ML040720415

Opposition of Midway Sunset Cogeneration Company to Debtor'S Motion for Extension of Time to Object to Certain Proofs of Claim and for Related Relief; Supporting Declaration of Kimberly S. Winick

ML040720415
Person / Time
Site:	Diablo Canyon
Issue date:	02/24/2004
From:	Winick K Mayer, Brown, Rowe & Maw, Midway-Sunset Cogeneration Co
To:	Office of Nuclear Reactor Regulation, US Federal Judiciary, Bankruptcy Court, Northern District of California
References
01-30923 DM
Download: ML040720415 (10)

Text

MAYER, BROWN, ROWE & MAW LLP KIMBERLY S. WINICK (SBN 120363) 1. MSCC and the Debtor are parties to a power purchase agreement (the WPPA").

2 350 South Grand Avenue, 25th Floor Los Angeles, CA 90071.1503 2 2. Pursuant to this Court's order of December 20,2002 (the "Order"), the Debtor 3 Telephone: (213) 229-9500 Facsimile: (213) 625-0248 3 assumed the PPA. A true and correct copy of the Order is attached hereto as Exhibit 1.

4 Attorneys for Creditor 50-2 7-5 4 3. The Order provides for the Debtor to assume the PPA pursuant to the Agreement 5 Midway-Sunset Cogeneration Company aa3 5 attached to the Order (the 'Agreement"). and provides that all cure amounts are entitled to 6

6 administrative expense pritxity. Agreement, I 3(g). Paragraph 4 of the Agreement provides the 7

7 method for calculating the final cure amounts, and retains jurisdiction in this Court to resolve any 8 UNITED STATES BANKRUPTCY (ZOURT 8 disputes relating to that calculation. The purpose of the Agreement was to resolve the Debtor's 9 NORTHERN DISTRICT OF CAL ORNIA 9 objection to MSCC's proof 9f claim, which is registered as Claim No.6738, and to provide i 10 SAN FRANCISCO DIVISION 10 instead for the allowed amount of that Claim, which is subject to adjustment upon resolution of

.1 issues pending before FERC, to be allowed as an administrative claim consistent with the cure 12 In Re: CASE NO. 01.30923 DM 12 requirements of II U.S.C. § 365.

13 PACIFIC GAS AND EL.ECTRIC Chapter pNuntr: 11.

COMPANY, a Californi a corporation, 13 4. Although the Order and Agreement provide for MSCC to have an administrative 14 OPPOSITION OF MIDWAY SUNSET Debto r, COGENERATION COMPANYTO 14 expense claim equal to the agreed cure amount, and to waive and withdraw any proofs of claim 15 DEBTOR'S hMOTION FOR EXTENSION OF TIME TO OBJECT TO CERTAIN 15 relating to the period before April 6,2001, the Motion identifies MSCC as holding a Class 5 16 PROOFS OF CLAIM AND FOR RELATED RELIEF; SUPPORTING DECLARATION 16 Claim. Motion, Ex. 2. MSQC holds no Class 5 Claim and does not wish to have its claims under 17 ,OFKIMBERLY S. WINICK 17 the Order and Agreement treated as Class 5 Claims.

91 Date: N;l1rcb 5,2004 IS S. The Order provided for MSCC to file an actual withdrawal of any claims it filed in Time: Ii30 p.m.

19 Place: 235 Pine Street, 22'd Floor 19 the bankruptcy case, other than the administrative claims provided for in the Agreement. MSCC 20 Son Francisco, California Judge: lion. Dennis lMlontali 20 was to perform this ministerial act during the 2002 Christmas holidays (between December 23 21 .. *1 .

21 and 30, 2002). It appears that MSCC inadvertently did not make the formal filing to withdraw 22 22 Claim No.6738. However, if this oversight is the basis for PG&E's inclusion of MSCC in the 23 TO TIlE HONORABLE DENNIS MONTALI, TIlE DEBTPR, AND ITS ATTORNEYS:

23 Motion as a Class 5 creditor, it would have been more expedient simply to request that MSCC file 24 Midway Sunset Cogeneration Company ("MSCC") hereby opposes the Debtor's Motion 24 the withdrawal at this time, which MSCC will be pleased to do.

25 For Extension Of Time To Object To Certain Proofs Of Claim And For Related Relief (the 25 6. MSCC submits that, but for this ministerial oversight, MSCC and PG&E have 26 "Motion"), and requests that that Motion be denied insofar as it perains to MSCC. In support of 26 performed in all respects as contemplated by the Order and the Agreement, and MSCC will 27 this opposition, MSCC respectfully represents as follows:I 27 continue to do so.

