ML030550194
| ML030550194 | |
| Person / Time | |
|---|---|
| Site: | Diablo Canyon  |
| Issue date: | 02/13/2003 |
| From: | Lafferty W 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: ML030550194 (7) | |
Text
1 JAMES L. LOPES (No. 63678)
WILLIAM J. LAFFERTY (No. 120814) 2 HOWARD, RICE, NEMEROVSKI, CANADY, FALK & RABKIN 3 A Professional Corporation Three Embarcadero Center, 7th Floor 4 San Francisco, California 94111-4065 Telephone: 415/434-1600 5 Facsimile: 415/217-5910 6 Attorneys for Debtor and Debtor in Possession PACIFIC GAS AND ELECTRIC COMPANY 7
8 UNITED STATES BANKRUPTCY COURT 9 NORTHERN DISTRICT OF CALIFORNIA 10 SAN FRANCISCO DIVISION 11 In re Case No. 01 30923 DM 12 PACIFIC GAS AND ELECTRIC Chapter 11 Case COMPANY, a California corporation, HoARD KJCE 13 Date: March 14, 2003 NEMEPCV Debtor. Time: 1:30 p.m.
cvFA 14 Place: 235 Pine Street, 22nd Floor FiRABKJN Federal I.D. No. 94-0742640 San Francisco, California S15 16 17 NOTICE OF MOTION AND MOTION FOR ORDER APPROVING 18 AMENDMENT TO THE TERMINATION AGREEMENT BETWEEN EAST BAY MUNICIPAL UTILITY DISTRICT 19 AND PACIFIC GAS AND ELECTRIC COMPANY; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF 20
[Declaration of David C. Landes Filed Concurrently Herewith]
21 22 23 24 25 26 4os/
27 viv 10
- e 28 MOTION FOR ORDER APPROVING AMENDMENT TO TERMINATION AGREEMENT
1 NOTICE OF MOTION AND MOTION 2 PLEASE TAKE NOTICE that on March 14,2003 at 1:30 p.m., or as soon 3 thereafter as the matter may be heard in the Courtroom of the Honorable Dennis Montali, 4 located at 235 Pine Street, 22nd Floor, San Francisco, California, Pacific Gas and Electric 5 Company, the debtor and debtor in possession in the above-captioned Chapter 11 case 6 ("PG&E"), will and hereby does move the Court for entry of an Order Approving 7 Amendment To The Termination Agreement Between East Bay Municipal Utility District 8 And Pacific Gas & Electric Company (the "Motion").
9 This Motion is based on this Notice of Motion and Motion, the accompanying 10 Memorandum of Points and Authorities, the Declaration of David C. Landes, filed 11 concurrently herewith, the record of this case and any evidence presented at or prior to the 12 hearing on this Motion.
HoWAmm 13 PLEASE TAKE FURTHER NOTICE that pursuant to Rule 9014-1(c)(2) of the KICE FALK 14 Bankruptcy Local Rules for the Northern District of California, any written opposition to the F_ABKN
"- 15 Motion and the relief requested herein must be filed with the Bankruptcy Court and served 16 upon appropriate parties (including counsel for PG&E, the Office of the United States 17 Trustee and the Official Committee of Unsecured Creditors) at least two (2) days prior to the 18 scheduled' hearing date. If there is no timely objection to the requested relief, the Court may 19 enter an order granting such relief without further hearing.
20 21 22 23 24 25 26 27 28 MOTION FOR ORDER APPROVING AMENDMENT TO TERMINATION AGREEMENT
1 MEMORANDUM OF POINTS AND AUTHORITIES 2
3 INTRODUCTION Pacific Gas and Electric Company ("PG&E" or "Debtor"), the debtor and debtor in 4
possession in the above-captioned Chapter 11 case, seeks the Court's entry of an Order 5
Approving Amendment To The Termination Agreement Between East Bay Municipal 6
Utility District And Pacific Gas & Electric Company (the "Motion").
7 From 1981 until 1999, East Bay Municipal Utility District ("EBMUD") had a 8
bilateral power purchase contract with PG&E for power EBMUD generated at its Pardee and 9
Camanche powerhouses. In 1999, EBMUD and PG&E (together the "Parties") agreed to.
