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Ninth Interim and Final Application of FTI Consulting Inc. for Allowance and Payment of Compensation and Reimbursement of Expenses (April 11, 2001 Through April 12, 2004); Declaration of Thomas E. Lumsden in Support Thereof
	ML042030269
Person / Time
Site:	Diablo Canyon
Issue date:	07/12/2004
From:	Lumsden T; FTI Consulting, Official Committee of Unsecured Creditors
To:	; Office of Nuclear Reactor Regulation, US Federal Judiciary, Bankruptcy Court, Northern District of California
References
	SF 01-30923 DM
	Download: ML042030269 (28)
	v • d • e

Thomas E. Lumsden TO THE HONORABLE DENNIS MONTALI, UNITED STATES BANKRUPTCY M. Freddie Reiss 1 Michael Hamilton PILZE) - - JUDGE, THE OFFICE OF THE UNITED STATES TRUSTEE, THE DEBTOR, AND OTHER PARTIES IN INTEREST:

FlI Consulting Inc. 2 2

353 Sacramento Street JUL .? 7004 3 San Francisco, CA 94111 3 Telephone: (415) 283-4200 w At.z " xz As previously disclosed to this Court through the Eighth Supplemental Declaration of 4 Facsimile: (415) 283-4266 4

.,<0-i 2;./RZ Mr. Thomas E. Lumsden and FT's retention pleadings, on August 30,2002 (the 'Closing S

Accountants and Financial Advisors for Official Date"), the Business Recovery Services practice (the "BRS Practice") of 6 Committee of Unsecured Creditors . 6 PricewaterhouseCoopers LLP ("PwC") was transferred to FTI Consulting, Inc. ("FTI"). This 7 7 transfer included the business, receivables and employees comprising the BRS Practice of PwC.

8 8 Effective upon the Closing Date, Mr. Lumsden, as well as all of the BRS Practice professionals 9

UNITED STATES BANKRUPTCY COURT 9 NORTHERN DISTRICT OF CALIFORNIA working on behalf of the Committee in this matterbecame employees of FTI.

10 SAN FRANCISCO DIVISION 10 As disclosed in FTis retention pleadings filed on September 27, 2002 and approved by 11 11 the Court on October 31, 2002, nuncpro tune to September 1,2002, FTI, as successor to the 12 12 BRS Practice, will be responsible for filing appropriate fee applications regarding previously 13 In re ' Case No. SF 01-30923 DM 13 unbilled services provided by PricewaterhouseCoopers LLP (CWC") prior to the Closing Date.

14 PACIFIC GAS AND ELECTRIC Chapter II 14 COMPANY, a California corporation, Further, FTI is entitled to all payments to be made by the Debtors after the Closing Date for any 15 15 NINTH INTERIM AND FINAL outstanding receivables related to BRS services. Fn assumes the responsibility for filing a Debtor.

16 APPLICATION OF FTI CONSULTING 16 INC. FOR ALLOWANCE AND PAYMENT single, final fee application for pre-Closing Date BRS services and post-Closing Date En 17 17 OF COMPENSATION AND services at the conclusion of these proceedings. As such, as outlined above, FI respectively 18 REIMBURSEMENT OF EXPENSES 18 (APRIL 11,2001 TIHROUGII APRIL 12, submits this Final Fee Application for services rendered by FTI for the period from April 11, 19 2004); DECLARATION OF THOMAS E. 19 2001 through April 12, 2004 to the Official Committee of Unsecured Creditors (the LUMSDEN IN SUPPORT THEREOF 20 20 "Committee').

21 Hearin: 21.

22 Date: September 14,2004 22 Time: 1:30 PM Place: 235 Pine Street,22's Floor 23 INTRODUCTION 23 San Francisco, CA 24 24 This is the Final long-form application filed by En for approval of compensation and 25 25 reimbursement of related expenses for services rendered on behalf of the Committee during 26 26 PG&E's chapter 11 case. FTI submits thUs Final Application in accordance with Bankruptcy 27 27 Code sections 330 and 331, Rule 2016 of the Federal Rules of Banlauptcy Procedure (the 28 28 2

I I

'Bankruptcy Rules"), the Office ofthe United States Trustee for ihe Northern District of which all estate professionals would sham in the success of the reorganization. The Committee California Guidelines (the "UST Guidelines"), and the United States Bankruptcy Court Northern voted to support the concept of a cash pool for professional success fees in the amount of S I U 1 2 2 Million to be shared equally among the professionals for the Committee, conditioned on, among District of California Guidelines for Compensation and Expense Reimbursement of Professionals 3 3 other things, that the success fee pool concept would be supported by the Debtor and that the and Trustee ("Court Guidelines"). Through this Final Application. FTI seeks an order (i) 4 4 success fees would not be funded by the ratepayers. The Debtor refused to support such a allowing interim compensation of S569,657 in fees and S5,317 in expenses for a total of 5 5 success fee pool for Committee professionals (or any other professionals) and on that basis, FTI

$574,974 for services rendered by FT! on behalf of the Committee during the period December 6 6 and Milbank determined that they would not proceed with a request for a success fee so as not to 1,2003 through and including April 12, 2004 ("Ninth Interim Period): (ii) approval and 7 7 involve the Committee in protracted litigation. However, should the Court determine that allowance of $7,917,497 in fees and S288,229 in expenses incurred for services rendered by ITM 8 8 success fees are appropriate for Committee professionals, Fri reserves its right to amend its on behalf of the Committee during theperiod April 11, 2001 through and including April 12, 9 9 Final Fee Application to request a share of such success fee. Some of the reasons for the 2004 and (iii) allowing PT! to be reimbursed for certain fees and expenses that were previously 10 10 Committee support for FTI were the following:

unbilled andlor reduced per the Court's Memorandum Decision Regarding Applications for 11 I1

Full payout to creditors with interest.

Interim Compensation of Professionals filed December 12,2001 (Unbilled Fees') in the amount 12 12

Reduced administrative burden of exiting bankruptcy in 3 years.

of S144,149. Accordingly, FIT seeks final allowance and payment of a total of $8,349,875 for 13 13

Structure that supports credit worthy status and maintains a stable regulatory services rendered and reimbursement of costs and expenses incurred during the Final Application 14 14 environment.

Period.:

15 15

Designed with Milbank, the Regulatory Asset under the Joint Plan.

16 During the Ninth Interim Period, FMi professionals spent a total of 1,107.6 hours6.944444e-5 days 0.00167 hours 9.920635e-6 weeks 2.283e-6 months 16

Participated with Milbank in the mediation process and approval of the Settlement rendering services to the Committee in connection with the PG&E bankruptcy case. FTi also 17 17 Agreement by the CPUC (including a key meeting with one Commissioner that pushed 18 incurred $5,317 in costs and expenses in connection with those services, for which FTI is 18 the swing vote to 3.2 in favor of the Settlement Agreement).

requesting reimbursement To date, PG&E has made payments for fees and expenses in the 19 19

Testimony in support of the Settlement Agreement and the Plan in Bankruptcy Court and 20 amount of S,120,285. These amounts reflect the cover sheet and interim fee applications for 20 the CPUC.

21 April 11,2001 through April 12,2004. The 15% holdback of fees from the December 2003 thru 21 April 2004 cover sheet applications of $85,447 are currently outstanding. The services and costs 22 22

SUMMARY

OF DEVELOPMENTS IN THE CASE 23 for the Final Application Period are described below with details of the Ninth Interim Period in 23 24 the exhibits filed concurrently herewith. 24 On April 6, 2001 (the "Petition Date"), Pacific Gas and Electric Company (the 25 25 "Debtors") filed voluntary petitions for reorganization under Chapter II of title II of the United 26 In its employment application FT! reserved the right to petition the Court with the 26 States Bankruptcy Code ("Bankruptcy Code"). The Debtors continue to operate their business 27 consent and support of the Committee, for a success fee. FT participated in discussions with the 27 and manage their properties as debtors-in-possession pursuant to Sections 1107(a) and 1108 of 28 Committee and other Professionals to the Committee concerning the creation of a cash pool in 28

-/' 4 3

i .

the Bankruptcy Code. (f) Attendance at meetings and assistance in discussions with the Debtor, I

regulators, State agencies, mortgage holders and other secured lenders in 2 On July 2, 2001 this Court entered an order authorizing, nunc pro tune, employment of 2 this chapter 11 case, the U.S. Trustee, other parties in interest and 3 PwC as of April 11, 2001. as Accountants and Financial Advisors for the Committee. On 3 professionals hired by the same, as requested; 4 October 31, 2002, an order (the "Retention Order') was entered to extend this employment to 4 (g) Assistance in the review and/or preparation of information and analysis 5 F1i as successor to the PwC BRS Practice, nunc pro tunc to September 1, 2002. Neither PwC S necessary for the confirmation of a Plan of Reorganization in this chapter 6 (BRS) nor FTI received a retainer in this case. 6 11 case; 7 7 (h) Assistance to the Committee and its counsel in the preparation and 8 The Retention Order authorized the retention of FTI to render to the Committee the 8 evaluation of potential litigation; 9 following essential services, which include but are not limited to the following: 9 (i) Assistance in the discharge of the Committee's duties and functions in this 10 10 case, including, but not limited to, compilation of material required for 1 (a) Assistance to the Committee in the review of financial related disclosures 11 court testimony, and 12 required by the Court, including the Schedules of Assets and Liabilities, 12

() Render such other general business consulting or such other assistance as 13 the Statement of Financial Affairs and Monthly Operating Reports; 13 the Committee or its counsel may deem necessary that are not duplicative 14 (b) Assistance with a review of the Debtor's short-term cash management 14 of services provided by other professionals in this proceeding.

15 practices; 15 16 (c) Advice and guidance to the Committee with respect to utility accounting 16 FM1 incorporates by reference the overview of case activity presented in the Ninth Interim 17 and electric and gas utility operating elements, including elements of rate 17 and Final Application of Milbank Tweed Hadley & McCloy LLP for Allowance and Payment of 18 making, cost recovery and the financial impact of regulatory decisions; 18 Compensation and Reimbursement of Expenses. Two competing plans were filed in the case, 19 (d) Assistance and advice to the Committee with respect to the value of the 19 subsequently a Joint Plan was filed and a Settlement Agreement was reached as the result of 20 Debtor's operating assets and make recommendations regarding the 20 Court ordered settlement negotiations. The Commission approved the modified Settlement 21 highest and best use, operation, and ultimate disposition of such assets; 21

'Agreement which led to the Court's order confirming the Settlement Plan of Reorganization on 22 (e) Assistance in the review of financial information distributed by the Debtor 22 December 22,2003.

23 to creditors and others, including, but not limited to, cash flow projections 23 24 and budgets, cash receipts and disbursement analysis, analysis of various 24 25 asset and liability accounts, and analysis of proposed transactions for 25

SUMMARY

OF FMI'S EXPERIENCE 26 which Court approval is sought; 26 27 27 FTI, as successor to the BRS practice of PwC, has extensive experience in financial 28 28 reorganizations and bankruptcy consulting services. Our professionals have provided services 5 6

to a wide variety of companies in the electric and gas utility industry, and as a result, MT! has professionals who have rendered the services. In matters such as this, time records are kept in 6 accumulated a wealth of knowledge concerning the intricacies in these matters. minute (.1 hour1.157407e-5 days 2.777778e-4 hours 1.653439e-6 weeks 3.805e-7 months ) increments.