28 28 WHEREFORE, MSCC respectfully requests an order of the Court:

.2-2104322.1 01t42025 TWIM~TOw TOCERAI

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1. Directing that MSCC's claims relating to the penl prior to April 6,2001, shall be IiE<LARATION OF KIMBERLY S. WINICK 2I calculated and allowed as administrative expense claims in accordance with the Order and the 2 1,Kimberly S, Winick, declare:

.3 Agreement; .3 I. I am counsel to the firm of Mayer, Brown, Rowe & Maw LLP. In that capacity, Il 4 2. Denying the Motion insofar as it pertains to the claims of MSCC as provided for in 4 am responsible for representing Midway Sunset Cogeneration Company ("MSCC") in the the Order and the Agreement and . 5 chapter II case of Pacifc Gas and Electric Company (the 'Debtor"). I have personal knowledge 16 3. Granting such further relief as may be just and proper. l6 of the facts set forth below and could and would testify competently with respect to those facts.

7 Dated: teHiv .2004 MAYER, BROWN, ROWE & MAW LLP 7

2. MSCC and tI. Debtor are parties to a power purchase agreement (the 'PPA").

8 8

3. Pursuant to I is Court's order of December 20,2002 (the "Order'), the Debtor, 9 9 1Kimberly SNflick assumed the PPA. A true and correct copy ofthe Order is attached hereto as Exhibit I.

10 Attorneys forCreditor Midway-Sunset 10 Cogeneration Company 4. The Order provides for the Debtor to assume the PPA pursuant to the Agreement 11 attached to the Order (the "Agreement"), and provides that all cure amounts are entitled to 12 *12 administrative expense priority. Agreement, I 3(g). Paragraph 4 of the Agreement provides the 13 13 method for calculating the final cure amounts, and retains jurisdiction in this Court to resolve any 14 14 disputes relating to that calculation. The purpose of the Agreement was to resolve the Debtor's 15 15 objection to MSCC's proof of claim, which is registered as Claim No.6738, and to provide 16 21 16 instead for the allowed amount of that Claim, which is subject to adjustment upon resolution of 17 ..... 1 17 issues pending before FERC, to be allowed as an administrative claim consistent with the cure Is 18 I3.

requirements of II U.S.C. § 365.

19 19

5. Although the Order and Agreement provide for MSCC to have an administrative 20 20 expense claim equal to the agreed cure amount, and to waive and withdraw any proofs of claim 21 21 22 *a 22 relating to the period before April 6,2001, the Motion identifies MSCC as holding a Class 5 23 / 23 Claim. Motion, Ex. 2. MSCC holds no Class 5 Claim and does not wish to have its claims under the Order and Agreement treated as Class 5 Claims. /

24 24

6. The Order provided for MSCC to file an actual withdrawal of any claims it filed in 25 25 the bankruptcy case, other than the administrative claims provided for in the Agreement. MSCC 26 .26 was to perform this ministerial act during the 2002 Christmas holidays (between December 23 27 * *3- 27 28

.. I ~uN TUn~N An uc!op~~l FYF~ciN 28 and 30,2002). It appears that MSCC inadvertently did not make the formal filing o withdraw 4

MurruzilluN lUMUlnAruK r-AltNalurr w 29604322.101t42021S .. . ; 2t60322.01t4021 .

TIME TOOBJECT TOCERTAIN PROOFSOF CLAIM TiMETOOBJECT TOCEITA( PROOFS OF CLAM I1' I

fbeei0ed 0 *1 1II-43AM In 01:4 on fine (UI for KSW 4 02-JAN-t3 11:41AM FitROWaOi*,.0 i 4151217-5ll0 4IAISU752S W1 t-500 P.03/16 F-426 Claim No. 6738. However, if this oversight is the basis for PG&E's inclusion of MSCC in the 2 Motion as a Class 5 creditor, it would have been more expedient simply to request that MSCC file l .5 _ __

3 the withdrawal at this time, which MSCC will be pleased to do.

JAMES L LOPES (No. 63678)

WILLIAM J. LAFFERTY (No. 120814)

FILED 2 KIMBERLY A. BUSS (No. 207857) '{02EC23 Mll9:24

.4 7. 4MSCC submits that, but for this ministerial oversight, MSCC and PG&E have HOWARD. RICE. NEMEROVSKI, CANADY.

3 FALK & RABKIN I A Professional Corporation U.S. BAUKRUPTCY COURT S performed in all respects as contemplated by the Order and the Agreement, and MSCC will .4 . v NORTHERN DIST. OF CA.

Three Enbarcadero Center 7th Floor S.4" rRANCISCO. CA.

continue to do so. San Francisco, California 94111-4065 6 S Telephone- 415/434-1600 '

Facsimile 415f2 74 91.

7 I declare under penalty of perjury that the foregoing is trMe and correct. 6 Attorneys for Debtor and Debtor in Possession 8 Executed this 246 day of February, 2004. 7 PACIFIC GAS AND ELECTRIC COMPANY 9 8 UNITED STATES BANKRUPTCY COURT 10 /6,2/IAteeg 9 NORTHERN DISTRICT OF CALIFORNIA.

KIUBRLYS.W K 10 II SAN FRANCISCO DIVISION 12 11 Inre Case No. 01-30923 DM 12 13 . , PACIFIC GA S AND ELECTRIC Chapter 11 Case COMPANY. a California corporation.

