provide added value to the exercise, 11 particularly including advice on such matters bearing on the formulation of PG&E's plan of 12 reorganization or the content of the disclosure statement; 13
- c.
Advice to PG&E or internally within Heller Ehrman regarding the 14 effect of the bankruptcy filing and bankruptcy law on pending or contemplated litigation, 15 transactions or relationships within the scope of Heller Ehrman's engagement as Special 16 Counsel; 17
- d.
Research, analysis and advice to PG&E regarding various bankruptcy 18 law issues or matters arising out of or related to litigation, regulatory or transactional 19 matters for which Heller Ehrman was retained as Special Counsel; 20
- e.
Monitoring developments in the Chapter 11 case and providing internal 21 communication and advice to Heller Ehrman's litigation, regulatory and transactional 22 lawyers regarding the bankruptcy case to facilitate the performance of their services as 23 Special Counsel in their non-bankruptcy areas of responsibility; and 24
- f.
Research, analysis and advice to PG&E on certain bankruptcy law 25 issues as a backup or second opinion to advice provided by PG&E's other counsel.
26
- 64.
During the Application Period, Heller Ehrman provided legal advice regarding 27 the CPUC's Plan of Reorganization but did not otherwise bill significant time to this matter.
Heller 28 We anticipate being called upon to continue to provide ongoing advice and consultation to Ehrman White &
HELLER EHRMAN WHITE & McAULIFFE LLP'S FOURTH INTERIM FEE APPLICATION McAuliffe LLP CASE NO.: 01-30923 DM 1
PG&E on various matters, issues and questions in this area, but are unable to predict the 2
nature or scope of future services.
3
- 65.
Matter No. 82: Bankruptcy -
Employment and Fee Applications.
4 Hours spent: 350.80; fees sought: $79,750.40; expenses sought: S4,296.21. During the 5
Application Period, the services and fees in this matter related primarily to Heller Ehrrnan's 6
preparation of its Third Interim Fee Application and four monthly Cover Sheet 7
Applications. Extensive work was required in connection with the Third Interim Fee 8
Application, in which approximately $2.5 million in fees and expenses were at issue. The 9
Application involved assembling and filing hundreds of pages of timesheets and other 10 exhibits; preparing detailed narrative descriptions of work performed; preparing for and 11 participating in the hearing; and preparing a Response to an Objection by the United States 12 Trustee. Preparation of Heller Ehrman's monthly Cover Sheet Applications also involved 13 substantial time and effort.
14
- 66.
The timekeepers principally dedicated to Matter 82 during the Application 15 period were Adam M. Cole and David R. Luster. Mr. Cole recorded 89.3 hours3.472222e-5 days <br />8.333333e-4 hours <br />4.960317e-6 weeks <br />1.1415e-6 months <br /> with a time 16 value of $30,540.60, and Mr. Luster recorded 90.40 hours4.62963e-4 days <br />0.0111 hours <br />6.613757e-5 weeks <br />1.522e-5 months <br /> with a time value of $14,155.80.
17 Mr. Cole, a shareholder, was assigned responsibility for managing the fee application 18 process and cover sheet application process, in large part because he has the lowest billing 19 rate of all Heller Ehrman shareholders working on the engagement. Mr. Luster, a senior 20 paralegal, was assigned to this task based on his comprehensive overall knowledge of the 21 PG&E Matters, enabling him to provide the most efficient support and assistance.
22
- 67.
Matter No. 85: Appeals of FERC Orders -
Dockets EL 00-95 et al.