2 2 In bankruptcy restructurings, the FTI has accumulated over a quarter of a century of This case, which was one of the ten largest bankruptcy cases filed in the United States, 3 3 experience serving Debtors, Creditors, and Trustees in bankruptcy matters.

has involved significant interaction with outside agencies, including the Federal Energy 4 4 FTI has assisted numerous Debtor and Debtor-Tn-Possession entities involving, successful Regulatory Commission ('CFERC), the California Public Utility Commission ("CPUC"), the 5 5 development of reorganization plans, numerous valuation projects, sales of assets in Chapter 11, 6 6 California Energy Commission, the Department of Water & Power (DWR"), the State extensive tax consulting, and other services related to reorganization.

Legislature, the Governors Office, as well as taxing authorities and other reporting agencies. The 7 7 activity in this case has been continuous and intense as the Debtor and Creditors have moved 8 8

SUMMARY

OF SERVICES RENDERED BY FMI swiftly to grapple with the innumerable issues of a regulated utility in bankruptcy, and parties 1 9 9 have sought to develop a consensual plan of reorganization structure. During the course of this 10 10 During the Ninth Interim Period, FTI represented and advised the Committee with..

case, we have observed unprecedented action by all of the parties noted above to address the I 11 respect to a wide range of issues and challenges. Due to the comprehensive nature of the underpinnings of the energy crisis in California. These have included the filing of two competing 12 12 services rendered by FTI, no attempt is made herein to detail the totality of such services. The plans of reorganization within one year of the case's commencement, proceedings by the 13 13 full scope of the services rendered by F1l is set forth in detail in the billing reports filed legislature and the CPUC to address hardship by the QF generators, proceedings by the 14 14 concurrently herewith under captions entitled "Detail Reporting by Task Code Exhibit for the Governor, Legislature and FERC on price caps and refunds for energy, action by the Legislature 15 15 Period December 1, 2003 to April 12,2004 " (the "Billing Reports). However, in order to assist and Energy Commission to support development of power plants, proceedings with the CPUC 16 16 the Court, the United States Trustee, PG&E and other parties in interest in reviewing this Final over the DWR power purchases, long term contracts, negotiations and legislative proceedings 17 17 Application, a brief summary of FTl's billing procedures and the services rendered by FTI during involving bailout measures for utilities in California, issues involving the State Treasurers office, 18 18 the Ninth Interim and Final Application Period with regard to each activity code category, DWR, CPUC and the Governor over bond financing for the DWR power purchases, interplay 19 19 including certain undertakings within each category, is set forth below. among the utilities in California, the CPUC and DWR concerning allocation of the costs of 20 20 power and bond financing as it may affect each utility, and agreement between the CPUC and 21 A. Summary of fT's Billing Procedures. 21 Southern California Edison (SCE) on a means to repay SCE's past-due obligations. The issues at 22 22 It is FTI's normal business practici to charge its clients in full for services rendered and stake have been monumental with PG&E's reported debt and claims exceeding S13 Billion, the 23 23 all actual and necessary out-of-pocket costs and expenses incurred by FTI in providing those range of revenue at stake for their electricity procurement activities varies from $2.8 Billion to 24 24 services.

S3.7 Billion per year, the proposed allocation of DWR power and bond finance costs varying 25 25 from S2.0 Billion to over S2.2 Billion per year, and QF pre-petition claims on executory 26 In the ordinary course of its practice, FTI maintains records of time expended by 26 contracts exceeding SI Billion. During the pendency of this case, we have observed electricity 27 professionals in rendering services to its clients. Time records are made substantially 27 prices vary from hundreds of dollars per Megawatt to power prices in the $15-30 range. We have 28 contemporaneous with the rendition of these professional services and are prepared by the 28 7 8

seen natural gas prices varybya factor of lOx the historic price average. Reported purchases of the past 25 years. He has unique knowledge of the regulatory and business environment facing power by the DWR have varied from over SIOO million per dayto under S12 million per day utilities. Mr. Hamilton has coordinated the Committee work on plan structuring, regulatory 2 during this period. There have been numerous legal challenges to actions of the Debtor, CPUC 2 matters, cash flow projections and legislative matters.

3 and the State of Califomia in this case, resulting in pending appeals and legal action on these 3 4 4 Thomas Lurnsden is one of FT1's senior bankruptcy specialists, with specialization in matters. Numerous appeals of decisions have been made on matters in this case and related utilities and the California Market, having participated in development of the infrastructure for 5 cases. Many of the claims are subject to scrutiny and legal action at the State and Federal levels. 5 6 the electricity deregulation in the State, and has operated and bought and sold electrical 611 12 The Committee organization structure has been unique for this case, with greater time generation facilities. Mr. Lumsden coordinated the Committee work on the financial modeling 7 7 involvement by Committee members than in most any other case. The personal commitment of and analysis of PG&E's operations and finances, the DWR power purchases and revenue 8 8 Committee members to actively participate on a continuous basis has matched the activity level requirements, the tax issues involving the Plan structure, the retained generation filings with the 9 9 in the case with over 15,100 filings listed in the Court docket through April 12, 2004. The CPUC, the analysis of claims by class, analysis of the CPUC Plan, and development of 10 10 I11 Committee has participated in an unprecedented number of meetings of the Committee, advisors, 11 alternative plan structures, including the Joint Plan and Settlement Plan. Mr. Lumsden testifted in the Debtor and the CPUC. The Committee, in order to address the monumental workload and support of the Settlement Agreement before the CPUC and confirmation hearings for the Joint 12 12 myriad of tasks at hand, created four distinct subcommittees: Financial, Legislative, Regulatory Plan and Settlement Plan.

13 13 and Plan. FIT assembled sub-teams of professionals to address the issues and work assignments 14 '14 M. Freddie Reiss is a senior bankruptcy specialist for FrT with expertise in serving.

set forth by the Committee, subcommittees and working group. In the course of FTI's 15 15 Committees and dealing with intercreditor matters. He has coordinated the Firm's negotiations in representation of the Committee in this matter, it has been necessary and requested that more 16 16 the areas of employee retention issues, employment of Debtor professionals, ordinary course than one or two professionals participate in meetings and conferences with the Conimittee 17 17 motions, committee governance, inter-creditor matters, and plan negotiations with the Debtor representatives, the CPUC or with the Debtor. This is not normally the case for FTI in such 18 18 and with the CPUC.

matters and has been dictated by the size of the case, the complex nature of the matters being 19 19 discussed, the speed with which matters are being addressed in the case, and requirement to have Rocky Ho is now a Senior Managing Director for FTI and has beenresponsible for 20 20 various specialty skills represented and participating in certain key discussions. In many cases, coordinating staff assignments and projects for the FT! team, review of work product, quality 21- 21 these have been high-level meetings or key discussions with the Debtor representatives or the control, and active participation in the development of the Settlement Agreement/Plan of 22 22 CPUC and its advisors who are not able to make themselves available for repetitive follow-up Reorganization, and has specialized in review and coordination of all Committee response to 23 23' discussions. In many cases, the participation of multiple professionals by FM has been dictated 24 Debtor motions and filings, litigation matters, Committee consent on capital expenditures and 24 by the specific specializations and backgrounds such as those of the following key professionals: .25 claims disputes and settlements. Mr. Ho was responsible for maintaining Committee contacts 25 26 with the CPUC staff and financial advisors.

Michael Hamilton is FTI's senior Utility Specialist in Accounting and Regulatory 26 27 Matters. He has participated in each of the Firm's restructurings that have involved a utility over i27 Allison Young is a Director for MT!and has specialized in the financial modeling, the 28' 28' 9 10

statewide grid modeling, the cash flow analysis, the assessment of Debtor projections, the Application; 1 assessment of the CPUC's projections, alternative plan structures and feasibility, tax analysis of 1 3. Exhibit 3 - Expense Detail reports by individual and itemized total expenses for 2 both plan proposals, and analysis of creditor claims by class. 2 which reimbursement is sought. All expenses for which reimbursements are sought are disclosed 3 3 in detail by individual.. It should be noted that any airfare charges were incurred as a result of 4 Jennifer Kitchin was a Director for FTI and during her tenure with FTI she specialized in 4 travel in coach class. FTI has not requested reimbursement for certain out-of-pocket expenses the Rating Agency analysis of PG&E, the DWR power purchases and contract data.

5 5 when it would not be feasible to assemble the billing details for reimbursement under the 6 Maryam Ghazi is a Director for FTI and has specialized in the analysis of the Settlement 6 Guidelines. These unbilled out-of-pocket expenses typically include telephone charges for calls 7 Agreement and assisted in the preparation of Thomas E. Lumsden's testimony in support of the 7 placed in its offices, postage costs including Federal Express charges, photocopying and 8 Settlement Agreement presented to the Court and the CPUC. 8 facsimile charges incurred at the Applicant's offices in connection with these cases. These 9 9 unbilled out-of-pocket expenses are real costs that have been incurred by Frn and have benefited 10 Margery Neis was a Utilities specialist in the BRS Practice and during her tenure with 10 the Estate; and FTI coordinated the review and monitoring of all matters with the CPUC, the DWR power I1 11 4. Exhibit 4 - Summary of Meetings when more than two FEl professionals purchases and contract database and QF contracts.

12 12 attended. The summary highlights the relative importance of each team member and the purpose 13 An analysis of meetings with multiple Fri professionals in attendance and an explanation of the 13 of their involvement at the meetings.

14 role and purpose of each professionals' participation are presented in Exhibit 4 to this 14 15 Application. 15 NARRATIVE

SUMMARY

OF SERVICES PROVIDED BY FrI.

16 16 B. Summary of Exhibits Regarding Services Rendered By FT1.

17 17 FTI has submitted detailed listings of time incurred by professional by task for the 18 Fri has attached the following exhibits as support to its Application:

18 monthly Cover Sheet Applications to the Debtor, Committee, the United States Trustee and the 19 .1..

Attached to the Declaration of Thomas E. Lumsden ("Lumsden Declaration) is 19 Court for the period covered by this Final Application. FTI has reclassified some of the detailed 20 Exhibit I - A summary schedule showing the professionals who performed the services, the 20 time into categories that more appropriately reflect the work performed. Reclassification was 21 number of hours spent, and the total fees for such services; 21 made to harmonize the categorization among professionals.

22 2. Exhibit 2, Exhibit 2-1, Exhibit 2-2 and Exhibit 2 Sunmary of Fees by Project 22 23 Category and itemized time records, in chronological order, of each specific service for which an 23 1. Asset Sales/Valuation Issues (Category 01).

24 award of compensation is sought, including previously unbilled and/or interim Court-ordered 24 FTI did not incur any hours in this category during the Ninth Interim Period.

25 reductions. The itemized record includes: (1) the date each service was rendered, (2) the 25 During the overall case, FTI professionals spent a total of 1,027.9 hours1.041667e-4 days 0.0025 hours 1.488095e-5 weeks 3.4245e-6 months rendering services in this 26 professional(s) who performed the service, (3) a description of the services rendered, and (4) the 26 category, forwhich F-i seeks compensationofS356,311. AsummaryoftheFrI professionals 27 time spent performing the service in increments of tenths of an hour for the Final Interim 27 who rendered services in this category and the corresponding amount of fees requested is 28 28 11 12

included in Exhibit "." The Billing Record for this category, which sets forth a detailed FPT did not incur any hours in this category during the Ninth Interim Period.

description of the services rendered are filed concurrently herewith. 21 During the overall case, FTi professionals spent a total of 72.2 hours2.314815e-5 days 5.555556e-4 hours 3.306878e-6 weeks 7.61e-7 months rendering services in this 2 2 category, forwhich FPTseeks compensation ofS40,613. A sununaryofthe P!professionals.