14 110 7 1 14 STIPULATION AND ORDER (FILED

! I .. .I C 14 Debtor.' PURSUANTTO THE COURTS i DECEMBER 21.2001 ORAL ORDER) 15 'I AUTHORIZING ASSUMPTION OF

- POWER PURCHASE AGREEMENT 16  ; AND COMPROMISE OF CLAIMS 16 I I, WITH MIDWAY SUNSET 17 COGENERATION COMPANY 17 18 18

.I Federal l.D. I No.94-0742640 INO HEARING REQUESTED]

19 It 19 20 20 I' 21 21 22 22

- - 23 23 .1 24 24 25 25 26 26 27 27 28 28

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WHEREAS, on December 21. 20012 the Court granted Pacific Gas and Electric installments, with a piovision for any necessary upward or downward adjustments after 2 Company's Motion For Authority To Compromise Clims Between Estate And Various 2 the QF receives payment of certain amounts owed by the California Power Exchange 3 Qualifying Facilities, and entered an order approving "Supplemental Agreemcents" betwcen 3 (the "PX");'

4 Pacific Gas and Electric Company ("PG&E"), the 'debtor and debtor and possession herein, 4 WIEREAS, PG&E respectfully submits that in light of this Court's approval of 5 and several qualifying facilities or their successors-in-interest; I 5 PG&E's assumption of well over 200 similar PPAs. the Commtitte's support of the 6 WHEREAS, on December 21, 2001. the Court ordered that substantially similar 6. assumption of the QF's PPA, and the service of this Stipulation and Order by facsimile on 7 Supplemental Agreemcats with other qualifying facilities couldc presected to the Court for 7 December 18, 2002 to all panics who (pursuant to the Coun's August 16, 2001 Order) have.

8 approval by Stipulation and Order between ihe Official Committee of Unsecured Creditors 8 identified themselves as desiring service of notices and pleadings regarding PG&E's 9 (the "Committce") and PG&E., 9 assumption of PPAs, adequatc and appropriate notice of these assumptions has been given t0 WHEREAS, PG&E now seeks authorization toentrI into the Agreement atta bed 10 under the circumstances i 1I hereto as Exhibit I with Midway Sunset Cogeneration Company (-QF"); 11 For good cause appearing, IT IS HEREBY ORDERED, ADJUDGED, AND 12 WHEREAS, the Agreement attached hereto is substantially similar to the 12 DECREED:

13 Supplemental Agreements approved by the Court on December 21 2001, except for the "OIA 13 1. PG&E is authorized to enter into the Agreement. a copy of which is attachedc

.0.5 14 following additional provisions agrecd to by the QF and not objected to by the Comnittee: 'r 14 hereto as Exhibit 1, and the Agreement is hereby approved;

-15 (a) the assumption of the QF's Power Purchase Agreement ("PPA) pursuant to -t5 2. PG&E and the QF shall be bound by all of the Agreement's terms and conditions; 16 11 U.S.C. Section 365 and Rules 6006 and 9019 of the Federal Rules of Bankruptcy 16 and.

17 Procedure; 17 18 (b) the QF's waiver of its entitlement for scni-monthly (as opposed'to 18 19 monthly) payment for deliveries of energy under the QF'sPPAs; 19 20 (c) the QF's withdrawal, within seven days of a bankruptcy court order. 20 21 approving the Agreement, of any claims the QF has filed in the bankruptcy case, other 21 22 than the Section 503 administrative expense claims provided for in the Agreemaent with 22 23 respect to PG&E's prepetition defaults (the "Payables') under the PPA and interest 23 24 theteon; -l 24 'As described in the recitals of the Agreement, pursuant to the terms of the parties' 25 (d) the QF's representation that it is the sole holder of all right, title and interest Enabling Agreement, this QF was paid in the following non-standard fashion: For a specific 25 Damemntpcriod, QF would receive payment from the PX for certain energy deliveries (the 26 to the Payables; and tPX Payment") which pa ment QF was requircd to forward to PG&E. PG&E would make 26 payment to the QF under tccrms of the PPA, resulting in a net amount due to one party or 27 (e) the payment of the QF's Payables in an estimated amount of S280.584 (as another. The PX, however, failed to pay QF under the terms of the Enabling Agreement in 27 or after January 2001. Accordingly the final net amount of Payables due QF is 28 defined in the Agreement, the 'Provisional Prepetition Payabics") in six equal monthly indeterninable until the PX pays QF tie PX Payment.

28 2

SflP. ANOOROER AULTHORJZNO ASSUMTI ONFOfPA AWDCOMPROMISr OPCLAIMSWITH MlDWAYSUNSST I STIP.ANn oRDER AUTHORIZING ASSUMPTION OFPtA ANOCOMPROMISE oF CLAIM WITHMIDW^YsuNSET EXHIS ,4 IPAGE 2 i' Emair I PACiE

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-j ACREEMENT 21  ; ,

3 THIS AGREEMENT ('Azrrmrnt) dated as of'Novecnber 30,2002 (the "Effeclive DATED: Il 2002 HOWARD RIE NEMERVSKI, ANADY Date'), by and berwcen Midway Sunset Cogeneration Company, a California general partnership 4 (.Q) and Pacific Gas and Electric Company. a Califomia corporation F ) QF aud A PriofasinoCrporation PG&E are sometimes referred to herein collectively as 'Paries" and individually as a "Panv.