10 terminate their agreement in order to settle a dispute regarding the contract's price 11 adjustment term. The termination was approved by the California Public Utilities 12 Commission ("CPUC") in April, 2000.
HumWAR^ 13 RKU Pursuant to the terms of the 1999 termination agreement (the "Termination A
&KABMN 14 "A. -- 15 Agreement"), EBMUD, agreed to make monthly payments to PG&E until 2008 (the "Royalty Payments"). The Royalty Payments were to be based on a percentage.of the 16 market price for power, as set by the California Power Exchange (the "PX") or, in the event 17 the PX no longer existed, its successor or the market that most closely approximated it.
18 Since the PX ceased, operations in January 2001, PG&E and EBMIUD have not been 19 able to agree on a successor or market that most closely approximates the PX. To resolve all 20 of their disputes, PG&E and EBMUD now wish to amend the Termination Agreement by 21 providing that the Royalty Payments be calculated as a percentage of EBMUD's actual sales 22 revenues.
23 PG&E seeks this Court's authorization to compromise the dispute with EBMUD by 24 amending the Termination Agreement on terms beneficial to both parties on the basis that 25 such a result would best promote the business interests of PG&E's estate.
26 27 28 MOTION FOR ORDER APPROVING AMENDMENT TO TERMINATION AGREEMENT 2 FACTS AND PROCEDURAL HISTORY1 3 PG&E and East Bay Municipal Utility District ("EBMUD") entered into a 4 Revised Contract for Purchase of Electric Power on or about February 10, 1981 ("1981 5 Contract"), which was amended by the First Amendment thereto, executed on or about 6 December 4, 1986 ("1986 Amendment"). The 1981 Contract and 1986 Amendment, 7 together with any other amendment thereto are known as the Power Purchase Contract 8 ("Power Purchase Contract" or "PPC").
9 After various disagreements as to the interpretation of the PPC and the respective 10 rights and obligations of PG&E and EBMUD thereunder, the Parties decided to terminate 11 their agreement. On or about October 13, 1999, the Parties entered into a termination, 12 agreement (the "Termination Agreement"). Pursuant to the Termination Agreement, mow¢m 13 EBMUD agreed to make monthly payments to PG&E until 2008 (the "Royalty Payments").
A*VJ 14 The Termination Agreement specified that the Royalty Payments were to be calculated KABKMN "15 based on the market price for power set by the PX, according to a detailed formula termed 16 the base payment (the "Base Payment"). In its definition of PX, the Termination Agreement 17 provided that in the event the California Power Exchange ceased operations, the term would 18 then refer to "its successor. If there is no single successor, then that market for Calfornia 19 electricity that most closely approximates the PX during the last full calendar year period 20 that the PX operated." Termination Agreement at § 1.5. In April, 2000, the California 21 Public Utilities Commission (the "CPUC") approved the Termination Agreement.
22 The PX ceased operations as of January, 2001. Since that time, the Parties have 23 not been able to agree on which entity or market fits the definition of the Termination 24 Agreement. The Parties have discussed the proper replacement of the PX price and the 25 potential alternative of a lump-sum buyout by EBMUD but have been unable to agree on 26 either possibility.
27 1The evidentiary basis and support for the facts set forth herein are contained in the 28 Declaration of David C. Landes filed concurrently herewith.
MOTION FOR ORDER APPROVING AMENDMENT TO TERMINATION AGREEMENT 1 In an effort to resolve their disagreement, the Parties have negotiated an 2 amendment to the Termination Agreement (the "New Amendment") which eliminates 3 confusion by changing the calculation of the Base Payment. In lieu of a formula dependent 4 on the PX or other mnarket price, the New Amendment provides that the Royalty Payments 5 shall be based on EBMUD's actual sales revenues, as specified in § I of the New 6 Amendment. New Amendment § 1.
7 The New Amendment also provides that no earlier than June 30, 2004, upon 30 8 days notice, either of the Parties may elect to return to the original Base Payment formula set
.9 forth in the Termination Agreement, using a "PX Substitute" for the remaining term, as the 10 tenr "PX Substitute" is defined in the New Amendment. New'Amendment § 3.b.
