ML040260526
| ML040260526 | |
| Person / Time | |
|---|---|
| Site: | Diablo Canyon  |
| Issue date: | 01/16/2004 |
| From: | Kaplan G 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: ML040260526 (23) | |
Text
1 2
3 4
5 6
7 8
9 10 JAMES L. LOPES (No. 63678)
GARY M. KAPLAN (No. 155530)
HOWARD, RICE, NEMEROVSKI, CANADY, FALK & RABKIN A Professional Corporation Three Embarcadero Center, 7th Floor San Francisco, California 94111-4024 Telephone:
415/434-1600 Facsimile:
415/217-5910 Attorneys for Debtor and Debtor in Possession PACIFIC GAS AND ELECTRIC COMPANY UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION 11 12 HEj'4YD 13 RKE GoAM 14 JUK AP*ilMb 15 16 17 18 19 20 In re PACIFIC GAS AND ELECTRIC COMPANY, a California corporation, Debtor.
Federal I.D. No. 94-0742640 Case No. 01-30923 DM Chapter 11 Case Date:
February 9, 2004 Time:
1:30 p.m.
Place:
235 Pine Street, 22nd Floor San Francisco, California Judge:
Hon. Dennis Montali NOTICE OF MOTION AND DEBTOR'S MOTION FOR ORDER APPROVING SETTLEMENT AGREEMENT AMONG THE DEBTOR, ENRON CANADA CORP.,
ENRON ENERGY MARKETING CORP., ENRON ENERGY SERVICES, INC., ENRON NORTH AMERICA CORP. AND ENRON POWER MARKETING, INC.;
SUPPORTING MEMORANDUM OF POINTS AND AUTHORITIES 21 22 23 24 25 26 27 28
[DECLARATION OF FONG WAN IN SUPPORT THEREOF FILED SEPARATELY]
DEBTOR'S MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT WITH ENRON PARTIES
1 TABLE OF CONTENTS 2
Page 3
NOTICE OF MOTION AND MOTION 1
4 MEMORANDUM OF POINTS AND AUTHORITIES 3
5 I.
FACTUAL BACKGROUND 3
6 A.
Filing Of The Bankruptcy Cases By PG&E And The Enron Parties 3
7 B.
The Enron Parties' Claims Filed In The PG&E Bankruptcy 8
Case 3
9 C.
The PG&E Claims Filed In The Enron Bankruptcy Cases 5
10 D.
The Settlement Agreement 7
11
- 1.
Allowed Retail DA Credits Claim And Release Of PG&E Claims Against EES, EEM And Related 12 Guarantee Claims 8
HoWvRD 13
- 2.
Allowed Wholesale Power & Gas Claim And Release NFA4UCYK IOf PG&E Claims Against ENA And EPMI And Related cANFAAD 14 Guarantee Claims 10
& RAWNN 15
- 3.
Limitation On EES And EEM Recovery On CRS Claims 11 16 E.
Mutual Releases 12 17 F.
Retail Settlement Termination Option And Escrow Agreement Provisions 12 18 G.
Other Provisions Of The Settlement Agreement 15 19 II.
ARGUMENT 15 20 A.
Standard For Approval Of A Compromise Under Bankruptcy 21 Law.
15 22 B.
The Probability of Success is Uncertain.
16 23 C.
Since The Settlement Agreement Primarily Involves Resolution Of The Enron Parties Claims, The Difficulty Of 24 Collection Factor Is Less Relevant; In Any Event, The Settlement Agreement Reduces The Risk Of PG&E Not 25 Recovering On The PG&E Claims By Effectively Providing For Recovery Through Reduction In The Amount Of The 26 Enron Parties Claims 16 27 D.
The Disputed Issues Are Complex And Continued Litigation Would Entail Unnecessary Expense, Inconvenience and 28 Delay.
17 DEBTOR'S MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT WITH ENRON PARTIES 1
2 3
4 5
6 7
8 9
10 21 12 HOWARD 13 RKi CPA 2 14
&R-ABMI 15l 16 217 18 19 20 21 22 23 24 25 26 27 28 TABLE OF CONTENTS Page E.
The Settlement Agreement Would Benefit The Estate And Its Creditors.
CONCLUSION 18 19 DEBTOR'S MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT WITH ENRON PARTIES
-i-
HOWARD FICE CANADY FALK
& RAB3KIN 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 28 Page(s)
Cases Martin v. Kane (In re A & C Properties), 784 F.2d 1377 (9th Cir. 1986) 15, 16 Woodson v. Fireman's Fund Ins. Co. (In re Woodson), 839 F.2d 610 (9th Cir.
1988) 15 DEBTOR'S MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT WITH ENRON PARTIES
-ill-TABLE OF AUTHORITIES
1 2
3 4
5 6
7 8
9 10 11 12 13 RKE CANY 14 MM 16 17 18 19 20 21 22 23 24 25 26 27 28 11 NOTICE OF MOTION AND MOTION PLEASE TAKE NOTICE that on February 9, 2004 at 1:30 p.m., or as soon thereafter as the matter may be heard, in the Courtroom of the Honorable Dennis Montali, located at 235 Pine Street, 22nd Floor, San Francisco, California, Pacific Gas and Electric Company, the debtor and debtor in possession in the above-captioned Chapter 11 case (the "Debtor" or "PG&E"), will and hereby does move the Court (the "Motion") for entry of an order approving a certain Settlement Agreement And Limited Mutual Release (the "Settlement Agreement") by and among PG&E on the one hand, and Enron Canada Corp.
("ECC"), Enron Energy Marketing Corp. ("EEM"), Enron Energy Services, Inc. ("EES"),
Enron North America Corp. ("ENA") and Enron Power Marketing, Inc. ("EPMI")
(collectively, the "Enron Parties"), on the other hand. By this Motion, PG&E seeks the Court's approval of the Settlement Agreement, which, as discussed in greater detail below, resolves numerous claims and related disputes between PG&E and the Enron Parties, including claims filed by the Enron Parties herein aggregating approximately $1.035 billion.'