6 WITNESSETH .

KIMBERLY fr BLISS 7 WHEREAS. QF arnd PG&E ate Parties to a power purchase agreement, dated December AttneYs for Debtor and Debtor in Posiesaion 14a1989. for PG&E'as purchase 0o1power from QF's project identified by PG&E LogNo.-

a PACIfC GAS AND ELECTRIC COMPANY 2SC321 (as amended.f Ej) . '

9 DATED: ,L l18 2002 MILBANK.TWEE Y &McCLOY e WHEREAS. QFand PG&E were also Parties loan enabling agreement executed on...

ID .71) , ,-,-Y LE July 28 1998 (the 'Enrabline A rreenent") which among other things provided that, for a specific payment perioda QF was to receive payment from the California Power Exchange ( -)

II which payment QF was required to forward to PG&E in its entirety, and PG&E was required to 12 make payment to QF for deliveries during the sante period based on the terms of thc PPA Atarnewy for OFFICIAL COMMIEE air resulting in a net amount due to one Party or to the other;

- 13 UNSECURED CREDrroRs WHEREAS, thc Enabling Agreement was terminated and ieplaced by a new agreemcet tthc 'I citcr A men1 cxeculed on December 21.2001;

. 15 ORD .,

WHEREAS, the tenns of the Enabling Agreement continue to govern transactions under

. - 16 B"ad upon theo foregoing sipwation and ood4 CeUa Appealng

,ibeor, it u So .. - I the PPA occuning up lo Decernber 21 2001 and the LertrAgreemcn govems transactons underihePPAoeccrringonorafierDecember2l,2001:, z '.-: -

17 ORDERED.

12DC EC20 2rZM WHEREAS, CaIPX failed to make the required payment to QF for deliveries oternrgy 1I DATED; ____2_0____ and for other charges payable to QF. attributable to the PG&E PPA, under the Enabling 19 . . . . . DaNiIS MCbILIJl Agreement in or aher January. 2003 (the "PX Pamen"), which QF has calculated as totaling S876,472, as a result of which QF did not forward any sums to PG&E for the same time period; 20 IIONORAB~LE DEW~SMOSTAM J UNID STATES BANKRUFrCY JUDGE - WHEREAS. PG&E failed to pay the full amount due QF undertthe PPA for deliveries of 21 *1 22

..IW. energy and capacity for the month of anuary. 2001 (totalingSI.013,730) anwdforother charges, owed to QF for January. 2001 and for other months ynder the Enabling Agreemcnt Ltotaling 5143.326) (collectively, the -rG&EAMount") in the aggwegate antuunt ofSlIS57.05o6 as 23 i . calculated by QF; - .

24 WHEREAS on March9.2G01, CalPX flcd a voluntarypetitiotunderChapter 1I ofthe 25 United States Bankruptcy Code (tle 'PX Bankrtrttcv Case") in the Los Angeles Division of the I l, , .,, , . United States Biankruptcy Court for the Central District of California (the -PX Bin*vvcy

• 26 Cort-') (in re Caliornia PowerFichange Corpora!ion,Blankr. Case No. LA 01-16577E'S);

I- ': . I

i. . Il 27 WHEREAS the aclual net amount ofpayablcs due QF is indeterninable until the CaUJX 21 pays QF the PX Payment; -  ; -

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• .rftwd 01 1tt1ot in 06:20 an tIne Itt for t51 /tS ktel a0 103 iStA1s_In 06:20 on tln@5t5 for-41415i111t5t T-SJ P.01/1t F-4di dt1lt75tt12 T-5t0 P*01/l5 F-4tt 02-JAW-fI 5tt:AI IM - le . *g AU tl51217-Slt0 02-JAW-ti 11:56tIA FRM-tO*ARAILt AL.tt415)Il-5t10 shall be payable WHEREAS, QP has calculated and inforrned PG&E thit the maximum amount payable outsisnding unpaid principal amount of the Provisional Prepetition Psyables until the by CalPX for the PXPaymrent is S876,472, although the actual amount paid by CAiPX could be monthly in arrears on the declining balance of the Provisional Prepetition Payable confirned been paid in full lower for reasons including but not limited to. the terms ofany plan offreorgpnization Provisional Prepetition Payables have amount agsinst the in the PX Bankruptcy Case. The netting of this maximum PX Payment PG&E Amount results in an estimated net amount ofpsyables dueiQF from PG&E in the amount b. Princinal. Notwithstanding the terms of any plan ofreorganization riled principal of Two Hundred Eighty Thousand, Five Hundred Eighty-Four Dollars (S280,SS4) (the by PG&E ot anyether party in ihe Bankruptcy Case, PG&E shall pay the outstanding on the lass "Provisionsl Prep~etitionpavables), asset forthin Attachment A"hereto; balance of the Provisional Prepetitiort Payables in six (6)equal monthly installments at the end PG&E business dayoreach month commencing November 30,2002 and continuing Court order WIIEREAS. on April 6.2001. PG&E filed a voluntarypetition under Chapter II of the oreach month thereatler until paid inftll; oprovided, however, that if the Bautkruptcy installment United States Bankruptcy Code (the DlnlkruneCv Case) in the San Frncisco Division of ie approving this Agreement is not entered until after November 30,2002. then the order.