Services rendered by MT!professionals in this category included:

3 3 who rendered services in this category and the corresponding amount of fees requested is 4 a) MT!prepared top level valuations of the Debtor's assets and business segments 4 included in Exhibit "2." The Billing Report for this category, which sets forth a detailed 5 to ascertain solvency of Debtor and ability of the assets to provide asset value 5 description of the services rendered is filed concurrently herewith.

coverage for the proposed debt issued under the plan ofreorganization. 6 7 7 Services rendered by FTI professionals in this category included:

8 b) FTI performed a joint review with Saybrook Capital of the Debtor's improved 8

a) PT!attended Confirmation Hearings and unimproved real property asset base to determine values and potential sale 9 9 or finance opportunities. b) PT!reviewed and analyzed various testimonies and supporting depositions 10 16 10 presented at the confirmation hearings.

c) FTI reviewed and analyzed the Debtor's schedule of assets expected to be sold II 12 in the Plan of Reorganization. 12 c) MT!reviewed and analyzed trial briefs presented at the confirmation hearinzgs.

13 13 d) FT! determined the value of the lands donated by PG&E in the Settlement Frl worked closely with the CPUC, its consultants and PG&E to articulate the 14 14 Agreement and assessed the tax impact on the Settlement POR. benefits of the Settlement Agreement to all involved partie.PFTr's findings were essential in 15 21 obtaining OCC support of the modifications proposed for the Settlement Agreement.

16 This work was perforned to enable the Committee to assess the accuracy of the 16 17 values presented by PG&E as shareholder contributions, assess the solvency of the Debtor, .17 3. Bankruptcy Reporting/Operations (Category 03)..

assess proposed property sales to fund the plan of reorganization. and to assess the ability of the 18 19 During the Ninth Interim Period, FT! professionals spent a total of 202.8 hours9.259259e-5 days 0.00222 hours 1.322751e-5 weeks 3.044e-6 months Debtor's assets, at market value, to provide adequate coverage for the proposed debt to be issued 19 is rendering services in this category, forwhich PT seeks compensation of S107,819. During the 20 15 under the plan of reorganization. The valuation of the Debtors business segments involved 20 overall case, FPl professionals spent a total of 1,221.7 hours8.101852e-5 days 0.00194 hours 1.157407e-5 weeks 2.6635e-6 months rendering services in this category, 21 analysis of each component of the Debtors operations, adjusting for the different cost structure, 21 22 forwhich Frl seeks compensation of$431,818. A summaryofthe FTlprofeisionals who, resources, market pricing and regulatory environment in California. This information assisted the 22 23 rendered services in this category and the corresponding amount of fees requested is included in 18 Committee in evaluating the debt capacity and creditworthiness of each of the proposed new 23

24. 24 Exhibit "2." The Billing Report for this category, which sets forth a detailed description of the entities in the Plan of Reorganization. In the process of developing the comparable company 25 services rendered is filed concurrently herewith.

data which is referenced in valuations, FrP also utilized the information to assess the viability of 26 the Debtors financial projections for plan purposes. 26 Services rendered by FTI professionals in this category included:

27 27

2. Bankruptcy Court Approval of Settlement Agreement (Category 02) a) PT! reviewed and analyzed various motions and pleadings of the case, and 28' 28 13 14

provided comment to the committee on the financial impact of these items. rendered services in this category and the corresponding amount of fees requested is included in Exhibit "2." The Billing Report for this category, which sets forth a detailed description of the 2 b) FTI reviewed and summarized the Debtor's updated Statement of Financial 2 services rendered, is filed concurrently herewith.

Affairs and Schedule of Assets and Liabilities. 3 3

4 Services rendered by FTI professionals in this category included:

4 c) FTI participated in the Section 341 meeting.

a) FTI conducted interviews with members of management and their advisors to 5 5 d) Ff1 reviewed the Debtor's Operating Reports submitted to the United States understand the structure and underlying assumptions of financial projections.

6 6 Trustee to assess financial performance, compliance with orders on capital Specific analyses focused on revenue, balance sheet, cash flow projections, 7 7 expenditure, and track other Debtor activities. working capital needs, capital expenditure plans, and EBITDA margins. This 8 8 analysis was necessary in to assess long-term viability and potential recovery to 9 9 There have been innumerable motions filed in the case by the Debtor and other the unsecured creditors.

10 10 parties which required review and assessment by FTI to assist counsel to the Committee irl.

11 b) FTI compared the historical cash flows to the cash flow projections for previous determining the necessary response. These included motions on capital expenditures, asset sales, 12 12 periods to ascertain the reasons for variations from budget and to aid in and claim settlements, Power Exchange, lease extensions, POR transition costs, procurement 13 13 determining the accuracy of future cash fl6w projections.

plans, as well as document discovery requests. In many cases, the time associated with those 14 14 c) FT! analyzed the capital expenditure budget for each business segment and its motions was posted to a distinct task code, but in other more generic cases, the time was posted 15 15 impact on the debtors' cash flow projections.

to the Bankruptcy Reporting task. Time charged to this task code also involved updating FTI's 16 16 review of the Debtors Schedules of Assets and Liabilities and the Statement of Financial Affairs. d) FTI analyzed the Debtors' cash flow forecasts to develop an understanding of 17 17 These documents comprised over 30,000 pages of data and required extensive time to review and the Debtor's liquidity position and its ability to generate sufficient cash to fund 18 18 compile. This information, which primarily summarized the real assets and creditor claims of the proposed Plans of Reorganization.

19 19 PG&E, was utilized in several aspects of our work including the valuation of real assets and in The process was critical to understanding the financial projections, both cash based and 20 20 assessment of solvency and claim categorization. FrI correlated the claim information provided operating, to evaluate the liquidity of the debtor, and its parent, to assess the Committee position 21 21 in the Schedules with reported data for key categories of claimants. with respect to motions related to ordinary course expenditures, capital expenditures, payments 22 22 to DWR, payments to ISO, payments of Mortgage bonds due, the relationship and sensitivity of 23 4. Cash Flow Analysis (Category 04). 23 the cash flows to changes in natural gas fuel prices, and the Debtor's ability to generate sufficient 24 24 During the Ninth Interim Period, FTI professionals spent a total of 94.0 hours0 days 0 hours 0 weeks 0 months cash flows to fund the Settlement Agreement or any proposed Plan of Reorganization.

25 25 rendering services in this category, for which FPT seeks compensation of S46,1 18. During 26 26 overall case, FTI professionals spent a total of 766.8 hours9.259259e-5 days 0.00222 hours 1.322751e-5 weeks 3.044e-6 months rendering services in this category, 5. Claims Analysis (Category 05).

27 27 for which FTI seeks compensation of S313,074. A summary of the FTI professionals who 28 During the Ninth Interim Period, FPT professionals spent a total of 113.2 hours2.314815e-5 days 5.555556e-4 hours 3.306878e-6 weeks 7.61e-7 months 28 is 16

rendering services in this category, for which FTI seeks compensation of $58,728. Dining the committee's understanding of the terms of the agreement and to assist in further overall case, FrI professionals spent a total of 1,162.2 hours2.314815e-5 days 5.555556e-4 hours 3.306878e-6 weeks 7.61e-7 months rendering services in this category, negotiations with the Debtor.

2 for which FIT seeks compensation of S495,342.' A summary of the FrI professionals who 2 3 3 This work product involved the review ofclaims filed by creditors totaling in rendered services in this category and the corresponding amount of fees requested is included in 4 4 excess of $44 Billion; reconciling these amounts to those reported by the Debtor, and to Exhibit "2." The Billing Report for this category, which sets forth a detailed description of the 5 5 information supplied by institutional creditors and in public filings; and evaluating those claims services rendered is filed concurrently herewith.

6 which are subject to estimation or adjustment through the ISO or PX, and those subject to CPUC 6

7 Services rendered by FTI professionals in this category included: review. Work in this area resulted in validation on behalf of the Committee of a large segment 7

8 8 of the claims in this case and evaluation of key claims including those for Financial Creditors, a) FI! coordinated with the Debtor to summarize and reconcile those claims filed 9 9 QF's, Sempra, Enron, ISO/Generators, cities, counties and other claimants where settlements against the company to validate the value of potential allowed claims that the 10 have been proposed or discussed. MT! coordinated with the Debtor to summarize and reconcile Estate is responsible for. 10

,11 those claims filed against the company to validate the value of potential allowed claims that the I1 b) FrI reviewed the settlement between Enron and Southern California Edison to Estate is responsible for.

12 12 13 determine if this could be a possible template for the settlement of Enron's 13 6. Coordinating with Debtor (Category 06).

14 claim with the Debtor, 14 15 FTI did not incur any hours in this category during the Ninth Interim Period.

c) FTI reviewed and analyzed numerous claims stipulations. 15 16 During the overall case, FTI professionals spent a total of 157.0 hours0 days 0 hours 0 weeks 0 months rendeing services in this 16 17 d) MT! reviewed the support for and documentation of the NCPA and City of Palo category, for which MT! seeks compensation of S74,329. A summary of the FTI professionals 17 18 Alto claims against the debtor to evaluate the potential amount of this litigation who rendered services in this category and the corresponding amount of fees requested is 18 19 claim. 19 included in Exhibit `2." The Billing Report for this category, which sets forth'a detailed 20 20 description of the services rendered is filed concurrently herewith.

e) FPTreviewed the data on application of any generator and pass through claims, 21 and evaluated the FERC ordered refundito reduce the allowed claims in the 21 Services rendered by PT! professionals in ihis category included:

22 case. 22 23 23 a) FTI spent time coordinating meetings or the exchange of information with the 24 F- IT! reviewed the Sempra settlement agreement to assist the Committee in 24 debtor or its advisors. The time spent drafing data requests and preparing for 25 determining whether to support or reject Debtor's proposed settlement 25 these meetings are recorded in this task category. Attendance in meetings with 26 agreements. 26 the Debtor is recorded in the relevant task code.

27 g) FTI reviewed the settlement agreements with the PC bondholders to enhance the 27 This effort resulted in a coordinated and smooth flow of information from the 28' 28' 17 18

Debtor to the Committee and enabled the Committee to respond to requests of the Debtor and the Frl's work was critical to the assessment of the reasonableness of the interveners' Court on a timely basis. FTI also shared much of its analysis of various aspects of the Debtors testimonies, and their potential impact on the Settlement Agreement and Plan of Reorganization.

operations, including load and resource assessments, Plan financial projections, regulatory 2 FTI worked closely with the CPUC, its consultants and PG&E to articulate the benefits of the issues, and DWR contract and revenue requirement estimations with Debtors, its advisors, and 3 agreement to all involved parties and determine the impact of proposed modifications to the the CPUC in support of the Settlement Agreement. This collaborative effort enhanced the 4 Settlement Agreement. Fri's findings were essential in obtaining OCC support of the efficiency of exchange of information and advanced activities in the progress of the case. 5 modifications proposed for the Settlement Agreement and were relied on by the CPUC and 6 PG&E to validate their independent review of such modifications.