11 The New Amendment also institutes certain protective measures for both PG&E 12 and EBMUD, including audit rights. New Amendment § 2.b. Furthermore, the Parties have HOWAMR 13 each agreed to waive and release any and all claims they may have against one another RjCE NMv1ERtOVE cv'Ftm 14 related to the Termination Agreement to the date the Nevf Amendment was made. New A~15 Amendment § 4.
16 PG&E believes that the terms of the Ne w Amendment ire fair, equitable and in 17 the best interests of the estate. See Declaration of David C. Landes at ¶12.
18 19 20 ARGUMENT 21 A. The New Amendment Compromises The Dispute With EBMUD Under Terms Fair To Both Parties Without The Expense And Diversion Of 22 Resources Involved In Litigation And Should Be Authorized Pursuant To Bankruptcy Rule 9019.
23 24 Bankriptcy law favors compromises, which are considered "a normal part of the 25 process of reorganization." Protective Comm. for Indep. Stockholders of TMT Trailer Ferry 26 Inc. v. Anderson, 390 U.S. 414, 424 (1968). Accordingly, the Bankruptcy Court has great 27 latitude in approving compromise agreements. See Martin v. Kane (In re A & C Props.),
28 784 F.2d 1377, 1380-81 (9th Cir. 1986). The Court's discretion is not, however, unlimited.
MOTION FOR ORDER APPROVING AMENDMENT TO TERMINATION AGREEMENT 1 See Arden v. Motel Partners (In re Arden), 176 F.3d 1226, 1228 (9th Cir. 1999). The Court 2 may approve a compromise only if it is "fair and equitable." Protective Comm. for Indep.
3 Stockholders of TMT Trailer Ferry Inc., 390 U.S. at 424. In evaluating any proposed 4 compromise, the Court must consider the following factors:
5 (a) The probability of success in the litigation; (b) the difficulties, if any, to be encountered in the matter of collection; (c) the complexity 6 of the litigation involved, and the expense, inconvenience and delay necessarily attending it; (d) the paramount interest of the creditors and 7 a proper deference to their reasonable views in the premises.
(Woodson v. Fireman's Fund Ins. Co. (In re Woodson), 839 F.2d 610, 8 620 (9th Cir. 1988) (quoting In re A & C Props., 784 F.2d at 1381).
9 Courts weigh these factors to determine whether the compromise is in the best interests of 10 the estate. See A & C Props., 784 F.2d at 1382 (court must "weigh certain factors to 11 determine whether the compromise is in the best interest of the bankrupt estate").
12 Bearing these points in mind, the A & C Properties factors weigh in favor of H*OWR 13 RICE NEMEROVM authorizing PG&E's entry into the New Amendment. Litigating these issues against FAIK
&&AI3KIN 14 Af-"
EBMUD would undoubtedly prove time-consuming and costly, with no assurance of a 15 successful legal outcome.
16 By entering into the New Amendment, PG&E will obtain the benefit of mutual 17 liability releases and continued Royalty Payments. Amending the Termination Agreement is 18 a fair and equitable resolution of potential disputes and in the best interests of PG&E's 19 estate.
20 21 22 23 24 25 26 27 28 MOTION FOR ORDER APPROVING AMENDMENT TO TERMINATION AGREEMENT 1
2 CONCLUSION 3 For all of the foregoing reasons, PG&E respectfully requests that this Court grant 4 the Motion and enter its Order approving the said New Amendment as an appropriate 5 compromise in the interest of the estate pursuant to Bankruptcy Rule 9019.
6 DATED: February 13, 2003.
7 Respectfully, 8
HOWARD, RICE, NEMEROVSKI, CANADY, 9 FALK & RABKIN A Prof ssi nal Co oration 10 By: __ __'___
11 12 Attorneys for Debtor and Debtor in Possession PACIFIC GAS AND ELECTRIC COMPANY HaOm 13 RICE MMEMNM m 14 SKABMgd
"-- 15 WD 021303/1-1419905/pzl/1047573/vl 16 17 18 19 20 21 22 23 24 25 26 27 28 MOTION FOR ORDER APPROVING AMENDMENT TO TERMINATION AGREEMENT