United States Banlruptcy Court for the Northem District o Califomia (the 7R2nknspv Court ) payable onNovember 30,2002 shal bepaid as soon aspracticable afler entry ofthat (In re Pacific Gas andEectric Conpoany, 1a3iur. Case No. 01.03923); c. Setmarate Pamenti. Unless designated to the contraty in writing at least hereunder WHEREAS, QF notiied P&E of its desire to have the PPA assumed byPh&E "one (1)iweek in advance ofthe payment date, all principal and interest payments due ofthe pursuant to an order of the PO&E Bankruptey Coun under Section 365 of the Bankruptcy Code shall bemade to QF in the amounts set forth in Attachment A attached hereto. Each of in the llankruptcy Cse and -d piyments above is subject to aidjustment for rounding errors (either upwards or downwards) up to but no more than one dollar (S.00).,

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WHEREAS PG&E is willing to agree to QFs request to i5sume theiPA and conditions set fordt herein: - - d. DueonPtanErfeftiveDate .Ifheeffectivedateofanyplanconfirmedin.

allinterest the Bankruptcy Ciscshal occur beforethePovisionlPrepetition Payables andPrepeition NOW THEREFORE, in consideration of the premises described above nd the terms aid accrued thereon has been paid in fiall the remiining batance ofthe Provisional date.

conditions set fonh below; the Paities herby re as rollowrs- Payables and all interest accrued thereon' shall be paid on such plan effective assumption SStLffs. To the extent that PG&E has or claims to have any right to assert

1. AissurnDfon Theeff&ctiveness ofthi sAgreement is coniingent upon e.

obligations to pay ofthe PPA in eccordince with ihe procedure described below-..

1 any existing or future right of setoftis a defenre to or reduction of any of its the Provisional Prepetition Payables or the PG&E Amount and/or interest respect thereon, PG&E hereby to sutc i

a. Within a reasonabile period ifter the execuition and delivery ofthis waives such right of setofrfwith respict to such obligations, but only with this Agreement, Agreement by the Parties, PG&E shall file with the Bankruptcy Court and ierve a stipulation obligations. Provided PG&E is not in default of its payment obligations under not setaofTany seeking approval ofthis Agreement (the Stinulation") and and except as otherwise expressly provided underthis Agreement, QF shall Provisional of obligation owed to PG&E against such QF's right to receive payments of the b The Bankruptcy Court rnust approve the Stpulation effective s Prepetition Payables or the PG&E Amhount under this Agreement. Excep! as.set forth above, as of the Effective the Enabling November 30 2002 and authorize PG&E's assumption ofthe PPA effecdiie each Parry retains any and all setoffrights it may have. if any unde the PPA, Date. Agreement, and the Letter Agreement.

2. Calculation and Rfte of Interes. The ouistanding prineipal balance of the., . f. Monthly Payments under the PPA. For deliveries starting on October 1, per annuum (the Utilities Provisional Prepetition Payables.shall bear interest t a rate of five percenit(5%)

in Attachment A 2002, QF herebywalves any rlghl that it might have pursuant to CalifornIa Public Interest Rate) from the respective due dates of the principal *mounts set forth Commission ("E=I) Decisiont 01-03-067 to receive semi-monthly paymentsin lieu of.

ile 'ittuil number of until paid. Interest shall be cildulated on the basis of a 365-day year vvwih monthly payments pursuant to the PPA.

days (excluding the first day and including the list day) occurring during the period for which interest is payable.

. I, .

g. Other Terrs.f The right of QF to receive all payments hereunder be including, without limitation, under the assumed PPA and the Enabling Agreement.shall 503 and 507(aXl).

3. Pavment Schedule entitled to administrative expense priority under Bankruptcy Code Sections QF shall have standing and reserves the right to object or seek other relief innecessary the Banluuptcy

a. Inerest All ccrued prepetition and postpetiiion interest due on the what is reasonably to timely If all ascrued Coun in the event that PG&E's cash reserves fall belo ov Provisional Prepetition Payables shall be paid on or before November 30.2002. satisfy PG&E's postpehition obligations, including the obligations under thisin a Chapter 7 or Agreement. The total amount of interest prepetition and postpetition interest is paid onNovember 30.2002, the obligations ofPG&E under this Agreement shall be binding on any trustee Thiree Hundred Thirty due QF under this Agreement on that date shall be Nineteen Thousand Nine Dollars and Seventy-Eight Cents (SI 9,339.78). Thereafterc scrued interest on the ,, . ... . ..