In broad terms, the Settlement Agreement, inter alia, provides for claims of the Enron Parties aggregating approximately $1.035 billion2 to be allowed in a maximum aggregate amount of $345 million (ije., a reduction of at least $690 million), which amount can decrease to approximately $284 million (or even less) based on certain adjustments, while providing for the release of PG&E claims currently aggregating approximately $73 million on their faces plus additional unliquidated amounts. The Settlement Agreement also
'This Motion contains a general discussion of the terms and conditions of the Settlement Agreement intended to assist the Court and parties in interest in understanding the Settlement Agreement, but is qualified in its entirety by the actual language of the Settlement Agreement itself. In the event of any actual or perceived inconsistency between any provisions of the Settlement Agreement and the discussion provided herein, or in any other filings with or presentations to the Court or parties in interest, the provisions of the Settlement Agreement shall be controlling.
2As discussed below, the Settlement Agreement does not resolve a claim by EPMI asserted in an unliquidated amount estimated at approximately $30 million based on the purchase of electricity or ancillary services by PG&E in markets operated by the California Power Exchange Corporation (the "PX") or the California Independent System Operator Corporation (the "CAISO").
DEBTOR'S MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT WITH ENRON PARTIES I
contains broad mutual releases by the parties, while expressly preserving certain matters, 2
including all claims of PG&E against the Enron Parties (except EES and EEM) and their 3
affiliates relating to issues raised in Federal Energy Regulatory Commission ("FERC")
4 proceedings regarding alleged violations of the Federal Power Act or Natural Gas Act, 5
dysfunctions or potential manipulation of the Western gas or electric markets by Enron, its 6
Affiliates and others, and all claims of PG&E arising from transactions in the markets 7
operated or administered by the PX and/or the CAISO.
8 This Motion is brought pursuant to Rule 9019 of the Federal Rules of Bankruptcy 9
Procedure and is based on the grounds that the proposed Settlement Agreement is fair and 10 equitable and in the best interests of the bankruptcy estate. This Motion is based on this 11 Notice Of Motion And Motion, the accompanying Memorandum Of Points And Authorities 12 in support thereof, the supporting Declaration Of Fong Wan ("Wan Decl.") submitted 13 concurrently herewith, the record of this case, and any admissible evidence presented to the N
l,NU 14 Court prior to or at the hearing on this Motion.
15 PLEASE TAKE FURTHER NOTICE that pursuant to Rule 9014-16 l(c)(2)Error! Bookmark not defined. of the Bankruptcy Local Rules of the United States 17 District Court for the Northern District of California, any opposition to the Motion and the 18 relief requested herein must be filed with the Bankruptcy Court and served upon appropriate 19 parties (including counsel for PG&E) at least five (5) days prior to the scheduled hearing 20 date. If there is no timely objection to 21 the requested relief as described in this paragraph, the Court may enter an order granting 22 such relief without further hearing.
23
\\\\\\
24
\\\\\\
25
\\\\\\
26
\\\\\\
27
\\\\\\
28
\\\\\\
DEBTOR'S MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT WITH ENRON PARTIES 1
2 3
4 5
6 7
8 9
10 11 12 HOVPM 13 R1UE
&RAEMi PN, 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM OF POINTS AND AUTHORITIES3
~~~~I.
FACTUAL BACKGROUND A.
Filing Of The Bankruptcy Cases By PG&E And The Enron Parties On April 6, 2001 (the "PG&E Petition Date"), PG&E filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code commencing the above-captioned case (the "PG&E Bankruptcy Case") in the above-captioned Court (the "PG&E Bankruptcy Court"). PG&E is a debtor in possession and is operating its business pursuant to 11 U.S.C.
§§1107 and 1108.
Beginning on December 2, 2001 (the "Enron Petition Date"), the Enron Parties (except for ECC) and certain other direct and indirect affiliates of Enron Corp. ("Enron")
filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code, which cases are being jointly administered in Case No. 0 1-16034 (AJG) (the "Enron Bankruptcy Cases")
pending before the United States Bankruptcy Court for the Southern District of New York (the "Enron Bankruptcy Court"). The Enron Parties (except for ECC) are debtors in possession operating their respective businesses pursuant to 11 U.S.C. §§1 107 and 1108.
As discussed in greater detail below, PG&E and the Enron Parties, respectively, have each filed certain claims in the other party's bankruptcy case(s) arising from various contracts, agreements, guarantees, transactions, proceedings, disputes and other circumstances, including those listed on Schedule C attached to the Settlement Agreement.
B.
The Enron Parties' Claims Filed In The PG&E Bankruptcy Case The Enron Parties have filed certain claims in the PG&E Bankruptcy Case, as listed on Schedule A attached to the Settlement Agreement (the "Enron Parties Claims"),
including the following:
(1) Claim No. 8878 of ENA for (i) $24,13 8,010 under a certain gas agreement and (ii) $74,190,183 under a certain swap agreement.
(2) Claim No. 8879 of EPMI for (i) an unliquidated amount estimated at 3The evidentiary basis and support for the facts set forth in this Motion are contained in the Wan Declaration filed concurrently herewith.
DEBTOR'S MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT WITH ENRON PARTIES 1
approximately $30 million based on the purchase of electricity or ancillary services by PG&E in markets operated by the PX or the CAISO; (ii) an 2
unliquidated amount estimated at $33,800,000 on account of CAISO underscheduling penalty revenues; (iii) $186,000 on account of power sold under 3
certain block forward contracts "commandeered" by the State of California; and (iv) not less than $133,777,021 on account of the loss of certain collateral placed 4
with the PX.
5 (3) Claim No. 8880 of ECC for $22,054,852 under a certain gas agreement.
(4) Claim No. 8881 of EES for $239,920,010 on account of certain direct access 6
energy credits ("DA Credits") with respect to former direct access customers of EES or EEM in PG&E's service territory as to which EES or EEM (as the case 7
may be) acted as an energy service provider ("ESP")
8 (5) Claim No. 8882 of EEM for $164,029,412 on account of DA Credits.
(6) Claim No. 13378 of BBS (filed as an amendment to Claim No. 8881) for an 9
unliquideted amount estimated at $437,590,461 on account of "Customer CRS I Claims" based on certain "direct access cost responsibility surcharges" imposed 10 by the California Public Utilities Commission ("CPUC") on certain former direct access customers of EES and EEM.
11 l (7) Claim No. 13379 of EEM (filed as an amendment to Claim No. 8882) for an 12 unliquidated amount estimated at $73,393,160 on account of Customer CRS Claims.