7. CPUC Approval of Settlement Agreement (Category 07). 7

8. CPUC Plan of Reorganization (Category 08).

During the Ninth Interim Period, FIT professionals spent a total of 191.5 hours5.787037e-5 days 0.00139 hours 8.267196e-6 weeks 1.9025e-6 months 8 rendering services in this category, for which FMi seeks compensation of S 104,659. During the 9 FiT did not incur any hours in this category during the Ninth Interim Period.

overall case, FlI professionals spent a total of 643.4 hours4.62963e-5 days 0.00111 hours 6.613757e-6 weeks 1.522e-6 months rendering services in this category, 10 During the overall case FTi professionals spent a total of 462.9 hours1.041667e-4 days 0.0025 hours 1.488095e-5 weeks 3.4245e-6 months rendering services in this for which FiT seeks compensation of 3338,082. A summary of the FIT professionals who 11 category, for which FT! seeks compensation of S214,329. The CPUC Plan of Reorganization rendered services in this category and the corresponding amount of fees requested is included in 12 was filed May 17,2002, as an alternative to the Plan filed by the Debtor. A summary of the FT!

Exhibit "2." The Billing Report for this category, which sets forth a detailed description of the 13 professionals who rendered services in this category and the corresponding amount of fees services rendered is filed concurrently herewith. 14 requested is included in Exhibit "2." The Billing Report for this category, which sets forth a 15 detailed description of the services rendered is filed concurrently herewith.

Services rendered by FrI professionals in this category included:

16 Services rendered by FTI professionals in this category included:

a) FiT monitored the process for CPUC approval of the Settlement Agreement and 17 analyzed testimony filed by interveners for the related CPUC hearings. 18 a) FTI reviewed and analyzed the CPUC's alternative plan projections and 19 provided feedback to the CPUC on the reasonableness of the Plan projections, b) FiT reviewed and analyzed the OCC and PG&E trial briefs. 20 including the proposed capital structure and creditor recovery analysis.

21 c) Fri attended CPUC hearings on the Settlement Agreement 22 b) FTi prepared an in-depth analysis of the CPUC's initial Plan term sheet and d) FIT prepared Thomas E. Lurnsden's rebuttal testimony. 23 provided feedback on shortfalls in the initial plan terms.

e) FTI analyzed the Settlement Agreement and prepared a presentation for the 24 c) Fri assisted Milbank in preparing an objection to the term sheet by OCC detailing the key terms and conditions of the Settlement Agreement. 25 summarizing the deficiencies of the CPUC's Plan.

26 f) FTI worked with UBS in the preparation of models to calculate the financial 27 d) Fri prepared an in-depth analysis for the Committee of the CPUC's Plan and metrics achieved thru the Settlement Agreement. 28 Disclosure Statement and how it compared to the PG&E Plan.

19 20

I e) Fr! analyzed the projected financial ratios from the CPUC's alternate plan and b) FrI reviewed and monitored CPUC proceedings to deternine the potential

- compared to S&P benchmark ratios for utility investment grade companies. financial impact the proceedings could have on the Debtor.

2 2 I O FTI participated in mediation hearings between the CPUC, the Debtor and the c) FrI reviewed the TRA-TCBA and GMA account statements (regulatory 3 3 i professionals for the Unsecured Creditors Committee to determine if a 4 balancing accounts) to determine correlation with power process of PG&E. i 4

5 consensual Plan of Reorganization could be developed. 5 I d) FrI reviewed filings and proceedings related to the DWR refund proceedings 10 6 6 and its potential impact on PG&E's forecasted cash balance.

The work in this area enabled the Creditors Committee to quickly respond to the 7 CPUC's term sheet, to provide meaningful feedback to the CPUC on deficiencies in its plan, and

.7 e) FTI analyzed the merits and rationale of each California utilities' URG filing.

.8 to recommend alterations that enabled the Commission to readily prepare an amended plan that 8

This analysis was used to develop a projected revenue requirement for the 9 could provide for the payment in full of all valid claims. FT! also provided valuable input into 9

Debtor.

10 the mediation process by preparing models of consensual plans that incorporated aspects oqboth 10 11 f) MT!analyzed the merits and rationale of the CPUC's settlement agreement the Debtor's and the CPUC's proposed plans. This analysis provided a framework for alternative 12 plan structures during the mediation process.

12 with SCE, and whether a similar agreement would be beneficial or feasible for 13 13 the Debtor.

14 9. CPUCReview(CategoryO9). - 14' g) MT!reviewed and analyzed materials for GRC hearings and their assessed i5 During the Ninth Interim Period, FTI professionals spent a total of 102.5 hours5.787037e-5 days 0.00139 hours 8.267196e-6 weeks 1.9025e-6 months 15 16 impact on the Plans of Reorganizations for the Debtor.

16 21 rendering services in this category, for which FTI seeks compensation ofS50,135. During the 17 overall case, FTI professionals spent a total of 1,592.7 hours8.101852e-5 days 0.00194 hours 1.157407e-5 weeks 2.6635e-6 months rendering services in this category, 17 h) PT! prepared the Declaration of Thomas B. Lumsden regarding the DWR 18 for which FrI seeks compensation ofS631,369. The category of CPUC Review captures the Is rebate impact on the Company's cash flow and POR.

19 19 time incurred with the review and financial analysis of a myriad of regulatory filings and 20 20 i) 1T! reviewed sections of the Public Utility Commission code and regulations proceedings that have an affect on PG&E's finances and regulatory recoveries. A summary of 21 to assess Joint Plan compliance with and PG&E objections to the Joint Plan.

21 the F11 professionals who rendered services in this catcgory and the corresponding amount of 22 22 The work in this area was critical to the determination of future cash flow and fees requested is included in Exhibit "2." The Billing Report for this category, which sets forth a 23 23 funding of the Debtor to complete a plan of reorganization. As an integrated utility, the Debtor is detailed description of the services rendered is filed concurrently herewith.

24 24 regulated by the CPUC for all aspects of its owned generation (nuclear and hydro assets), intra-Services rendered by FTI professionals in this category included: 25 25 state gas transmission and storage facilities, gas and electric procurement, and distribution of 26 26 electricity and gas to its wholesale and retail customers through its network of pipes and wires a) FPT reviewed the Debtor's, SCE's, SDG&B's, DWR's and TURN's CPUC 27 27 throughout Northern California. The CPUC and PG&E have made filings and conducted filings to determine the potential financial impact on the Debtor's estate.

28' 28 21 22

hearings on such regulatory topics as utility retained generation rate setting, general rate case, of that plan structure and compared S&P benchmark ratios for utility investment l DWR revenue requirement, net short procurement, attrition, and matters involving transition grade companies.

2 period accounting during deregulation. PG&E had been actively engaged with the CPUC during 2 3 c) FrT analyzed the modified Joint Plan projections prepared by UBS and provided this period with the setting of the revenue requirements for its nuclear and hydro generation 3 4 advice and comments to UBS and the Committee on the modified Joint Plan assets and with the revenue requirement for the DWR power purchases and bond financing. FTI 4 5 projections.

monitored the CPUC hearings, testimonies and developments closely, and prepared minutes of 5 6 key hearings and modeled the range of outcomes for the Committee. Ffl also performed a 6 d) MT!participated in meetings with credit rating agencies, including Fitch, 7 thorough analysis of the CPUC's settlement with SCE for the recovery of its past-due 7 Moody's, and S&P, to present the financial aspects of the CPUC/OCC Plan of 8 procurement related obligations and how this agreement compared with the Plan proposed by the 8 Reorganization in support of investment grade ratings for proposed debt under 9 CPUC for PG&E. FTI also researched elements of the CPUC regulation to assess compliance of 9 the CPUC/OCC Plan.

10 the Plan of Reorganization. 10

.11. e) FTI advised attorneys for the CPUC and the OCC in confirmation hearings for I

10. CPUCIOCC Joint Plan of Reorganization (Category 10). the CPUC/OCC Plan, including preparing financial analyses in support of the 12 12 13 CPUCIOCC plan and in defense of PG&E objections to the CPUC/OCC Plan.

FTI did not incur any hours in this category during the Ninth Interim Period. During the 13 14 And in support of UBS in its testimony and delivery of the UBS Highly overall case, FTI professionals spent a total of 562.6 hours6.944444e-5 days 0.00167 hours 9.920635e-6 weeks 2.283e-6 months rendering services in this category, 14 15 Confidential letter on financing of the Joint Plan.

for which FTI seeks compensation of $286,112. Time captured in this category represents the 15 16 development, filing and confirmation hearings for the joint Plan of Reorganization between the 16 f) Tom Lumsden of FT! provided testimony in the confirmation hearings for the 17 OCC and the CPUC. A summary of the FTI professionals who rendered services in this category 17 CPUICOCC Plan.

18 and the corresponding amount of fees requested is included in Exhibit "2." The Billing Report 18 19 The work in this area enabled the Creditors Committee to provide meaningful for this category, which sets forth a detailed description of the services rendered is filed 19 20 feedback to the CPUC on modifications to the Joint Plan to improve plan feasibility, to assist concurrently herewith. 20 21 UBS in developing modifications to the Joint Plan projections, and assessing indications for 21 22 Services rendered by FTI professionals in this category included: ratings for modified Joint Plan Securities. This work also enabled the CPUC to address 22 23 objections to the plan filed by the Debtor and helped the CPUCIOCC plan receive preliminary a) FTI reviewed and analyzed the alternatives to the Joint Plan projections and 23 24 investment grade ratings from the agencies.

provided feedback to UBS and the CPUC on the reasonableness of the Plan 24 25 projections, including the proposed capital structure, capital expenditures, and 25 11. Debtor Plan or Reorganizatfon/NegotlatIons (Category 11).

26 creditor recovery analysis. 26 27 27 During the Ninth Interim Period, FT! professionals spent a total of 0.6 hours6.944444e-5 days 0.00167 hours 9.920635e-6 weeks 2.283e-6 months 28' b) FTI analyzed the projected financial ratios from the Joint Plan and derivations 28 rendering services in this category, for which FTI seeks compensation of S 177. During the 23 24

overall case FTI professionals spent a total of 1,540.5 hours5.787037e-5 days 0.00139 hours 8.267196e-6 weeks 1.9025e-6 months rendering services in this category, that have incorporated all elements of the work that PT!performed on behalf of the Committee,

.1 enabling a continuous engagement and review of underlying detail ofall plan alternatives. The for which FTI seeks compensation of $740,720. A summary of the FT! professionals who 2 2 Committee continued to monitor the Debtor's financial performance and changes to Debtor's rendered services in this category and the corresponding amount of fees requested is included in

.3 3 plan of reorganization, until this plan was supplemented with the Settlement Agreement; Exhibit "2." The Billing Report for this category, which sets forth a detailed description ofthe 4 4 services rendered is filed concurrently herewith.

5 12. DWR Contracts Analysis (Category 12).