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/1 1--04 P.I/tt6 F-4l6 Chapter II bankruptcy Case, and cannot be altercd, maided ormodified by any plan of . psvnrent of Post.AssuntplionOblimations. In accordanrc with BankruptcyCodc reorganization or other order or rulang in the Bankruptcy Case. Section 365, from and slaer the date the Bankruptcy Court approves this Agreement, PG&E shall pay in full any and all postassumption obligations due under the PPA and the Enabling

4. Scnklements and Adiustmerts. Agreement, and all obligations dte undcr the Lenctr Agrcemcnt, at such times and in such

a. Interim Adiustmenis. IfQFreceivcs anyinterim payments from CIPX on amounts as provided thercir. Such obligalions sball be affotded administrativc ptiority status under Bankruptcy Code Section 503. Good faith disputes regarding the amounts to be paid lo account of the PX Payment, QF shall apply each such payment to reduce the amount o0fthc ls scheduled and unpaid installment of the PG&E Amount. and shall notify PG&E ofcach such QF under the PPA. the Enabling Agreement or the Lener Agreement for posl asstimpUioU deliverics of cnegy and capacity shall not be decmed a brcach of this Agremn application within fivc (5) busincss days therafcr. Intrcest, for purposes ofcalculating the Finsl Setilement Amount describcd in the following P&ragraph 4.b, sha ceasc to accruc on such 9. ROsrvation o Other than as set forth in Section 6 above, neither this tRirht.

interim payent amount s of the date reccived by QF. Agreement nor PG&E's assumption of thc PPA in the manncr contemplated hacin "hll modify, waive, or otherwise picjudiec cither Party's rights and obligations witli respect to any

b. 'Final Settlemcn . Within fve (5) business days aAcr QF rccivcs the firal proceedings before the CPUC, the Federal Enagy Regulatory Commission and the courts, payment fron GCIPX on account ofthe PX Payment, QFshall notifyPG&E of thcact SDamOunt, relating lo thc encrgy price to bc paid pursuant to thc PPA the Enabling Agreement, and thc

• and the aggregate amount paid,by CaIPX on account ofthe PX Payment. The Partics shall each Letter Agrcmenat for the period prior to POhE's assumption ofthc PPA provideS berein.

calculate the adjustment, if any, due fhom one Party to the other, as appropriate under t ternu of the Enabling Agriement as well as the inercst duc on suc adjustmnt (the "Final Setilemn t0. Furthae Assurances. QF-and PG&E shall take all necessity action to implement Ar 'j. Inictest shal be calculaied at the Inercst Ratce Within fifteen calendar days this Agreement, including but not limited to preparing any documentation and taking any actions folldwing receipt by PG&E ofQF's notice the Parties shall conferin good faith to econcile. necessary to implement Section I of this Agreement, and approving executing and delivaeing their rcspective clculstions of thc Final Settlernt Amount. Subject to the tensaining this Agreement.

provisions of this Paragraph 4.b, the Party that owes the Final Sesdlenent Amount shall make payment to the other Party within five (5) business days aller the p'arties agrec in writing to the 11. BEankruotcvCoun Anoroval. This Agreement is subject to Bankruptcy Court Final Settlement Amount: Should the CaLPX distribute to QF on account of the PX Paymnct a approval and shall not becomc effective until entry of an order approving this AgreemrentL surn greala than the calculated PX Payment arnount; and desigsit the excess amount as'

.intcst.QF shall remit that interest go PG&E. QF shall bear no other responsibiliy for inst 12. Descripive Headings. Thc descriptive headings of this Agreement are inserted Should the Pantics not be able to agree on the Final Settlement Amowut. thc dispute will be for convenience of reference only and do not constitute a part ofthis Agrccmcn submined to the Bankruptcy Court for resolution.

13. Exsenscs Each Party shall pay its ovin cxpenscs professional fees and other 5.' Wihdrwal xcp for (hose administrative claims specifically costs connected with or associated with the negotiation and execution of this Agriemnrt. In the provided for by Seclion 3g. hereof, and, except for administrativec claims payable with rcspect to event any Party bleaches this Agieement, the breaching Party shall pay all costs and espenses the Lena Agreement, QF waives its right to file any Etankruptcy Code Section 503 (including reasonable alromeys' fees and expenses) incurred by.the othr PaMy o Parties ia administrative expense claims based on services provided to the estate through the date of this connection with or prising out of such breach.

Agicemaat. Furthermorc, QF agrees to waive and withdraw any and all cliinu or proof of claims QF has filed in the Bankruptcy Case within seven (7) days after a anksrpicy Court order 14t pcfault I thc ccvnt that anypaymcnt required to be madc bylPC&E to Ql approving this Agreement has become final and not subject to appeal. QF further agrees to forgo under this Agrccment is no niadc on or before thc datc due QF may makc amoton to enforce any rights it Tnay have to amend such claims, or to file new claims for the period befor Apri16, this Agrecmnt orseck other apropriate relicf fore the lankruptcyCourton seven (7) 2001. - _ calendar days' notice. QFshall not b¶ required to commence an adversary proceeding or other suit and may proceed by noticd motion on scven (7) calendar days' notice without the

6. Waiver orPecuniary Loss Damatses. QF waives its right to recover pecuniary' requiremenl of obtaining an order shortening imc. QF reserves the righl to seek, asappropriate loss" damages in connection with assumption of the PPA pursuant to DankruptcyCodc relief, that all amounts owed to QF. arid all interest thercon, should be accelerated as a result of Section 36S(bX 1)(B). This waiver shall not diminish or affect QF's right jo payment ofthe such nonpayment. PG&E reserves the right to assert that acceleration is not appropriate.