131 HOOP 1
PG&E has filed objections to each of the Enron Parties Claims (collectively, the mmA~ 14 eRU<~s l,"Objections"). Other than certain portions of EPMJ's Claim No. 8879 (designated as items l (2) (ii), (iii) and (iv) above) which were previously disallowed by order of the PG&E 16 Bankruptcy Court, each of the Objections currently remains unresolved.5 Pursuant to the 17 Settlement Agreement, the currently remaining Enron Parties Claims aggregating 18 approximately $1.035 billion (items (1), (3), (4), (5) (6) and (7) above) will be allowed in a 19 maximum aggregate amount of $345 million, which amount can decrease to approximately 20
$284 million (or even less), based on certain adjustments, as discussed in greater detail 2 1 below. The remaining portions of EPMI's Claim No. 8879 (item (2) above) are not resolved 22 pursuant to the Settlement Agreement, nor are Claim Nos. 13378 and 13379 of EES and 23 EEM, respectively, although the latter two claims are limited to an aggregate recovery of 24 25 4Capitalized terms not defined herein have the meaning ascribed to them in the Settlement Agreement.
26 1 5Hearings on the Objections with respect to items (1), (3), (6) and (7), which have been continued multiple times based on ongoing settlement discussions, are currently 27 scheduled for February 26, 2004 at 1:30 p.m. Resolution of the Objections with respect to 2 items (2), (4) and (5) is dependent on ongoing proceedings in non-bankruptcy fora, including 28 1 the Federal Bnergy Regulatory Commission and CPUC.
DEBTOR'S MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT WITH ENRON PARTIES 1
$30 million, which is reflected in the amounts stated in the immediately preceding sentence.
2 C.
The PG&E Claims Filed In The Enron Bankruptcy Cases 3
PG&E has filed certain claims in the Enron Bankruptcy Cases, as set forth on 4
Schedule B attached to the Settlement Agreement (the "PG&E Claims"), including the 5
following:
6 (1) Claim No. 5251 against National Energy Production Corporation for $298.94 7 l on account of natural gas supply.
(2) Claim No. 12547 against EEM for at least $1,984,163.00 on account of 8
terminated transactions under a certain gas agreement.
(3) Claim No. 12562 against EES for at least $20,637,886.74 on account of 9
transmission and distribution charges under a certain ESP agreement.
10 (4) Claim No. 12563 against EES for an amount to be determined arising out of acts in Western energy markets resulting in overcharges.
11 (5) Claim No. 12564 against Enron Natural Gas Marketing Corp. in an amount to be determined arising out of acts in Western energy markets resulting in 12 overcharges.
HOWARD 13 (6) Claim No. 12572 against Enron Capital & Trade International Corp. in an
_R_
amount to be determined arising out of acts in Western energy markets resulting MIffcu14 in overcharges.
PMa__
(7) Claim No. 12573 against EPMI for at least $86,353,173.00 on account of A.am,, <
15 terminated transactions under a certain electricity agreement.
16 (8) Claim No. 12574 against EEM for at least $16,969,63 1.00 on account of transmission and distribution charges under a certain ESP agreement.
17 (9) Claim No. 12575 against EES for at least $981,293.00 on account of l 8 terminated transactions under a certain gas agreement.
18 (10) Claim No. 12576 against Enron in an amount to be determined arising out of 19 acts in Western energy markets resulting in overcharges.
(11) Claim No. 12577 against EES for at least $466,179.93 for gas storage and 20 transmission services under a certain gas agreement.
21 (12) Claim No. 12578 against ENA for at least $10,578,303.11 for terminated transactions under a certain gas agreement.
22 (13) Claim No. 12579 against EES for at least $11,762.81 on account of charges 23 under a certain ESP agreement.
(14)Claim No. 12580 against EEM for at least $34,354.00 on account of charges 24 under a certain ESP agreement.
(15) Claim No. 12581 against EEM for at least $4,027.00 for gas storage and 25 transmission services under a certain gas agreement.
26 (16) Claim No. 12931 against Enron in an amount to be determined on account of FERC refund proceedings.
27 (17) Claim No. 12932 against EEM for an amount to be determined arising out of 28 acts in Western energy markets resulting in overcharges.
DEBTOR'S MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT WITH ENRON PARTIES 1
(18) Claim No. 12935 against Enron for at least $10,739,398.32 on account of a certain guarantee of ENA obligations.
(19) Claim No. 12936 against Enron for at least $22,097,124.48 on account of a certain guarantee of EES obligations.
(20) Claim No. 12937 against EPMI for at least $62,494,044.26 on account of 4
FERC refund proceedings.
5 (21) Claim No. 12938 against Enron for at least $45,000,000 on account of a certain guarantee of EPMI obligations.
6 (22) Claim No. 12939 against EES for an amount to be determined on account of FERC refund proceedings.
(23) Claim No. 12948 against ENA in an amount to be determined arising out of 8
acts in Western energy markets resulting in overcharges.
(24) Claim No. 13361 against EPMl in an amount to be determined arising out of 9
acts in Western energy markets resulting in overcharges.
10 (25)Claim No. 22698 against EEM in an amount to be determined related to erroneous metering data.
11 (26) Claim No. 22699 against EES in an amount to be determined related to erroneous metering data.
12 (27) Claim No. 22700 against EPMI in an amount to be determined related to H(M 13 1 erroneous metering data.
1PKE mc'AM 14 e
-N Enron and the Enron Parties have indicated their objections to certain of the PG&E Claims, although they have not filed any formal objections to any of the PG&E 16 Claims. Pursuant to the Settlement Agreement, all of the PG&E Claims against EES and 17 EEM, certain of the PG&E Claims against the other Enron Parties, and the PG&E Claims 18 against Enron based on the guarantee of such Claims (items (2), (3), (4), (7), (8), (9), (11),
(12), (13), (14), (15), (17), (18), (19) (21) and (22), above), which currently aggregate 206 approximately $73 million on their face,6 will be released, with certain exceptions (e.g.,
2 1 PG&E can continue to pursue recovery with respect to items (2) and (7) against parties other 22 than Enron and its Affiliates, including certain surety bonds and letters of credit; and PG&E 23 can continue to pursue its guarantee claim against Enron (item 21) with respect to claims 24 25 6This amount reflects PG&E's receipt of payment on a judgment (as to which an appeal is currently pending) in the amount of approximately $65 million (including pre-26 1 judgment interest) based on letters of credit securing EPMI's obligations with respect to item (7). This amount also eliminates "double counting" for guarantee claims against Enron for 27 which the underlying liability is already included, and does not take into account any amounts subject to setoff. Finally, certain of the PG&E Claims assert unliquidated claims 28 against the Enron Parties, the amount of which is not included.