23 Hours spent: 183.60; fees sought: $32,253.40; expenses sought: $3,188.12. This matter 24 involves the appeals of FERC orders in Dockets ELOO-95 and related dockets. On 25 December 19, 2001, FERC issued an appealable order resolving many of the outstanding 26 issues relating to refunds for overcharges in California power markets and prospective price 27 mitigation in California power markets. Over 50 parties, including PG&E, filed petitions Heller 28 for review of the December 19, 2001, Order and its predecessor orders. A subsequent Ehrman White &
HELLER EHRMAN WHITE & McAULIFFE LLP'S FOURTH INTERIM FEE APPLICATION McAuliffe LLP CASE NO
- 01-30923 DM 1
FERC order was issued on May 15, 2002, and again over 50 parties filed petitions for 2
review. Those petitions were filed in both the D.C. Circuit and Ninth Circuit Courts of 3
Appeals, although it appears that they all have been consolidated in the Ninth Circuit.
4
- 68.
Heller Ehrman has been retained to represent PG&E in these appeals. During 5
the Application Period, Heller Ehrman provided legal advice and filed papers on PG&E's 6
behalf. On August 22, 2002, the Ninth Circuit stayed the pending appeals and remanded the 7
proceeding to FERC to allow the parties to adduce additional evidence on certain issues.
8 We anticipate performing significant additional work for PG&E as these appeals proceed, 9
and as any matters are litigated concerning the Ninth Circuit remand.
10
- 69.
Matter No. 86: FERC Fact-Finding Investigation. Hours spent:
11 1,353.60; fees sought: $387,284.40; expenses sought: $19,336.92.11 This matter involves 12 a proceeding initiated by FERC in early 2002 to investigate activities in the electric and gas 13 markets in the western United States from January 2000 through December 2001. A series 14 of disclosures about potential market manipulation by Enron, and concerning other behavior 15 by other electric and gas market participants, prompted FERC to initiate a broad-reaching 16 investigation. PG&E is impacted by the investigation in two significant ways: (i) because 17 PG&E was a market participant in western electric and gas markets during the relevant 18 period, PG&E, like all market participants, has been required to comply with extensive 19 discovery requests propounded by FERC; (ii) because PG&E was a net buyer in electric and 20 gas markets during the relevant period, it may be able to recover significant sums 21 (potentially hundreds of millions or billions of dollars) if FERC finds that buyers in those 22 markets were overcharged as a result of wrongful behavior. Heller Ehrman has represented 23 PG&E in connection with both issues, counseling PG&E in its internal investigations to 24 25 "The July bill for Matter 86 as originally submitted to PG&E contained a July 31, 2002, entry for H S Kim ("Draft surrebuttal testimony"; 8.00 hrs at $329/hr = $2,632.00).
26 See supra note 6. Heller Ehrman subsequently prepared and provided to PG&E revised July 27 bills for Matter Nos. 63 and 86 reflecting a transfer of the foregoing entry from Matter No.
86 to Matter No. 63. The figures above reflect the corrected hours and fees for Matter 86.
Heller 28 The accompanying Time Records Exhibit contains the corrected bills.
Ehrman White &
HELLER EHRMAN WHITE & McAULIFFE LLP'S FOURTH INTERIM FEE APPLICATION McAuliffe LLP CASE NO.: 01-30923 DM 1
comply with FERC discovery requests, and advising PG&E on relief that may be available 2
as a result of the investigation. We anticipated performing significant additional services for 3
PG&E as this investigation proceeds.
4
- 70.
Matter No. 87: Abbell Credit Corp., et al. v. Bank of America 5
Corporation, et al. Hours spent: 155.10; fees sought: $56,080.80; expenses sought:
6 S1,799.68. This now-resolved matter involved claims by purchasers of commercial notes 7
issued by PG&E from Banc of America Securities, L.C.C. ("BAS"), one of the dealers 8
appointed to sell the notes and redeem them at maturity. Plaintiffs alleged that the notes 9
were not prime quality commercial paper as of the date of issuance and thus did not fall 10 within the nonregistration exemption of Section 3(a)(3) of the Securities Act of 1933.
11 Plaintiffs' complaint alleged three counts against BAS, the third being an alleged violation 12 of Section 12(1) of the 1933 Act.
13
- 71.