Provisional Prepetition Payables, the Final Sctilemenl Amount. and any intacist thercon.

Is. GoyemirniLaw .This Agecrtentasmade and entcrd into in thc Stateof 7 Waiver of Righi to PreAssumprtion Claim. QF waives its right to assert claims to California, and shall in all respects be inteirpreted and governed under the laws ofCalifornia, rtceivc the difference betwecn the market price and the contract price for tnegy and capacity without rCgard to principles ofconflicts of law.

delivecrd to PG&E horm and after April 6.2001 ihrough the Effective Date, provided that PG&E assumes the PPA. pursuant to Bankruptcy Code Section 365 and 503(b). 16. EntireAerement. This Agreement, and all attaclansents hcrto, set forth the entire agreement between the Parties relating to the assumption by PG&E of the PPA and the 4157^ 2i55,tOt ttJSOJ

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Rtcitved DIt 1:514 tn 06:20 on tine tII for rW It ttllTttt _

& 13 t-So0tPz12/1tI lftel~t 0103 II:5OxInt06:20 on tin, tit 'or KSW 0/IS 02-JAN-83 1I:SBAt Fk-iR DRIA AL. t1412t1-SII0 F-4ie C2-JAX-tO11:56AMFRW-H.0stRlT ALUlSl217-5It0 41412T51tl9 T-104 P.1/16 F-A96

• O - ' *w payment of the Provisional Prepetition Payabics. and the Final Settlement Amotunt nd QF may not assign its night to receive any payment from PG&E or its obligation to make any.

supersedes and replaces any pnior understanding. corespcndece comraitmeigs or arnenmets payment to PG&E, as the case may be, pursuant to the terms of Patraraph 4 herein.

C whether oral or writien, concerning the subject matters of this Agreement. Any modification o; 21. Execution by Counternants. lThis Agreement may be executed in separate amendment to this Agreement must be in writing and must be signed and dated by the Parties, counterparts, each of which when executed shall be an original, but all ofwhich, taken together.

and must explicitly state that it is intended to be an amendment to or rnodification of this shall constitute one and the same instn'ment.

AgTsmcni. . b b u IN WITNESS WHeREOF, this Agreement has been duly executed by or on behalf'of QF

17. Bindini Attectment. ThisaAgcment shallbebindingupon d inure to the and PG&E as of the date first written above.

benefit of the success5rs and assigns of the Parties hereto, including any trustee appointed in the Bankiuptey Case. PACIFIC GAS AND ELECTRIC COMPANY, MIDWAY SUNSET COGENEKAKION a California corporation COMPANY, a California general p .urtnrshp

18. Construction Atreemen' Counsel for the respective Panies I4ave reviewed and panicipated in the draftingofthis AgTeement. Consequently. the principleofconStruccionof contracts thal ambiguities shall be resolved against the diallcrshall not be used orapplied in the interpretation of this Agreement; l Name: C. Nauc Z It. UiSTERN

19. Ripresentatins. Each Party hereby tepresents and warrants to each ofthe other Panies that (a) the execution of this Agreement has been duly authorized by all necessary L ri*ie -

Title:

- EXtECInIVE DtaREcoz corporate, sharetholder and similar ictions; (b) this Agreement has been duly executed and delivered and constitutes the legal valid and binding obligation of such Pany, enforceable against sucih Party in accordance with its terms-; and (c) the execution ind delivery qfthis Agreement and ihe performance by such Party of its obligations hereunder do not and will not conflict witht contravene or breach, any law, judgrnent, order or material contract applicable to or binding oa such Party or any of its properties or assets.

20. Assienrnent ofReivybles. QF eapressly repteserts and warraU tO PG&5l (a) that it is the sole holder of alUright, title and interest to the Provisional.Prepetition Payables and any right or claim to receive paymnrnts, ptoceeds or distributions thereon, ant (b) that QF has not assig~ned pledged or otherwise transferred its right, title and interest in the Provisional

.Prepetition Payables.(or any right or claim to receive payments, proceeds or distributions thereon) to any third party or parties for any purpose, whether as an outright esnsforOtas*s transfq for security. Accordingly, all payments due under this Agreement shall be made by' PG&E to QF until PG&E receives notice from QF or assignees to make such payments directly to the assignees, in which case PG&E shall have no further obligation to make such payments directly to QF. Such notice shall be in writing, to the attention of.

Joseph C. lHenri Pacific Gas and Electric Company P.O. Box 770000, MC N12E San Francisco, California 94177 Fax: 415-973.9176 . --

In the event tlt PG&E makes a payment of Provisional PrcpctitionlPayables to QF aft the effective date of any transfer of QF s right title and interest in the Provisional Prepetition Payabies. QF shall (x) promptly forward such payment to the transferee of its right. title and inictest in the Provisional Ptepelilion Payabies and (y) indemnify and hold PG&E harmless fiom any claim, demand or action by the transferee to collect any such parnent from PG&E.