DEBTOR'S MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT WITH ENRON PARTIES 1
against EPMI that are not being released (items (20), (24) and (27)). All other PG&E 2
Claims against Enron and the Enron Parties (other than EES and EEM), primarily 3
unliquidated claims arising out of FERC refund proceedings, acts in Western energy markets 4
resulting in overcharges and erroneous metering data, and claims against Enron based on the 5
guarantee of such Claims (items (1), (5), (6), (10), (16) (20), (23), (24), (25), (26) and (27),
6 are preserved under the Settlement Agreement.
7 Although no Chapter 11 plan in the Enron Bankruptcy Cases has been approved 8
by the Enron Bankruptcy Court, the plan proposed by Enron provides for distributions on 9
account of unsecured claims of approximately 20% of allowed claims.7 Thus, the liquidated 10 PG&E Claims against the Enron Parties being released pursuant to the Settlement 11 Agreement, if allowed in their stated face amounts (adjusted for payments received and 12 elimination of duplicate liability for guarantee claims) as unsecured claims, would receive an HOMBD 13 estimated recovery of approximately $15 million.
CNAc 14 D.
The Settlement Agreement A;-Oz 15 PG&E and the Enron Parties were in negotiations for more than two years in an 16 attempt to resolve the Enron Parties Claims, the PG&E Claims and the parties' respective 17 objections with respect thereto. On December 23, 2003, the Debtor and the Enron Parties 18 (collectively, the "Parties") finalized and executed the Settlement Agreement, subject to the 19 approval of this Court and the Enron Bankruptcy Court, the terms of which are summarized 20 below. A copy of the Settlement Agreement is attached as Exhibit A to the Wan 21 Declaration. 8 22 7The plan proposed by Enron actually provides for different recovery percentages 23 with respect to each of the Enron debtors, but the percentages for the Enron Parties (other than ECC which is not in bankruptcy) are in the range of approximately 20%.
24 5PG&E is not attaching copies of the Settlement Agreement to the service copies of the Wan Declaration because it is too voluminous. However, PG&E will make copies of 25 such document available to anyone being served with this Motion and the Wan Declaration.
Any person served with this Motion and the Wan Declaration may obtain a copy of the 26 Settlement Agreement by written request by mail to Howard, Rice, Nemerovski, Canady, Falk & Rabkin, Attn: Nathaniel H. Hunt, Three Embarcadero Center, 7th Floor, San 27 Francisco, California 94111-4024, or by e-mail request to nhunt howardrice.com.
Additionally, copies of the Settlement Agreement will be available at the hearing on this 28 Motion if any other person wishes to review it.
DEBTOR'S MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT WITH ENRON PARTIES 1
2 3
4 5
6 7
8 9
10 I1 12 HOMM'.R 13 1RKE MIX
&RAWN 15 16 17 18 19 20 21 22 23 24 25 26 27 28 In addition to the resolution of the Enron Parties Claims and the PG&E Claims as discussed above, the Settlement Agreement contains the following other material terms:
- 1.
Allowed Retail DA Credits Claim And Release Of PG&E Claims Against EES. EEM And Related Guarantee Claims As discussed above, EES and EEM have filed Claim Numbers 8881 and 8882 in the PG&E Bankruptcy Case (items (4) and (5). listed in part I.B. above) (the "EES and EEM DA Credits Claims") in the aggregate amount of $404 million on account of DA Credits allegedly owed by PG&E. Such DA Credits are the subject of complaints previously filed by EES and EEM with the CPUC (the "CPUC Complaints"). PG&E has opposed the CPUC Complaints, which currently remain pending before the CPUC. PG&E takes the position that, inter alia, the DA Credits Claims are based upon wholesale electricity prices that FERC has determined to be unjust and unreasonable and that the CPUC should adjust the DA Credits to reflect just and reasonable electricity prices as determined by FERC.
In addition, PG&E has filed Objections to the EES and EEM DA Credits Claims as part of its Omnibus Objection to Direct Access Credit Claims filed on June 28, 2002 in the PG&E Bankruptcy Court (Docket No. 8339). The PG&E Bankruptcy Court's November 5, 2002 order on that objection (Docket No. 10920) ruled that such claims (as well as certain other claims) "constitute 'disputed' claims whose allowance is subject to further proceedings." Id. at 2, ¶2-3. PG&E also takes the position that the EES and EEM DA Credits Claims are subject to setoff based on debts owed by EES and EEM to PG&E.
The Settlement Agreement provides for the allowance of the EES and EEM DA Credits Claims in the aggregate amount of $229 million (the "Allowed Retail DA Credits Claim"), subject to certain potential reductions, as discussed below, and for the dismissal of the CPUC Complaints. Id. §§2.2(a); 4.6; 5.1(a). The Settlement Agreement also provides for the release of the PG&E Claim Numbers 12562, 12563, 12575, 12577, 12579 and 12939 against EES (items (3), (4), (9), (11), (13) and (22) listed in part I.B. above) and Claim Numbers 12547, 12574, 12580, 12581 and 12932 against EEM (items (2), (8), (14), (15) and (17) listed in part I.B. above) (collectively, the "PG&E Claims Against EES and EEM")
DEBTOR'S MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT WITH ENRON PARTIES 2
3 4
5 6
7 8
.9 10 11 12 IMAM 13 MIX CA4D 14o
.&RAsW<N AQ 15 16 17 18 19 20
.21 22 23 24 25 26 27 28 filed in the Enron Bankruptcy Cases, which currently aggregate approximately $41 million on their face, as well as the release of PG&E Claims against Enron with respect to the guarantee of such claims (including Claim No. 12936 (item (19) listed in part I.B. above)).
Id. § §5.1(c); 5.1(f); 5.1(g).