5 10 Services rendered by FTI professionals listed in this category included:

6 6 During the Ninth Interim Period, MT! professionals spent a total of 1.3 hours3.472222e-5 days 8.333333e-4 hours 4.960317e-6 weeks 1.1415e-6 months 7 7 rendering services in this category, forwhich FM! seeks compensation of $715. During the a) FM! personnel prepared for and participated in numerous meetings with 8 8 overall case, FTI professionals spent a total of 1,290.1 hours1.157407e-5 days 2.777778e-4 hours 1.653439e-6 weeks 3.805e-7 months rendering services in this category, Committee members, Committee Advisors, the Debtor, and the Debtor's 9 9 forwhich FPTseeks compensation ofS467,070. A summary of the MT! professionals who advisors to obtain background information and support of the Debtor's 10 10 rendered services in this category and the corresponding amount of fees requested is included in proposed plan of reorganization.

1 11 Exhibit "2." The Billing Report for this category, which sets forth a detailed description of the b) FTI assisted the Committee in negotiations with the Debtor surrounding its 12 12 services rendered is filed concurrently herewith.

proposed plan of reorganization..' 13 13 14 Services rendered by FTI professionals in this category included:

14 c) FrI reviewed and analyzed variouis filings made by the debtor in support of its 15 15 a) FPTanalyzed and summarized the terms of the DWR power purchase contracts, Plan of Reorganization for the Plan's confirmation hearings. FTI further 16 16 and April to June 2001 short-term energy purchases. This involved analysis of participated in various depositions of key financial personnel of the Debtor to 17 17 each long term contract which DWR entered into, development of a database obtain a better understanding of the changes to the Debtor's financial 18 18 for this contract informnation, and coordination of this infornation with PG&E projections.

19 19 to facilitate the evaluation of the underlying data which was being utilized by 20 - d) FPT analyzed and summarized amended financial aspects of the Debtor's Plan 20 DWR to establish the revenue requirement for each utility in California.

of Reorganization and presented our analysis to the Committee. 21 21 22 b) PT!calculated the potential range of future payments that will be required to be 22 e) FrI reviewed the amended Disclosure Statement, and Plan documents to 23 remitted to the DWR by the Debtor to pay for its purchased power, 23 insure consistency between the'details in these documents and the revised 24 administrative costs, long-term contracts and debt service requirements.

24 supporting plan projections.

25 25 c) FT! evaluated how the revised DWR revenue requirement would impact the 26 Despite the size and scale of this bankruptcy proceeding, the Committee and 26 projected financial statements of the Debtor, CPUC and Joint Plans and the 27 Debtor adopted a schedule to develop a range of plan alternatives and quickly move to 27 Settlement Agreement.

28' implement the optimal plan of reorganization for stakeholders. This involved fast-track efforts 28' 25 26

d) Fri reviewed updates to the DWR Revenue Requirement and the underlying Services rendered by FMI professionals in this category included:

Navigant model and settlements amending the underlying contracts.

a) FTI reviewed and analyzed the proposed bonus retention plan of the Debtor.

2 2 Approximately 40% of the electricity that PG&E supplies to its customers was 3 b) FTI summarized the retention plan and prepared a recommended course of 4 provided by the DWR through spot and contract purchases under the program initiated by ABxl .

action for the Committee to take on the Debtor's motion for approval of its This program by DWR provided the power to meet the net short load component of each utility 5 bonus retention plan.

6 in California since February 2001. DWR entered into long term power purchase contracts 12 amounting to over S40 billon in financial commitments. FrI developed a database of these c) FTI professionals attended court hearings to monitor the Debtor's motion for a 7

contracts to determine PG&E commitments. FTI monitored the power purchases supplied by management retention plan.

8 DWR to PG&E, estimated the costs of that power, as well as future costs associated with 9 As with many large bankruptcy filings, the issue of impact on management and key contractual commitments and spot purchases to meet PG&E's net short position, and developed 10 employees was a critical concern for the Committee. Working with the Debtor, FTI reviewed the 21 estimates of those future costs. This information was compared with financial data supplied by framework for a retention plan and developed incentives to retain and empower key employees consultants to the DWR and was also shared with PG&E to assist in efforts to influence the 12 to achieve a plan of reorganization as quickly as possible. FTI reviewed the compensation and 13 structure of the allocation of those costs among the utilities in California. FTI continued its incentive structure of existing and proposed employee benefit plans as part of this analysis for 14 review of the contracts that had been completed by the DWR and updated our database model of the Committee.

those contracts for newly obtained contracts and renegotiated contracts to enable the Committee 15 and PG&E to estimate the volume and cost of that power and its potential allocation to PG&E. 14. Executory Contracts Analysis (Category 14).

16 These future power costs were integrated with the DWR proposed bond finance program to 17 FTI did not incur any hours in this category during the Ninth Interim Period.

estimate the cash flow impact to PG&E. The impact of the cost of DWR power and finance 18 During the overall case, Fri professionals spent a total of 567.8 hours9.259259e-5 days 0.00222 hours 1.322751e-5 weeks 3.044e-6 months rendering services in this 19 charges wvas substantial to any proposed plan, amounting to estimated amounts of S2.2 billion to category, for which FTI seeks compensation of S239,335. A summary of the FTI professionals 20 Si billion per year for PG&E.

who rendered services in this category and the corresponding amount of fees requested is 21 13. Employee lssues/BeneftlRetentlon (Category 13). included in Exhibit "2." The Billing Report for this category, which sets forth a detailed 22 description of the services rendered are filed concurrently herewith.

FMI did not incur any hours in this category during the Ninth Interim Period.

23 During the overall case, FTI professionals spent a total of 13.7 hours8.101852e-5 days 0.00194 hours 1.157407e-5 weeks 2.6635e-6 months rendering services in this Services rendered by FTI in this category included:

24 25 category, for which FTI seeks compensation of S6,073. A summary of the FTI professionals a) FM analyzed various settlement scenarios for executory contracts to determine 26 who rendered services in this category and the corresponding amount of fees requested is the impact on the Debtor's projected cash position and cash flows.

included in Exhibit "2." The Billing Report for this category, which sets forth a detailed 27 description of the services rendered is filed concurrently herewith. b) FrI performed in-depth financial analysis of various issues related to 28 27 28

proceedings brought by numerous Qualified Facility ("QF") creditors to compel description of the services rendered are filed concurrently herewith.

1 PG&E to assume or reject the power purchase agreements between PG&E and 2 2 Services rendered by FTI in this category included:

the QFs.

3 3 a) FrI maintained an Extranet site for use by the Committee to allow for the easier 4 c) FTI analyzed QF hardship claims, participated in negotiations with the Debtor 4 transfer of information during the initial year of the case. The web-site includes 5 and QFs, and presented its findings on the matter to the Court.

5 postings of relevant documents, including counsel and financial advisor prepared 6 d) FTI reviewed and analyzed proposed stipulation between the debtor and the 6 documents, calendar of major case events, a contact database, glossary of key 7 Power Exchange to assume powerIcontracts subject to certain limitations. 7 industry terns, and links to relevant external websites.

S 8 9 This work involved review of proposed QF and other various settlement This effort provided the 11 members of the Committee and their counsel and 9

10 agreements, pricing forecasts, production volumes, comparison to historic levels, assessment of advisors with an efficient central repository of financial and legal data, links to key internet sites, 10 I1 the potential for return to full production, evaluation of the alternative cost of replacement and a central communication channel for Committee acdvities. This served to be an effective 11 12 power, assessment of financial hardship and impairments to achieving full production by several communication tool in educating the Committee members during the first year of the case about 12 13 QFs, and negotiations with the Debtor on structures for assumption and modification of these the California Energy Market. Fri wrote-off S27,150 in extranet programming expenses that 13 14 executory contracts. The more than 300 QF generators supply approximately 1/3 of the power were incurred in the First Interim Fee Application Period, but for which FTI did not receive a bill 14 15 PG&E delivers to its customers, and the associated pre-petition claims approximated $1 Billion. until September 2001.

15 16 FrI's work in this area helped the Committee to understand the financial consequences of the 16 16. FeeApplication(Category16).

17 proposed settlements and whether to support or reject the Debtor's proposed settlement 17

.agreements. This work was also instrumental to the Court and QFs in developing a payment During the Ninth Interim Period, Fri professionals spent a total of 74.5 hours5.787037e-5 days 0.00139 hours 8.267196e-6 weeks 1.9025e-6 months 18 '18' 19 program for QFs facing financial hardship, and in negotiating modifications to the contracts rendering services in this category, for which FTI seeks compensation of S25,052. During the 19 20 which reduced the price risk to PG&E and retained the benefit of these QF contracts for PG&E's overall case, FTI professionals spent a total of 1,036.6 hours6.944444e-5 days 0.00167 hours 9.920635e-6 weeks 2.283e-6 months rendering services in this category,

20 21 customers. for which FTI seeks compensation of S237,087. A summary of the FTI professionals who 21 22 22 rendered services in this category and the corresponding amount offees requested is included in

15. Extra-net Web Site Development and Maintenance (Category 15).

23 23 Exhibit "2." The Billing Report for this category, which sets forth a detailed description of the 24 FTI did not incur any hours in this category during the Ninth Interim Period. services rendered are filed concurrently herewith.

24 25 During the overall case, FTI professionals spent a total of 224.6 hours6.944444e-5 days 0.00167 hours 9.920635e-6 weeks 2.283e-6 months rendering services in this 25 Services rendered by FTI professionals in this category included:

26 category, for which FTi seeks compensation of S64,848. A summaryof the FTI professionals 26 27 who rendered services in this category and the corresponding amount of fees requested is a) Time spent preparing FTI's eight Interim Fee Applications and the thirty-eight 27 28' included in Exhibit "2." The Billing Report for this category, which set forth a detailed monthly Cover Sheet Applications for Allowance and Payment of Interim 28 29 30

Compensation and Reimbursement of Expenses in accordance with the also advised the Committee with respect to the impact of FERC market price caps and the impact requirements established by the United States Bankruptcy Code, the Court and the of the retroactive application of those caps to the PX, ISO and DWR purchases as they may 2 U.S. Trustee. Time expended preparing this Final Application will be billed 2 affect the Debtor. FTI also monitored the FERC approvals of PG&E's plan of reorganization.

3 directly to PG&E in accordance with the Court's post confirmation guidelines for 3 4 4 18. Financial Grid Load Modeling (Category 18).

professional fee reimbursements.

5 5 FrI did not incur any hours in this category during the Ninth Interim Period.

10 6 17. FERC Review (Category 17). 6 During the overall case, FTi professionals spent a total of 698.3 hours3.472222e-5 days 8.333333e-4 hours 4.960317e-6 weeks 1.1415e-6 months rendering services in this 7 During the Ninth Interim Period. FTI professionals spent a total of 2.6 hours6.944444e-5 days 0.00167 hours 9.920635e-6 weeks 2.283e-6 months 7 category, for which FT! seeks compensation of S236,067. A summary of the FT! professionals 8 rendering services in this category, for which FTi seeks compensation of S949. During the 8 who rendered services in this category and the corresponding amount of fees requested is 9 overall case, FTI professionals spent a total of 328.0 hours0 days 0 hours 0 weeks 0 months rendering services in this category, 9 included in Exhibit "2." The Billing Report for this category, which sets forth a detailed 10 for which F!! seeks compensation of S139,365. A summary of the FTI professionals who.. t0 description of the services rendered is filed concurrently herewith.