Although PG&E was not named as a defendant in the Abbell Credit litigation, 14 BAS threatened to proceed against PG&E, especially if BAS was not able to establish on 15 summary judgment that the commercial paper was prime quality when issued. BAS's 16 threatened litigation against PG&E focused on the fact that PG&E represented and 17 warranted to BAS that its commercial paper "shall not require the registration of the Notes 18 under the Securities Act of 1933, as amended." BAS also contended that its dealer 19 agreement with PG&E obligated PG&E to indemnify BAS.
20
- 72.
In light of BAS's position, PG&E sought legal representation from Heller 21 Ehrman to evaluate, among other things: (i) BAS's chances of recovery from PG&E in the 22 threatened litigation; (ii) the effect of the automatic stay in bankruptcy on any claim BAS 23 may have against PG&E; (iii) the risk that the pending litigation would have a preclusive 24 effect on any claim brought by BAS against PG&E; and (iv) the possibility that PG&E 25 could assist BAS resolve the litigation, while at the same time protecting its own interests.
26 Ultimately, PG&E provided BAS with a declaration intended to help resolve the Abbell 27 Credit litigation -
namely, a declaration on behalf of PG&E establishing that the notes at Heller 28 issue properly fell within the nonregistration exemption of Section 3(a)(3). After receiving Ehrman White &
HELLER EHRMAN WHITE & McAULIFFE LLP'S FOURTH INTERIM FEE APPLICATION McAuliffe LLP CASE NO.: 01-30923 DM 1
the declaration, BAS resolved the matter with plaintiffs through a mediator. It now appears 2
that BAS will not be pursuing any claim for indemnity against PG&E relating to the 3
settlement. Accordingly, it is unlikely that Heller Ehrman will be called on to perform any 4
significant additional services on this matter.
5 VII.
REQUIRED DISCLOSURES AND CERTIFICATION 6
- 73.
Heller Ehrman has not charged for expenses for: (a) office overhead; (b) 7 secretarial overtime; (c) charges for after-hours and weekend air conditioning and other 8
utilities; (d) cost of meals or transportation provided to attorneys and staff who work late; 9
(e) word processing and similar clerical functions; and (f) amenities such as newspapers, 10 shoe shines, dry cleaning, etc., and the cost of lunches while Heller Ehrman personnel are 11 away from the office.
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- 74.
By agreement with PG&E, Heller Ehrman's in-house photocopy charges 13 (regularly charged to other clients of the firm at 22¢ per page) have been reduced to 12¢ per 14 page, and facsimiles have been charged at 75¢ per page for outgoing transmissions 15 (regularly charged at $1.50), with no charge for incoming transmissions.
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- 75.
Computerized legal research is billed at the standard Westlaw and LEXIS 17 rates without markup or discount. Heller Ehrman receives a volume discount from Westlaw 18 and LEXIS which is not allocable to any particular matter, and which Heller Ehrman does 19 not attribute to any particular client, including PG&E.
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- 76.
Heller Ehrman believes that the regular hourly rates of the attorneys and 21 paralegals employed by Heller Ehrman for similar services of lawyers and paralegals of 22 reasonably comparable skill and reputation are consistent with those prevailing in the 23 various legal communities in which Heller Ehrman's attorneys and paralegals practice.
24 Heller Ehrman's compensation and expense reimbursemerit requested in this Application 25 have been billed at rates, in accordance with practices, more favorable than those 26 customarily employed by Heller Ehrman and generally accepted by Heller Ehrman's clients.
27 Pursuant to a Master Fee Agreement with PG&E, Heller Ehrman has agreed to apply a 10%
Heller 28 discount from regular hourly rates to the fees of all timekeepers Working on the matters for Ehrman White &
HELLER EHRMAN WHITE & McAULIFFE LLP'S FOURTH INTERIM FEE APPLICATION McAuliffe LLP CASE NO.: 01-30923 DM 1
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McAuliffe LLP which compensation is sought herein, and to provide a significant additional billing accommodation as described in the following paragraph.
- 77.