The Settlement Agreement expressly preserves PG&E Claim Numbers 22698, 22699 and 22700 against EEM, EES and EPMI, respectively (related to erroneous metering data), although such claims may not be setoff against claims of the Enron Parties; and Claim Number 12547 against EEM, limited to recovery against parties other than Enron and its Affiliates, including PG&E's claims against Federal Insurance Company based on the issuance of certain surety bonds. Id; §§5.3(h); 5.3(j).
The Settlement Agreement further provides for the release to EES and EEM of amounts that EES and EEM have deposited in escrow with the CPUC (the "CPUC Escrow Account") in the amount of approximately $22 million, with respect to disputed transmission and distribution charges, which are included in PG&E Claim Numbers 12562 and 12574 against EES and EEM, respectively (items (2) and (8) listed in part I.B. above). Id. §4.1.
The Settlement Agreement provides for the potential reduction in the amount of the Allowed Retail DA Credits Claims to the extent that Duplicative DA Credits Claims are asserted against PG&E (presumably by EES's or EEM's former customers ), PG&E provides appropriate notice to the Enron Parties of such claims ("Scheduled Duplicative DA Credits Claims"), and such claims are allowed in the PG&E Bankruptcy Case.9 Id. §2.2. In such event, the amount of the Allowed Retail DA Credits Claim will be reduced by the allowed amount of the Scheduled Duplicative DA Credits Claims, up to a maximum of
$29.5 million (i.e., the Allowed Retail DA Credits Claim could be reduced from $229 million to $199.5 million). Id. §2.2(e). To the extent that the allowed amount of Scheduled Duplicative DA Credits Claims exceed $29.5 million, PG&E is liable for the next $25 9The Settlement Agreement also provides that EES and EEM have standing to file and prosecute objections to Duplicative DA Credits Claims in the PG&E Bankruptcy Case, which objections must be filed within 30 days after the Effective Date of the Settlement Agreement. Id. §2.2(d).
DEBTOR'S MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT WITH ENRON PARTIES 1
nmillion of such amounts without any corresponding further reduction in the amount of the 2
Allowed Retail DA Credits Claim.' 0 Id.
3
- 2.
Allowed Wholesale Power & Gas Claim And Release Of PG&E Claims 4 l Against ENA And EPMI And Related Guarantee Claims 5
As discussed above, ENA and ECC have filed Claim Numbers 8878 and 8880 in 6
the PG&E Bankruptcy Case (items (1) and (3) listed in part I.B. above) (the "ENA and ECC 7
Wholesale Power & Gas Claims") in the aggregate amount of approximately $120 million 8
based on certain gas agreements. PG&E has filed Objections to the ENA and ECC 9
Wholesale Power & Gas Claims based on various grounds, including that such claims are 10 miscalculated (by a total of approximately $11 million), and that such claims are subject to 11 setoff based on debts owed to PG&E by ENA and EPMI, including PG&E Claim Numbers 12 12573 and 12578 against EPMI and ENA, respectively (items (7) and (12) listed in part I.B.
HORD 13 above), which currently aggregate approximately $32 million on their face. ENA and ECC RKE 14 have opposed PG&E's Objections to their Wholesale Power & Gas Claims.
BUK 15 The Settlement Agreement provides for the allowance of ENA's Claim No. 8878 16 and ECC's Claim No. 8880 in the aggregate amount of $86 million (the "Allowed 17 Wholesale Power & Gas Claim")." Id. §§2.1(a); 5.1(d); 5.1(e). The Settlement Agreement 18 also provides for the release of PG&E Claim Numbers 12573 and 12578 against EPMI and 19 ENA, respectively, and the release of PG&E Claims against Enron with respect to the 20 guarantee of such claims (including Claim No. 12935 against Enron (item (18) listed in part 21 I.B. above), but preserves the other PG&E Claims against ENA, ECC and EPMI, and the 22
'0However, as discussed below, in the event that the allowed amount of Scheduled 23 Duplicative DA Credits Claims exceeds $54.5 million, then PG&E has the option (but not the obligation) of terminating the provisions of the Settlement Agreement dealing with the 24 Allowed Retail DA Credits Claim (as well as certain related provisions), although the Enron Parties-have the option (but not the obligation) to prevent such termination by agreeing to 25 further reduce the amount of the Allowed Retail DA Credits Claim below $199.5 milion to the extent that the allowed amount of Scheduled Duplicative DA Credits Claims exceed 26
$54.5 million. Settlement Agreement §7.4.
27 Gas "Pursuant to the Settlement Agreement, the amount of the Allowed Wholesale Power 27 1 Gas Claim may be reduced by approximately $1 million, to the extent that a certain "Duplicative Wholesale Claim" filed by Wheelabrator Martell, Inc. in the amount of 28 approximately $1 million is allowed. Id., §2.1(b).
DEBTOR'S MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT WITH ENRON PARTIES 1
related guarantee claims against Enron (including Claim No. 12938 against Enron (item (21) 2 listed in part I.B. above)). Id. §§5.1(f); 5.3(a); 5.3(b); 5.3(1).
3
- 3.
Limitation On EES And EEM Recovery On CRS Claims 4
As discussed above, EES and EEM have filed Claim Numbers 13378 and 13379 5
in the PG&E Bankruptcy Case (items (6) and (7) listed in part I.B. above) (the "CRS 6
Claims") in the aggregate amount of approximately $511 million on account of Customer 7
CRS Claims filed against EES and EEM in the Enron Bankruptcy Cases on account of 8
surcharges imposed upon former EES and EEM customers by the CPUC. The CRS Claims 9
assert that to the extent that EES and EEM are liable on the Customer CRS Claims, EES and 10 EEM are entitled to recover such amounts from PG&E.
11 PG&E has filed Objections to the CRS Claims on grounds that such claims were 12 late-filed, which Objections remain pending. In the event that such Objections are not HOPRD13 sustained, PG&E expects to file substantive objections to the CRS Claims based on, inter
~RE 14 alia, PG&E's. position that it has no legal liability for any breach of contract claims against 15 EES and EEM by their customers.