1 rendered services in this category and the corresponding amount of fees requested is included in I1 Services rendered by FTI professionals in this category included:

12 Exhibit "2." The Billing Report for this category, which sets forth a detailed description of the 12 13 services rendered is filed concurrently herewith. 13 a) FrI developed a model to simulate the load grid balance of electrical power 14 14 across the state to assess the feasibility of a state-wide restructuring plan, Services rendered by FTI professionals in this category included: I5 15 including the anticipated financing needs of the State, anticipated net short 16 a) FTI monitored FERC proceedings to determine the potential financial impact of 16 requirements, and projected future prices of gas and electricity for PG&E and

17 regulatory proceedings on the Debtor's Estate, including possible changes in 17 for other utilities served by DWR.

18 rates, generator refunds, settlement of the California PXlGenerator claims, and 18 b) FTI updated its model to simulate the load grid balance of electrical power 19 progress on the Debtor's filings requesting FERC approval for various aspects 19 across the state with updated forecasts of load, demand and energy costs.

20 of its Plan of Reorganization.

20 21 21 c) FT! then analyzed the allocation of DWk costs across the state to determine the 22 b) FrP reported findings and financial analysis on FERC proceedings to the 22 financial impact on the Debtor and implications to the Debtor's ability to create 23 Committee. 23 a plan of reorganization.

24 24 This analysis and monitoring, in concert with regulatory counsel for the Since January 2001, the power procurement for the State of California was 25 Committee, was critical to assessment of potential refunds on claims that may be awarded to 25 performed by DWR on a combined basis to meet the collective requirements of all three utilities 26 26 PG&E, reducing the pre-petition obligations, and analyzing the potential claim PG&E will have in the State. Because of the language of ABxl, it was necessary to analyze the overall net short 27 from the settlement of generator claims against the now defunct California Power Exchange. FTi 27 28' position within the State to evaluate the potential net cost to the Debtor. The data collection and 28 31 32

operational modeling efforts in this area benefited many other segments of our analysis, Debtor both during and upon exit from bankruptcy. Models were created that including the QF contract assessment, DWR contracts, DWR spot purchases, load forecasting. analyzed the company's performance both on a cash-flow basis and an accrual 2 2 basis.

retained generation revenue proceedings, DWR cost allocations, natural gas price forecasts, 4 3 3 capital expenditure for load growth and relief of transmission constraints, and volatility of 4 b) FT lcreated an in-depth model that mimicked the Debtor's preliminary plan of 4 PG&E's future cash flows to interruptions in any segment of the supply chain. This work served 5 reorganization and allowed for the running of scenario analysis to test the 5 as the backbone for the financial modeling of the Debtors operations and cash flows in the financial impact of various changes in the Debtor's operating assumptions. This 6 financial statement modeling to assess various plan alternatives. The outcome of our grid load 7 modeling included analysis of the disaggregated financial projections for the 7 modeling was shared with the Debtor and compared with the forecasts of the Debtor and DWR 8 Debtors four segments.

8 for their own segments of the system.

9 9 c) FT! monitored and compared PG&E's actual financial results to those As the information flow from the Debtor to the Creditors Committee improved 10 10 forecasted in FTM's models and refined assumptions in future projection periods greatly over the first four to eight months of the case, FTI no longer needed to maintain a 16 21 21 to reflect current market conditions.

separate load grid model, and instead analyzed and utilized the Debtor's assumptions of the load 12 12 grid balance and related costs in our financial modeling. The work performed inthis task 13 d) FT! continued to assess the reasonableness of PG&E's financial projections that 13 category served to verify the validity of the Debtor's assumptions in its Load Grid model, and as 14 served as the basis for the Debtor Plans.

14 the backbone for the financial modeling of the Debtors operations and cash flows in the financial 15 15 e) FPI performed various other financial analysis of the Debtor's operations and statement modeling task code to assess various plan alternatives. 16 16 proposed plan settlements, including an analysis of the settlement agreement 17 17 proposed for LC backed bonds, a comparison of PG&E and Southern Califomia

19. Financial Statement Modeling (Category 19).

18 18 Edison's cost of service and the recovery the creditors would receive if a similar 19 During the Ninth Interim Period, FrI professionals spent a total of 12.9 hours1.041667e-4 days 0.0025 hours 1.488095e-5 weeks 3.4245e-6 months 19 agreement to the one reached between SCE and the CPUC was offered to 20 rendering services in this category, for which MT! seeks compensation of S5,801. During the 20 PG&E.

21 overall case, PT! professionals spent a total of 1,408.2 hours2.314815e-5 days 5.555556e-4 hours 3.306878e-6 weeks 7.61e-7 months rendering services in this category, 21 for which Fri seeks compensation of S511,557. A summary of the PT!professionals who - 22 f) PI developed an integrated financial statement model to support various 22 rendered services in this category and the corresponding amount of fees requested is included in 23 alternative plans under consideration by the committee. This integrated model 23 Exhibit "2." The Billing Report for this category, which sets forth a detailed description of the 24 enabled the committee to create financial projections to support the joint 24 services rendered is filed concurrentlyherewith .25 OCCICPUC plan of reorganization that was filed with the court. The results of 25 26 this joint plan modeling was shared with the UBS to facilitate development of 26 Services rendered by FTi professionals listed in this category included:

27 the Joint Plan and Disclosure Statement projections and rating agency analysis.

27.

28' a) FTI created various financial models to projeet the operating results of the 28' 33 34

Fli's financial modeling effort enabled the Committee to assess the feasibility of the to the SEC, FERC, and the CPUC that outline the accounting for GAAP (generally accepted 2 1 accounting principals) presentation and regulatory accounting purposes. These financial Debtor's POR, the CPUCIOCC's Joint POR and the Settlement Agreement. This model proved 32 integral in calculating the cash flows of the alternative plans and assessing the feasibility of 2 statements present voluminous information on the historical performance and financial health of 3 various capital structures. The Settlement Plan submitted to the court was supported by financial 3 the Debtor. FTI reviewed certain public filings to verify financial projections in the plan of 4 4 reorganization and to summarize the financial performance of the utility post-petition for the projections generated from FTi's financial modeling efforts. This model was also utilized as an 5 integral tool in our top-level valuation efforts to assess value of various segments of the Debtors 5 creditors committee.

6 business and operations.

6

21. General CommIttee Matters (Category 21).

7 7 8 20. Financial Statements (Category 20). 8 During the Ninth Interim Period, FTI professionals spent a total of 51.7 hours8.101852e-5 days 0.00194 hours 1.157407e-5 weeks 2.6635e-6 months 9 During the Ninth Interim Period, FrI professionals spent a total of 57.6 hours6.944444e-5 days 0.00167 hours 9.920635e-6 weeks 2.283e-6 months 9 rendering services in this category, for which FTI seeks compensation of S29,537. During the 10 rendering services in this category, for which FTI seeks compensation of S30,757. During the 10 Final Application Period, FTI professionals spent a total of 1,280.9 hours1.041667e-4 days 0.0025 hours 1.488095e-5 weeks 3.4245e-6 months rendering services in 11 overall case, FrI professionals spent a total of 558.8 hours9.259259e-5 days 0.00222 hours 1.322751e-5 weeks 3.044e-6 months rendering services in this category, 11 this category, for which FTi seeks compensation of S675,284. A summary of the FTI 12 12 professionals who rendered services in this category and the corresponding amount of fees for which Frl seeks compensation ofS218,498. A summary of the FTI professionals who 13 13 requested is included in Exhibit "2." The Billing Report for this category, which sets forth a rendered services in this category and the corresponding amount of fees requested is included in 14 14 detailed description of the services rendered is filed concurrently herewith.

Exhibit "2." The Billing Report for this category, which sets forth a detailed description of the

15. 15 services rendered is filed concurrently herewith.

Services rendered by FTI professionals listed in this category included:

16 16 Services rendered by MlI professionals in this category included: 17 17 a) FM prepared for and attended numerous meetings and conference calls 18 including the full Committee on a variety of issues, including general case 18 a) FrI reviewed the Debtor's historical financial statements filed during this 19 19 administration, financial issues, regulatory issues, litigation issues, Plan issues, period, including SEC, FERC and bankruptcy filings.

20 20 Settlement Agreement issues and confirmation hearing matters.

b) FTI used its research of the Debtor's historical performance in performing 21 21 various financial analyses on the Debtor's financial condition and ability to b) FMi personnel prepared for and participated in various formal and informal 22 22 reorganize, including assessment of changes in the parent financial condition. conference calls between Committee members, Committee working group 23 23 24 members, Committee advisors and PG&E regarding the financial impact of 24 c) FTI developed disaggregated financial information for the Debtor's four 25 various motions brought by PG&E, the Debtor's Settlement Plan of 25 operating segments to test the feasibility of PG&E's initial Plan of 26 Reorganization, confirmation hearings, and other issues surrounding the 26 Reorganization.

27 Debtor's estate.

27 As a regulated utility, the Debtor's financial statement filings include submissions 28 28 35 36

c) FTr prepared numerous presentations for distribution to the Committee a) MT! performed a review and analysis of financial implications of potential and regarding the financial impact of various matters affecting the Debtor's estate, passed legislation affecting the Debtor's estate, including the dedicated rate 2 2 component legislation supporting the Settlement Plan.

and addressed questions from individual creditors on aspects of the various Plan 3 3 of Reorganization and Disclosure Statements filed in this case and the 4 b) FTI participated in meetings and calls with legislative representatives to explain 4 Settlement Agreement.

5 the benefits and requirements for each plan of reorganization for PG&E.

5 6 As has been mentioned earlier, the Committee was extremely active, participating 6 11 This utility bankruptcy involved not just the interplay of the Debtor, creditors and in a significant number of meetings and conferences to address the volume of issues facing the 7 7 regulators, but also drew in the legislative element as the governor and state legislators sought a 8 Debtor and to accelerate the process of reorganization of this Debtor. FTI structured its team 8 resolution to the crisis that affected the energy supply in Califomia. PT! monitored, in concert into subgroups with senior members and staff splitting responsibility for various areas. This 9 9 with Saybrook Capital representatives, the various alternatives being presented by the governor category captures the time spent associated with the myriad of meetings and conferences that MT! 10 10 and legislators to assess ifthese may serve as a proxy for a plan of reorganization for PG&E, and participated in which do not address any one particular task code topic. FTI attempted to 11 21 to determine if any of these proposals would have detrimental impact to the Debtor or the 12 minimize the participation of more than one or two professionals in these meetings and 12 Settlement Plan of Reorganization.

conferences, but in many cases, the variety and complexity of the issues addressed, the speed 13 13 with which activities in the case progressed, and the particular specialdes of the FTI 14 23. Mediation Support (Category 23).

14 professionals involved hive dictated the need to have more than one or two professionals in - 15 15 FTI did not incur anyhours in this category during the Ninth Interim Period. During 16 attendance. For meetings where more than' two FTI professionals were present, Exhibit 4 16 the Final Application Period, FTI professionals spent a total of 116.6 hours6.944444e-5 days 0.00167 hours 9.920635e-6 weeks 2.283e-6 months rendering services in summarizes the role of each team member and the purpose of their involvement at the meeting. 17 17 this category, for which FTI seeks compensation of S60,465. A summary of the FTI 18 18 professionals who rendered services in this category and the corresponding amount of fees

22. Legislative Review (Category 22).

19 19 requested is included in Exhibit "2." The Billing Report for this category, which sets forth a During the Ninth Interim Period, MT! professionals spent a total of 16.0 hours0 days 0 hours 0 weeks 0 months 20 detailed description of the services rendered is filed concurrently herewith.

rendering services in this category, for which PT!seeks compensation of S9,345. During the 21 21 overall case, FPT professionals spent a total of 221.0 hours0 days 0 hours 0 weeks 0 months rendering services in this category, 22 Services rendered by FT! professionals listed in this category included:

22 23 for which FT seeks compensation ofS96,934.- A summary of the FTI professionals who 23 a) FMI reviewed and analyzed various alternatives under consideration during 24 rendered services in this category and the corresponding amount of fees requested is included in 24 the mediation process conducted in 2003 and analyzed financial forecasts 25 Exhibit -2." The Billing Report for this category, which sets forth a detailed description of the 25 and sensitivities of various financing structures under consideration.