Specifically, pursuant to the Master Fee Agreement between PG&E and Heller Ehrman, Heller Ehrman has agreed to freeze for the first two years in the lifetime of a matter the billing rates of shareholders working on that matter at 90% of the shareholder's rate in place when the matter commenced. The rates of associates and paralegals are not frozen at any time, but are charged at 90% of the rate in place when the work is performed.
- 78.
Heller Ehrman has neither received nor been promised any compensation from any source in connection with this case or its services to be performed herein, except compensation and reimbursement of expenses to be allowed by this Court and paid from the estate, pursuant to the applicable provisions of the Bankruptcy Code and Rules. To date, Heller Ehrman has received no payments from any source for its fees and expenses in this case, other than (a) those described in paragraph 5 above ($9,014,835.58); (b) those described in paragraph 6 above ($153,615.61, applied to retainer); and (c) a refund of
$7,395.00 and cancellation of a $9,825.26 charge in connection with its contingent fee engagement relating to insurance coverage matters (which are not the subject of this Application).
- 79.
Heller Ehrman has no agreement or understanding for sharing any fees or expenses which Heller Ehrman may receive in this case with any person other than members and associates of Heller Ehrman.
VIII. REQUEST FOR COMPENSATION
- 80.
Based on the foregoing, Heller Ehrman requests the Court to approve this Application; to allow it fees and expenses on an interim basis in the respective amounts of
$2,939,674.20 and $187,753.64; and to authorize PG&E to pay the allowed amounts forthwith.
- 81.
(a) Attached behind Tab 1 to the accompanying Time Records Exhibit and as Exhibit A to the Certification of Adam M. Cole ("Cole Certification") is the name of each professional who performed services in connection with the various matters described HELLER EHRMAN WHITE & McAULIFFE LLP'S FOURTH INTERIM FEE APPLICATION CASE NO.: 01-30923 DM 1
herein during the period covered by this Application and the hourly rates for each such 2
professional on such matters; (b) attached behind Tab 2 to the Time Records Exhibit is a 3
summary of the fees and expenses, and additional information, for each matter; (c) attached 4
behind Tabs 3-24 to the Time Records Exhibit are the detailed time and expense statements 5
for the Application Period that comply with all Northern District of California Bankruptcy 6
Local Rules and Compensation Guidelines, the Guidelines of the Office of the United States 7
Trustee, and the Court's December 12, 2001, Memorandum Decision Regarding 8
Applications for Interim Compensation of Professionals; and (d) attached as Exhibit B to the 9
Cole Certification is a list of the qualifications and experience of all timekeepers for whom 10 compensation is sought.
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- 82.
The Firm has served a copy of this Application (without Exhibits) on the 12 Special Notice List in this case.
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- 83.
The interim compensation and reimbursement of expenses sought in this 14 Application is on account and is not final. Upon the conclusion of this case, the Firm will 15 seek fees and reimbursement of the expenses incurred for the totality of the services 16 rendered in the case. Any interim fees or reimbursement of expenses approved by this 17 Court and received by the Firm will be credited against such final fees and expenses as may 18 be allowed by this Court.
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HELLER EHRMAN WHITE & McAULIFFE LLP'S FOURTH INTERIM FEE APPLICATION McAuhiffe LLP CASE NO: 01-30923 DM 1
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McAuhiffe LLP
- 84.
The Firm represents and warrants that its billing practices comply with all Northern District of California Bankruptcy Local Rules and Compensation Guidelines and the Guidelines of the Office of the United States Trustee, except as otherwise stated in the Cole Certification.
Dated: September 13, 2002 Respectfully submitted, HELLER EHRMAN WHITE & McAULIFFE LLP By:
ADAM M. COLE Special Counsel for Debtor in Possession PACIFIC GAS AND ELECTRIC COMPANY HELLER EHRMAN WHITE & McAULIFFE LLP'S FOURTH INTERIM FEE APPLICATION CASE NO.: 01-30923 DM