16 Pursuant to the Settlement Agreement, the CRS Claims are considered "Disputed 17 Claims," which will remain subject to PG&E's pending Objections, and, if necessary, 18 additional objections. However, regardless of the outcome of such objections, EES's and 19 EEM's maximum aggregate recovery on the allowed CRS Claims will be the lesser of (i) 20
$30 million and (ii) the product of (A) that portion of the Customer CRS Claims allowed by 21 the Enron Bankruptcy Court and (B) the percentage distribution which claims of the same 22 class as the Customer CRS Claims receive (excluding the Customer CRS Claims from such 23 calculation) in the EES and EEM Bankruptcy Cases (with such percentage distribution 24 calculated as a weighted average based on a formula set forth in the Settlement 25 Agreement).' 2 Id. §3.1(a).
26 l 'For example, assuming hypothetically that $100 million of Customer CRS Claims 27 were allowed by the Enron Bankruptcy Court and that claims of the same class would be entitled to a 20% distribution in EBS's and EEM's Bankruptcy Cases, EES's and EEM's 28 maximum recovery on the CRS Claims would be $20 million (i.e., $100 million x 20%),
DEBTOR'S MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT WITH ENRON PARTIES
1 E.
Mutual Releases 2
In addition to the releases of PG&E Claims and Enron-Parties Claims discussed 3
above, the Settlement Agreement also contains releases by the Parties' affiliates with respect 4
to the expressly resolved claims, and broad but limited mutual releases between the Parties, 5
excluding certain "Reserved Matters."
id. § §5.1; 5.2. The Reserved Matters include, in 6
addition to the matters discussed above which are expressly preserved under the Settlement 7
Agreement, all claims of PG&E against Enron and its Affiliates (including the Enron Parties, 8
except for EES and EEM), relating to issues raised in FERC proceedings regarding alleged 9
violations of the Federal Power Act or Natural Gas Act, dysfunctions or potential 10 manipulation of the Western gas or electric markets by Enron, its Affiliates and others, and 11l all claims of PG&E arising from transactions in the markets operated or administered by the 12 PX and/or the CAISO. Id. §5.3. However, (other than the potential adjustments discussed in HOM14M 13 parts I.D.1, I.D.2 and I.F. above) PG&E waives any right of setoff or recoupment it might RKE CAbW 14 otherwise have against the Allowed Retail DA Credits Claim or the Allowed Wholesale 15 Power & Gas Claim based on the Reserved Matters.
16 F.
Retail Settlement Termination O~tion And Escrow Agreement Provisions 17 Pursuant to the Settlement Agreement, in the event that the allowed amount of 18 Scheduled Duplicative DA Credits Claims exceeds $54.5 million, then PG&E has the option 19 (but not the obligation) of terminating certain provisions of the Settlement Agreement (the 20 "Retail Settlement Provisions") by providing written notice to the Enron Parties within 30 21 days after all Scheduled Duplicative DA Credits Claims have been allowed or disallowed by 22 Final Orders of the PG&E Bankruptcy Court (the "Retail Settlement Termination 23 Provision"). Id. §7.4. The Retail Settlement Provisions include provisions regarding the 24 Allowed Retail DA Credits Claim, dismissal of the CPUC Complaints, release of the funds 25 in the CPUC Escrow Account, the release of the PG&E Claims Against EES and EEM and 26 the related guarantee claims against Enron, the limitations on recovery of the CRS Claims 27 subject to the weighted averaging pursuant to the formula set forth in the Settlement 28 Agreement.
DEBTOR'S MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT WITH ENRON PARTIES 1
2 3
4 5
6 7
8 9
10 11 12 HOVARD 13 Pam CAMI 14 SAUC Go,~
15 16 17 18 19 20 21 22 23 24 25 26 27 28 and related release provisions in the Settlement Agreement. (Such provisions are discussed in parts I.D.1., I.D.3. and I.E. above). Id. §7.4(a) and (b).
However, the Enron Parties have the option (but not the obligation) to prevent PG&E from effectuating the Retail Settlement Termination Provision by agreeing to further reduce the amount of the Allowed Retail DA Credits Claim to the extent that the allowed amount of Scheduled Duplicative DA Credits Claims exceed $54.5 million (the "Reduction Election"), by providing written notice to PG&E of their acceptance of the Reduction Election (or failing to provide written notice to PG&E of their rejection of the Reduction Election) within 30 days after receipt of PG&E's exercise of the Retail Settlement Termination Option. Id.
Based on PG&E's potential exercise of the Retail Settlement Termination Provision, the Settlement Agreement provides for the establishment of an escrow with respect to the transactions contemplated by the Retail Settlement Provisions, in the event that the aggregate amount of Scheduled Duplicative DA Credits Claims filed with the PG&E Bankruptcy Court exceeds $54.5 million as of the Effective Date. Id. §7.4(c). Such escrow would close, and the transactions contemplated by the Retail Settlement Provisions would become effective if the aggregate amount of Scheduled Duplicative DA Credits Claims allowed by Final Order of the PG&E Bankruptcy Court is less than $54.5 million. Id.
In the event that EES and EEM accept the Reduction Election, upon the Effective Date of the PG&E Plan, the Settlement Agreement provides for release to EES and EEM of the amount of the Allowed Retail DA Credits Claim, net of the amount of the Scheduled Duplicative DA Credits Claims (with the remaining portion of the Allowed Retail DA Credits Claim treated as a Disputed Claim and retained in escrow). Id. Thereafter, additional amounts of the Allowed Retail DA Credits Claim would be released to EES and EEM as Scheduled Duplicative DA Credits Claims are allowed and/or disallowed in the PG&E Bankruptcy Case. Id.
In the event that PG&E exercises the Retail Settlement Termination Option and EES and EEM do not accept the Reduction Election, then the items in the escrow will be DEBTOR'S MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT WITH ENRON PARTIES 1
2
.3 4
5 6
7 8
9 10 11 12 HOA&W.RD 13 RKE NEMESES.14 EVK Ge,0*ar-~
1 5 I
w 15 16 17 18 19 20 21 22 23 24 25 26 27 28 returned to the Parties that delivered them (excluding any funds delivered from the CPUC Escrow Account, which will be retained in escrow pending a ruling on the dispute with respect thereto or a subsequent settlement thereof), the Retail Settlement Provisions will not become effective, and the Parties will retain all of their rights with respect thereto. Id.