26 services rendered is filed concurrently herewith. 26 27 b) FrTworked with UBS and the CPUC to prepare models to support the 27 Services rendered by FITprofessionals listed in this category included:

28' alternatives under consideration in the mediation process.

28 37 38

FMi assisted UBS in the creation of financial models to support various alternatives development of the Joint CPUCtOCC Plan.

under consideration in the mediation process. FrI further analyzed PG&E's financial models of 2 2 25. Other (Category 25).

the proposed settlement and reconciled the modeling results of PG&E to those of the CPUC/UBS 3 so that all parties were relying on the same set of financial projections. 3 FTI did not incur any hours in this category during the Ninth Interim Period.

4 4 During the overall case, FrI professionals spent a total of 49.4 hours4.62963e-5 days 0.00111 hours 6.613757e-6 weeks 1.522e-6 months rendering services in this

24. OCC Plan of Reorganlzation/Negotiatlons (Category 24).

5 5 category, for which FTi seeks compensation of S 15,245 summary of the FT! professionals who 6 FTI did not incur any hours in this category during the Ninth Interim Period. 6 rendered services in this category and the corresponding amount of fees requested is included in 7 During the overall case, FTI professionals spent a total of 189.7 hours8.101852e-5 days 0.00194 hours 1.157407e-5 weeks 2.6635e-6 months rendering services in this 7 Exhibit "2." The Billing Repolt for this category, which sets forth a detailed description of the 8 category between July 2002 through September 2002, for which FTI seeks compensation of 8 services rendered is filed concurrently herewith.

9 $99,012. A summary ofthe FTI professionals who rendered services in this category and the 9 Services rendered by FTI professionals listed in this category included:

10 corresponding amount of fees requested is included in Exhibit "2." The Billing Report for this 10 11 category, which sets forth a detailed description of the services rendered is filed concurrently I1 a) Fri performed other tasks inherent in the administration of the case. These 12 herewith. 12 tasks did not consume sufficient time to warrant separate task classification.

13 13 Services rendered by FTI professionals listed in this category included: b) Other tasks include organizing document database, research on the rumored sale 14 14 of SCE to City Light, and other tasks inherent in case administration..

15 a) FT. developed and analyzed various plan alternatives under consideration 15 16 by the OCC plan subcommittee. 16 26. Professional Compensation M%!atters (Category 26).

17 17 b) FT! reviewed the financial outputs of each scenario analysis to determine During the Ninth Interim Period, FT! professionals spent a total of 32.1 hours1.157407e-5 days 2.777778e-4 hours 1.653439e-6 weeks 3.805e-7 months 18 18 the feasibility of the alternative plan, the reasonableness of the proposed capital structure and the rendering services in this category, for which FTI seeks compensation of S16,835. During the 19 19 ability for each alternative plan's cash flows to support the debtor's operations and achieve overall case, PT!professionals spent a total of 199.8 rendering services in this category, for 20 20 investment grade ratings. which FTI seeks compensation ofS59,668. A summary of the FTI professionals who rendered 21 21 services in this category and the corresponding amount of fees requested is included in Exhibit 22 To respond to the disaggregation Plan filing by the Debtor, FTI moved quickly to 22 "2." The Billing Report for this category, which sets forth a detailed description of the services 23 develop and model at least four different reorganization structures. Through its review and in-23 24 rendered is filed concurrently herewith.

24 depth analysis of the various scenario assumptions, FT! was able to assist the professionals and 25 the OCC in readily evaluating and selecting an alternative plan that the OCC believed would be 25 Services rendered by FrI professionals listed in this category included:

26 confirmable in the shortest period of time with the fewest legal challenges. Our modeling of an 26 27 a) PwC BRS filed application for employment as accountant and financial 27 OCC plan later assisted in the first mediation between PG&E and the CPUC in 2002 and the advisor to the OCC.

28 39 40

b) FTI submitted updates to the Court reflecting disclosure of relationships of b) FTI reviewed intervener opening briefs filed with the CPUC and prepared PwC BRS and later, FM! and various parties in the case, in continuing support 2 rebuttal testimony addressing their issues.

2 of the retention of FTI as accountant and financial advisor to the OCC. 2 3 3 c) FTI reviewed and responded to various discovery requests from interveners.

4 c) FTi prepared and filed an employment application and supporting declarations 4 d) PT! performed in-depth research to support its findings that the Settlement 5 to retain FTI, as successor to PwC's 3RS Practice, as accountant and financial 5 Agreement is in the best interest of the CPUC, PG&E, the OCC and 6 advisor to the OCC. 6 ratepayers. In support of its findings, FTI performed the following analysis:

7 d) FTI reviewed and analyzed the Interim Fee Applications of other 7 8 8 Comparisons of the projected financial results of PG&E under the professionals and provided input to the chairperson of the Committee.

9 9 Settlement Agreement terms to the financial results of a comparable peer e) FTI attended fee application hearings for the all Interim Fee Applications and group of utilities.

10 10 reviewed UST objections to various professionals' fee applications. I11 11

Comparison of the projected financial results of PG&E to PG&E's 12 FTI is requesting reimbursement for Unbilled Fees comprising ofS64,951 related 12 historical performance prior to the energy crisis.

13 to time spent insuring compliance with confidentiality agreements as well as for the initial 13 14 14

Verified the accuracy of the "PG&E Bankruptcy Proposed Settlement Plan conflict check and establishing ethical walls.

15 Data Sheet" prepared by CPUC staff for information such as (I) foregone 15 16 27. Settlement Agreement Testimony Preparation (Category 27). 16 dividends (2) value of the conservation easements or donations to public

17. .17 agencies of 140,000 acres of watershed lands, and (3) rate calculation and FTI did iiot incur any hours in this category during the Ninth Interim Period.

18 18 the impact of the Regulatory Asset.

During the overall case, MT! professionals spent a total of 425.5 hours5.787037e-5 days 0.00139 hours 8.267196e-6 weeks 1.9025e-6 months rendering services in this 19 category, for which FT! seeks cornpensation of S189,600. 19

Researched the different definitions of Head Room per the Settlement 20 A summary of the FTM professionals who rendered services in this category and the 20 Agreement as it compares to the traditional definition of Head Roonn.

21 corresponding amount of fees requested is included in Exhibit "2." The Billing Report for this 21 22 22 FT! further researched the reasonableness of other quantitative and qualitative category, which sets forth a detailed description of the services rendered is filed concurrently 23 23 factors of the Settlement Agreement. The findings from FrI's analysis were incorporated into herewith.

24 24 the Testimony of Thomas E. Lumsden, which was filed in the CPUC hearings in support of the 25 Services rendered by FTI professionals listed in this category included: 25 Settlement Agreement; 26 26 a) PTI prepared testimony for filing with the CPUC in support of the Settlement 28. Settlement POR and Disclosure Statement (Category 28).

27 Agreement. 27 28 28' During the Ninth Interim Period, FTI professionals spent a total of 153.1 hours1.157407e-5 days 2.777778e-4 hours 1.653439e-6 weeks 3.805e-7 months 41 42

rendering services in this category, for which FTI seeks compensation of $82,289. During the included in Exhibit "2." The Billing Report for this category, which sets forth a detailed overall case, FTI professionals spent a total of 345.3 hours3.472222e-5 days 8.333333e-4 hours 4.960317e-6 weeks 1.1415e-6 months rendering services in this category, I description of the services rendered is filed concurrently herewith.

for which FTI seeks compensation of S 187,234. A sunmmary of the FTI professionals who 2 3 Services rendered by FrI professionals listed in this category included:

rendered services in this category and the corresponding amount of fees requested is included in Exhibit "2.- The Billing Report for this category, which sets forth a detailed description of the 4

a) FrI prepared for and participated in numerous meetings and teleconferences services rendered is filed concurrently herewith. 5 with the OCC's Plan Subcommittee to evaluate plan alternatives, discuss the 6

reasonableness of supporting plan assumptions, and strategize on steps for Services rendered by FrI professionals listed in this category included: 7 achieving confirmation of the Joint CPUC/OCC Plan of Reorganization.

a) FTI reviewed and summarized key terms of the Settlement Agreement 8 9 b) FrI also reported time in this category for subcommittee review and discussions and tied these terms to numerous drafts of the Settlement Plan of 10 on the Settlement Agreement and Plan confirmations.

Reorganization and Disclosure Statement to be filed with the court.

II c) FPn served as an active coordinator of the Financial and Regulatory committees b) FTI reviewed and analyzed proposed modifications to the descriptions 12 with Saybrook and Milbank.

in the POR and Disclosure Statement. 13 14 Fri played an active role in developing and evaluating alternative plan scenarios c) Fri reviewed and analyzed the hedging structure to lock in lower 15 with the OCC Plan Subcommittee. M71's in-depth knowledge of PG&E's operations and the financing costs at PG&E Company.

16 CPUC regulatory framework aided the committee in rapidly creating a plan that would face FiT spent considerable time reviewing and agreeing terms of the Settlement Agreement 17 fewer legal and financing challenged than either of the previous plans filed in the case. This to drafts of the Disclosure Statements and Plan of Reorganization documents before they were 18 effort involved activities with the Committee Counsel and Saybrook representatives. This filed with the court. FrI's thorough understanding of the financial terms of the Settlement 19 distribution of work among the Committee members has enabled coordinated direction and Agreement helped to insure the filed Disclosure Statement and POR documents accurately 20 accelerated completion of many of the tasks outlined above. Further this work was useful in reflected the settlement terms agreed in settlement negotiations and that the proposed 21 subsequent discussions with the CPUC on its proposed plan and in Settlement negotiations.

modifications were in the best interest of all parties. 22

30. Tax Review (Category 30).

23

29. Subcommittee Matters (Category 29).

24 FTI did not incur any hours in this category during the Ninth Interim Period.

FrI did not incur any hours in this category during the Ninth Interim Period. During the overall case, FTI professionals spent a total of 345.1 hours1.157407e-5 days 2.777778e-4 hours 1.653439e-6 weeks 3.805e-7 months rendering services in this 25 During the overall case, Fri professionals spent a total of 773.9 hours1.041667e-4 days 0.0025 hours 1.488095e-5 weeks 3.4245e-6 months rendering services in this category, for which FTI seeks compensation of S151,737. A summary of the FTi professionals 26 category, for which Fri seeks compensation of $319,870. A summary of the FTI professionals who rendered services in this category and the corresponding amount of fees requested is 27 who rendered services in this category and the corresponding amount of fees requested is included in Exhibit `2." The Billing Report for this category, which sets forth a detailed 28 43 44

description ofthe services rendered is filed concurrently herewith. services in this category and the corresponding amount of fees requested is included in Exhibit Services rendered by Fri professionals listed in this category included: "2." The Billing Report for this category, which sets forth a detailed description of the services 2 2 rendered is filed concurrently herewith.