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Received eu 1101A1I in 06:20 on tine liI for 5sw 01., icejid 01 9 11:51AM In 06:20 one tint 1 foer 113 1 02-J1-03 MOMt FRitlS)DJ A wsj211-5010 Ult5il55i0e T-504  ?.I4/I1 F-496 52-JAM-OS 112:00PM Fi~lkWWAR,91 AL.4151217-661i0

4. I4ISZI.7591:. T-504 P.15/16 F-4SC uI PROOF OF SERVICE BY FACSIMILE TRANSMISSION 2 I am employed in the City and County of San Francisco, State of California. I am 3 over the age of eightcen (18) years and not a party lothe within action; my business address 4 is Three Embarcadero Center, 7th Floor, San Francisco, California 94111-4065; my I-. . 5 business telephone number is 415/434-1600; my business facsimile number is 415/217-o7" t -. o e 6 11 5910.

--°---i2---- 7 I am readily familiar with the practice for collection and processing of documents

. C II __ .9.flfl.-t1...9 -

8 for transmission by facsimile machine of Howard, Rice, Nernerovski, Canady, Falk &

, Y II 9 Rabkin, A Professional Corporation, and that practice is that the document(s) are taken to the

=-4s 10 Telecommunications Department at Howard, Rice. Nemcrovski, Canady, Falk & Rabkin, A 11 Professional Corporation, along with a complete facsimile transmittal form for immediate

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• e - .. 12 transmission. Each such document received by the Telecommunications Department is I 13 transmitted, in the form received, as soon as possible after receipt.

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~~ . V- EI-.. . , 14 2 On Decemrber 18,'2002,1 served the following document(s) described as e1 . 215 Stipulatton And Order (Filed Pursuant To The Court's December 21, 2001 Oral

'Le c> fiz*F aa.......i 4

16 Order) Authorizing Assumption Of Power Purchase Agreement Aand Compromse Of Z.

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17

.. . .4 Claims With Midway Sunset Cogeneration Company on the person(s) at thc facsinilc W S *- ,.-°S;5 I.E.

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. . I . 's 2S number(s) listed below by facsimile transmission from facsimile number 415/217-5910 Ct '

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>4~4 *..5 19 along with a completcd facsimile transmittal form in accordance with the regular process at iSt I I-,b. .

4 20 the law offices of Howard, Rice, Nemerovski, Canady, Falk & Rabldn, A Professional o95, be R.

• ' S ' I{I .. 21 Corporation, as follows:

4 1 22 Sec Attached Service List a~~~2 os~4S B8o~a .* S E. . 23 I declare under penalty of perjury that the foregoing is true and correct. Executed 24 at San Francisco, California on December 18, 2002.

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26 NAlliANIEi HAHUNT o W(O 27 I.

_~ > i  ; U. 28 C0 PROOF OF SERVICE

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ecelved01 3 11:51M In 06:20 m Line I1] far KSW O2-JAI-93 12:00P`

.w Ft-IMCiiARD.Al U. AISI)ZIT-SiO *U1521515iO WI T-S04 P.1/16 F-4A6 I Gregg M. Ficks/Crosby, Heafy, Roach & FAX: 415-391-8269 2 May SWB: 510-763-2000 3 Gordon S. Young/Hantman & Egeli FAX: 410-266-5561 SWB: 410-266-3232 4 I William Bates, Randy Michelson, Geoffrey FAX: 415-393-2286 5 T. Holt/WMcCutchen, Doylc, Brown & ' SWB: 415-393- 000 6 Enersn 7 David A. Burns/Baker Botts FAX: 713-229-2767 SWB: 713-229-1234 8 1 9 Frank Vram Zcrunyan/Sulmeyer, Kupez FAX: 213-629-4520 SWB: 213-6262311 10 . - - . . .I Aron M. Oliner/Bulchaltcr, Nermer, Fields FAX.- 415-227-0770 11 SWB: 415-227-0900 12 Todd Duncan/r3NY Western Trust FAX: 213-630,6285 13 SWB: 213-630-6400 4 Evan C. Hollander/While & Case LLP FAX. 212-354,8113 SWB: 212-918-8660

-15 Patricia A. Cutler/ FAX: 415-705-3379 16 Office of the U.S. Trustec SWB: 415-705-3333 17 I Robert J. Moore/Milbank, Tweed, Hadley FAX- 213-629-5063 18 SWB: 213-892-4000 19 Anna Marie Fallon/l.P. Morgan Chase Co. FAX- 212-622-4834 20 SWB: 212-622.8395 21 Michael A. Rosenthal/Gibson Dunn FAXL: 214-698-3400 Counsel for Crockett SWB: 214-698-3100 22 Kimberly S. Winick/Mayer, Brown, Rowe . FAX, 213 576-8155 23 & Maw SWB: 213-229-5132 24 25 26 27 28 WD110A2lnl4ll"131104I PROOF OF SERVICE I

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