As a practical matter, the Parties believe that it is quite unlikely that the Retail Settlement Termination Option or Reduction Election (or the related escrow provisions) will ever be applicable. As a threshold matter, the Retail Settlement Termination Option cannot apply unless the allowed amount of Scheduled Duplicative DA Credits Claims exceeds
$54.5 million. In fact, only one Scheduled Duplicative DA Credits Claim has been filed in the PG&E Bankruptcy Case (Claim No. 8833 by Novellus Systems, in the approximate amount of $4.5 million (Settlement Agreement, Schedule 2.2(b)))'3, and the Parties believe that it is unlikely that additional Duplicative DA Credits Claims aggregating more than $50 million will be filed before the Effective Date of the Settlement Agreement' 4, the deadline for PG&E to supplement the list of Scheduled Duplicative DA Credits Claims (Schedule 2.2(b)). Id. §2.2(b).15 In the event that, as of the Effective Date, the aggregate amount of Scheduled Duplicative DA Credits Claims filed with the PG&E Bankruptcy Court is less than $54.5 million, then the Retail Settlement Termination Option lapses, the escrow provisions will be inapplicable and the Reduction Election will become moot. Id. §7.4(a). Furthermore, even if the aggregate amount of Scheduled Duplicative DA Credits Claims filed with the PG&E Bankruptcy Court exceeds $54.5 million, the Parties believe that it is very unlikely that such Claims would be allowed in an amount greater than $54.5 million.
13The Enron Parties have advised PG&E that the Enron Parties expect that Claim No.
8833 will be withdrawn.
'4The Effective Date is defined as the first day upon which appro riate orders approving the Settlement Agreement have been entered by both the PGTE Bankruptcy Court and the Enron Bankruptcy Court, which orders are not subject to any applicable stay of execution. Id. §1.1.
' 5The Parties believe that any additional Scheduled Duplicative DA Credits Claims are barred by the claims bar date established in the PG&E Bankruptcy Case.
DEBTOR'S MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT WITH ENRON PARTIES 1
Accordingly, while the Settlement Agreement contains detailed provisions 2
regarding the Retail Settlement Termination Option, the Reduction Election and the related 3
escrow, the parties believe that such provisions are unlikely to be relevant as a practical 4
matter.
5 G.
Other Provisions Of The Settlement Agreement 6
The Settlement Agreement provides that interest on the amount of the Allowed 7
Retail DA Credits Claim and the Allowed Wholesale Power & Gas Claim shall accrue and 8
be paid pursuant to the PG&E Plan and relevant orders of the PG&E Bankruptcy Court, at 9
the rate of 4.19% per annum, commencing on the PG&E Petition Date, compounded 10 annually. Id. §2.3. The Settlement Agreement also contains fairly detailed provisions 11 regarding dispute resolution and confidentiality. Id. §§8.4; 8.15.
12 The Settlement Agreement requires that the Parties promptly seek approval of the 13 Settlement Agreement from their respective Bankruptcy Courts (and share drafts of related 14 documents), and provides that the Settlement Agreement will be null and void (except for
- 15 certain provisions that survive termination of the Settlement Agreement, such as those 16 relating to dispute resolution, confidentiality and governing law) if it not approved by both 17 Bankruptcy Courts within 90 days after the December 23, 2003 Agreement Date (ei, by 18 March 22, 2004). Id. §§7.1; 7.2.
19 Il.
20 ARGUMENT 21 A.
Standard For Approval Of A Compromise Under Bankruptcy Law.
22 "The law favors compromise and not litigation for its own sake... " Martin v.
23 Kane (In re A & C Properties), 784 F.2d 1377, 1381 (9th Cir. 1986). Bankruptcy courts 24 have great latitude in approving compromise agreements that are "'fair and equitable."'
25 Woodson v. Fireman's Fund Ins. Co. (In re Woodson), 839 F.2d 610, 620 (9th Cir. 1988).
26 In determining whether a compromise is "in the best interest of the bankrupt estate" (A & C 27 Properties, 784 F.2d at 1382), courts consider the following factors:
28
"(a) The probability of success in the litigation; (b) the difficulties, if DEBTOR'S MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT WITH ENRON PARTIES 1
any, to be encountered in the matter of collection; (c) the complexity of the litigation involved, and the expense, inconvenience and delay 2
necessarily attending it; [and] (d) the paramount interest of the creditors and a proper deference to their reasonable views in the 3
premises." (Id. at 1381) 4 PG&E respectfully submits that the Settlement Agreement is fair and equitable 5
and in the best interests of the estate, and that the A & C Properties factors weigh in favor of 6
approving the proposed Settlement Agreement, as discussed below.
7 B.
The Probability of Success is Uncertain.
8 In a case of this type, the outcome is always uncertain, and the probability of 9
success is difficult to weigh. As discussed above, virtually all of the Objections to the Enron 10 Parties Claims remain unresolved, and they are likely to require extensive litigation to obtain I l final resolution. Further, in the event that certain of the Objections are not sustained, PG&E 12 1 anticipates raising additional objections to the Enron Parties Claims, particularly the CRS HO~D13
__sD 13 l Claims. At this stage, the expected outcome of the Objections and potential additional
<q 14 1 e aK objections to the Enron Parties Claims cannot be reliably predicted. Similarly, since neither 15 Enron nor the Enron Parties have yet filed any objections to the PG&E Claims, although 16 such objections are anticipated, there is no way to accurately predict the outcome of such 17l 17 l objections.
1 8 C.
Since The Settlement Agreement Primarily Involves Resolution Of The 19 Enron Parties Claims. The Difficulty Of Collection Factor Is Less Relevant; In Any Event, The Settlement greement Reduces The Risk Of PG&E Not 20 Recoverinz On The PG&E Claims BY Effectively Providing For Recovery Through Reduction In The Amount Of The Enron Parties Claims 211 21 In view of the fact that the Settlement Agreement primarily involves resolution of 22 l the Enron Parties Claims, the second A & C Properties factor (the difficulty with respect to 23 collecting a settlement) is less relevant here than it would be if the settlement primarily dealt 24 1 with resolution of the PG&E Claims. However, to the extent that the Settlement Agreement 25 resolves PG&E Claims, it reduces the risk of PG&E's not recovering with respect to such 26 l claims by effectively providing for recovery on most of the liquidated PG&E Claims 27 through reduction in the amount of the allowed Enron Parties Claims. In the absence of the 28 DEBTOR'S MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT WITH ENRON PARTIES 1
2 3
4 5
6 7
8 9
10 11 12 HOM&4BD 13 RKE CNEIX 14 AID 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Settlement Agreement, PG&E would face difficulties in recovering on such PG&E Claims, based on potential objections to such claims by Enron and the Enron Parties, and uncertainty regarding the treatment of such claims in the Enron Bankruptcy Cases (i.e., through a confirmed Chapter 11 plan or otherwise).
In particular, pursuant to the Settlement Agreement, (i) the EES and EEM DA Credits Claims and the ENA and ECC Wholesale Power & Gas Claims (which collectively aggregate approximately $524 million) are collectively allowed in the maximum aggregate amount $315 million, which amount can decrease to approximately $284 million16 (or even less17), based on adjustments resulting from the allowed amounts of the Scheduled Duplicative DA Credits Claims and the Duplicative Wholesale Claim, while (ii) PG&E Claims which currently aggregate approximately $73 million on their face, will be released.
See parts I.D.1., I.D.2. and I.F. above. The reduction of at least $209 million in the allowed amount of the EES and EEM DA Credits Claims and the ENA and ECC Wholesale Power &
Gas Claims, as compared to the asserted amounts of such claims (iLe., from $524 million to
$315 million), thus implicitly reflects PG&E's recovery with respect to the PG&E Claims being released. In this way, the Settlement Agreement reduces the risk of collection with respect to such PG&E Claims.
D.
The Disputed Issues Are Complex And Continued Litigation Would Entail Unnecessary Expense, Inconvenience and Delay.
As discussed above, the Settlement Agreement is extremely broad in scope and resolves numerous complex issues between the Parties. If the Settlement Agreement is not 16As discussed in parts I.D. 1. and I.D.2. above, the amount of the Allowed Retail DA Credits Claim will be reduced by up to $29.5 million to the extent that Scheduled Duplicative DA Credits Claim are allowed, and the amount of the Allowed Wholesale Power & Gas Claims will be reduced by up to approximately $1 million to the extent that the Duplicative Wholesale Claim is allowed.
17As discussed in part I.F. above, in the event that the Enron Parties exercise the Reduction Election, the amount of the Allowed Retail DA Credits Claim will be further reduced to the extent that the allowed amount of Scheduled Duplicative DA Credits Claims exceed $54.5 million, but subject to the $25 million "floor" discussed in part I.D. 1. above (i.e., to the extent that the allowed amount of Scheduled Duplicative DA Credits Claims exceed $29.5 million, PG&E is liable for the next $25 million of such amounts without any corresponding further reduction in the amount of the Allowed Retail DA Credits Claim).
DEBTOR'S MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT WITH ENRON PARTIES 1
approved, PG&E intends to continue litigating its Objection to the Enron Parties Claims 2
which are resolved by the Settlement Agreement, and, if necessary, additional objections, at 3
substantial expense and inconvenience to both the Parties and the Court. In addition, PG&E 4
anticipates that the Parties will incur considerable expense and inconvenience in litigating 5
the contemplated objections by Enron and the Enron Parties to the PG&E Claims which are 6
resolved by the Settlement Agreement.
7 Such litigation would-raise many complex and challenging issues, including 8
regarding the validity and appropriate amount of the EES and EEM DA Credits Claims, the 9
ENA and ECC Wholesale Power & Gas Claims and the CRS Claims, and PG&E's setoff 10 rights with respect thereto, as well as regarding the validity and appropriate amount of the 11 PG&E Claims Against EES and EEM, and certain PG&E Claims against ENA and EPMI.
12 These complex issues would presumably require extensive expert analysis and testimony HOVARD 13 and result in protracted and costly litigation. Based on the foregoing considerations, PG&E
'AM' 14 believes that the Settlement Agreement eliminates such unnecessary expense, inconvenience IKKx 15 and delay, in addition to being economically advantageous, and is thus favorable to PG&E.
16 E.
The Settlement Agreement Would Benefit The Estate And Its Creditors.
17 The Settlement Agreement, inter alia, provides for the Enron Parties Claims 18 aggregating approximately $1.035 billion1 8 to be allowed in a maximum aggregate amount 19 of $345 million (ie., a reduction of at least $690 million), which amount can decrease to 20 approximately $284 million (or even less), by fully resolving approximately $524 million of 21 Enron Parties Claims in a maximum allowed amount of $315 million, and limiting recovery 22 on another approximately $511 million of Enron Parties Claims to a maximum of $30 23 million, while fully resolving most of the PG&E Claims, which currently aggregate 24 approximately $73 million on their face, without the expense, risk and delay inherent in 25 continued litigation. Avoidance of unnecessary litigation will benefit PG&E's creditors by 26 minimizing costs and delay and allowing PG&E's personnel to focus on more critical 27 18As discussed in part I.B.2. above, the Settlement Agreement does not resolve the 28 portions of EPMI's Claim No. 8879 that have not previously been disallowed.
DEBTOR'S MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT WITH ENRON PARTIES I
functions. The Settlement Agreement also avoids the risk that the Enron Parties Claims will 2
be allowed against PG&E's estate in amounts greater than the settlement amounts, as well as 3
the risk of a lower net recovery for the estate with respect to the PG&E Claims resolved by 4
the Settlement Agreement.
5 In view of the foregoing, the Official Committee of Unsecured Creditors has 6
represented to the Debtor that it is in favor of the approval of the Settlement Agreement.
7 CONCLUSION 8
Based on all of the factors discussed above, PG&E respectfully submits that the 9
Settlement Agreement is fair and equitable and in the best interests of the estate.
10 Accordingly, PG&E respectfully requests that this Court grant the Motion and enter an order 11 approving the Settlement Agreement between PG&E and the Enron Parties.
12 DATED: Januaryl~
62004.
Respectfully, HOWAD 13 R_
13 HOWARD, RICE, NEMEROVSKI, CANADY, Fa'il 14 FALK & RABKIN
__sM_-
A Professional Corporation 16 By:
17 Od~~~~~~~~AW'M. KAPLAN 1 7 Attorneys for Debtor and Debtor in Possession 18 PACIFIC GAS AND ELECTRIC COMPANY 19 20 21 22 23 24 25 26 27 28 WD01 1504/1-1419954/1121789/v4 DEBTOR'S MOTION FOR APPROVAL OF SETTLEMENT AGREEMENT WITH ENRON PARTIES