3 a) Frl reviewed, analyzed and summarized the tax consequences to the Debtor and 3 4 the Creditors of the various proposed plans of reorganization. 4 Services rendered by Ff1 professionals listed in this category included:

5 5 b) FTI discussed and analyzed key elements of the Debtor's pending IRS ruling a) This category includes the time required for Fri professionals to travel to case 6 6 request to determine the likelihood of the Debtor receiving a favorable ruling on related meetings after September 11,2001.

7. 7 8 the tax treatment of the Debtors Disaggregation Plan of Reorganization. FTI's policy is to bill clients for the time associated with travel at full rates, where it 8

9 c) FTI monitored the status of the Debtor's pending IRS ruling request and the tax 9 is not possible to perform other client work. This is primarily associated with travel during the 10 sharing agreement proposed by the CPUC. 10 regular working day, and includes travel to airports via taxi, time spent at airports and on the 11 11 flight itself The Court previously removed S52,315 in fees for pre-September 11,2001 travel 12 d) Fri reviewed and analyzed real estate issues and transfer tax issues in transferring incurred during the first interim Fee Application. FTI is requesting reimbursement of Unbilled 12 13 property from PG&E to non-profit organizations in the Settlement POR. Fees for stafT traveling on this case in the amount of S65,645 during the Final Fee Application 13 14 14 period.

e) FTI reviewed and analyzed tax related matters between PG&E Corp and its

' IS subsidiaries. 15 32. Request For Reimbursement of Certain Previously Unbilled Costs and 16 16 FT1 researched and summarized key tax issues of the Debtor's Plan of Expenses (Category 32).

17 17 Reorganization, the Joint Plan of Reorganization and the Settlement Agreement and Settlement 18 18 Throughout the pendency of this case, PT! has received or requested a total of 19 POR for the Committee and the tax impact of alternative plan proposals, highlighting the $8,205,279 as payment for the fees and expenses in this Case. However, the actual and 19 20 potential financial impact on the Debtor and any potential tax risks to the creditors. FrI also necessary fees and expenses incurred on behalfofthis matterhave totaled $8,514,853. As 20 21 kept the Committee apprised of the status on IRS submissions and the implications of the discussed below, the difference of S309,574 represents real fre that FTI typically charges its 21 CPUC's proposed tax sharing agreement. clients with respect to services rendered on behalf of both debtor and non-debtor clients.

22 22 23 31. Travel Time (Category 31. 23 During the case through the interim fee application process, Fri did not seek the 24 24 reimbursement of S248,609 in fees for services based on this Court's guidelines, FTI is herein 25 During the Ninth Interim Period, FTI professionals spent a total of 1.2 hours2.314815e-5 days 5.555556e-4 hours 3.306878e-6 weeks 7.61e-7 months

.25 requesting reimbursement for certain of these unbilled fees from PG&E in the amount of rendering services in this category, for which Fr! seeks compensation of S750. During the 7:.

26 26 overall case, FTI professionals spent a total of 36.6 hours6.944444e-5 days 0.00167 hours 9.920635e-6 weeks 2.283e-6 months rendering services in this category, for S144,149 (the "Unbilled Fees') which includes (1) S64,625 in fees for travel time above and 27 27 which MT! seeks compensation of S20,455. A summary of the FTI professionals who rendered beyond the two hour maximum outlined in the Court's Memorandum Decision, (2) $14,573 in 28 28 45 46

fees for paraprofessional services performed by FTI previously reimbursed at a rate of S40/hour In this case, under the terms of the Settlement Plan of Reorganization, we have an which represented a substantial reduction from FTM's standard paraprofessional billing rate of extraordinary circumstance wherein the Debtor is solvent and all creditors have been, or will be, 2 2 paid in full, most with interest. Thus, FTI seeks to be treatedpartpassu with other creditors and S85/hour, and (3) S64,951 in fees for compliance with Court requirements for relationship 3 checking of parties in interest in the case and maintaining and reporting on ethical walls as 3 receive payment in full on its claim. In addition, FrI seeks reimbursement on the following 4 4 grounds:

directed by the Court. Indeed, if the Court grants this request for payment of these additional 5 S Unbilled Fees, FiIwill still have waived S 119,033 of actual fees that it is not seeking to collect, 6 First, the additional Unbilled Fees for which the Committee and its advisors now 6 incurred relating to the completion of extensive relationship checking and reporting to the Court, 7 seek reimbursement were necessary fees that were required by the day to day circumstances of 7 and time expended on the filing of fee applications. Moreover, no creditor will be prejudiced by 8 the Case and incurred at the direction of the Committee or the Court. As a co-proponent of both 8 reimbursement of 100% of the Unbilled Fees.

the Joint Plan and the Settlement Plan, Fri's roie in this case demanded the expenditure of a 9 9 Over the course of the Case, FTI has taken a sizeable reduction in the fees and large amount of time with respect to (i) travel time for its professionals (ii) paraprofessional 10 10 expenses for which it would normally seek reimbursement from other debtor and non-debitr services rendered to support this Case and (iii) monitoring and reporting of relationships of i1 I1 clients. In some instances, the reductions were based on the UST Guidelines and Court parties in interest in the case. For example, certain hearings required FTI to attend in person, 12 12 Guidelines. In other instances, the reductions were based on the Court's Memorandum Decision which required FrI professionals to spend many hours in transit to and from San Francisco.

13 13 Regarding Applications for Interim Applications for Professionals filed December 12,2001 (the 14 Additionally, the abundance of paper produced and handled during the Case required extensive 14 "Memorandum Decision'). Finally as was the case the with the rate reductions discussed above, involvement of FTI's paraprofessionals. The size of the case, extensive volume of investors, 15 15 certain of the reductions were voluntary in light of the financial hardship facing the Debtor and creditors and significant litigation activity involving energy suppliers required substantial 16 16 expenditure of professional time to evaluate, report and monitor the relationships for the Court.

17 the precarious state of the regulatory environment at the outset of the Case. 17 18 18 Second. FMI has proactively attempted to minimize the costs incurred at the The general guidelines on fee applications exist for good reason in a typical bankruptcy 19 19 expense of the Debtor. For instance, Fri ever-increasingly utilized e-mail transmission of case to protect creditors and provide the Debtor with a greater chauice of recovery. These 20 20 documents and correspondence in lieu of mail and facsimile transmission. In addition, FTI reasons become less meaningful when, at the end of the case, it is clear that the Debtor is solvent.

21 21 participated in numerous hearings both in the CPUC and Bankruptcy by telephone or intemet as Indeed, the Court itself has acknowledged the need to be flexible in the reimbursement of fees 22 22 opposed to in person. These actions helped to reduce travel and attendant expenses to a and expenses. See e.g. Practices and Procedures in Judee Montali's Court, Section J (allowing 23 23 minimum.

flexibility on travel time). Moreover, the UST Guidelines often defer to a court's discretion to 24 24 determine the extent of the reimbursement. Guideline 17 of the UST Guidelines regarding travel Accordingly, based upon the fact the Debtor is solvent and the fact that the 25 25 time provides as follows: "`i]fsignificant airplane travel time is expected in a case, specific Unbilled Fees are fees that FTI would normally charge its solvent debtor and non-debtor clients, 26 26 guidelines should be obtained for that case." Guideline For Compensation And Expense FTI hereby requests the Court award additional reimbursement for the Unbilled Fees in the 27 27 Reimbursement of Professionals and Trustees. amount of S144,149.

28' 28 47 48

IV. SUMIMARY OF ACTUAL AND NECESSARY EXPENSES INCURRED BY FTI Court and UST Guidelines For Compensation And Expense Reimbursement and represent actual costs incurred to the benefit of the Committee and the Debtor and for which FTMhas not sought FTI maintains records of all actual and necessary out-of-pocket expenses incurred 2 reimbursement.

and typically charged in connection with rendering professional services to its clients in the 3 ordinary course of its business practice. As is typical of FrI'spractice when representing .4 V.

4 creditor committees, FTI has reduced to cost or not charged certain of these out-of-pocket .5 COMPENSATION REQUESTED AND RELEVANT LEGAL STANDARD 3

10 expenses to the estate in accordance with the UST Guidelines and the Court Guidelines and to 6 6 To grant a request for compensation pursuant to Bankruptcy Code section 330, ensure the reasonableness of FTI's fee and expense request. A brief explanation of certain costs 7 7

12 the Court must find that such request is reasonable. The reasonableness of a compensation incurred and charged to the estate is set forth below: 8 request is determined by the "lodestar" method. See In re Yernakov. 718 F.2d 1465, 1471 (9 h 9 Cir. 1983). Under the lodestar approach. "reasonable" compensation is calculated by a) FTI does not charge its clients for photocopying done in-house; copying done by 10 10 multiplying the number of hours reasonably expended by the hourly rate of the professional. In third-party services is charged at cost; 19 11 re Rheuban 121 B.R. 368, 383 (Bankr. C.D. Cal. 1990). There is a strongpresumption that the b) FTI charges its clients for document storage and retrieval services, computer research 12 12 lodestar product is reasonable under Bankruptcy Code section 330. See In reDrexel Burnham and other specialized searches and services, such as messengers and storage 13 13 Lainbert Group. Inc., 133 B.R. 13,22 (Bankr. S.D.N.Y. 1991).

retrievals, at cost;- 14 14 The reasonableness of a professional's hourly rate is based on the cost for 15 c) FTI charges its clients for mileage at IRS limits, (if sought) and parking costs 15 comparable services charged in the area, in non-bankruptcy matters. See In re Yernmakov 718 16 16 incurred by its professionals in connection with services rendered, at cost; 17 F.2d at 1471. The reasonableness of the hours expended on a task is based on whether the 17 18 d) vrI charges its clients for transportation and travel-related costs including out-of- 18 services provided were actual and necessary. See In re Nucorn Enerkv. Inc., 764 F.2d 655, 658 town meals, excluding lunches, incurred by its professionals when working on (9,Cir. 1985). -: -- ;

19 19 specific client matters, at cost; and 20 20 FMl's fees are reasonable given the size and complexity of the bankruptcy case 21 21 and are commensurate with the fees that FTr has been awarded in comparable chapter 11 cases e) FTI normally charges its clients for the cost of overtime and weekend meals and 22 22 and that accountants and financial advisors of comparable experience and expertise charge on a transportation when pressing client matters require the professional to work past 23 23 regular basis to represent creditor committees in comparable chapter I I cases. Accordingly,'

normal office hours; however, in accordance with the UST Guidelines and the Court 24 24 utilizing the lodestar method, FTM's fee and expense request is reasonable and should be allowed Guidelines, no such charges are included in this Final Application.

25 I 25 and paid pursuant to Bankruptcy Code section 330. a Drexe 133 B.R. at 22.

Furthermore, it should be noted that FrI has taken a reduction of S60,965 from -26 26 the amount of expenses for which it would normally seek reimbursement from its non-debtor. VI .

27 27 clients. This reduction is in compliance with both Practices and Procedures in Judee Montali's 28 CONCLUSION 28' 49 50

For the reasons set forth above and pursuant to Bankruptcy Code sections 330 and DATED: July 12, 2004 Respectfully submitted.

331, Bankruptcy Rule 2016, the Court Guidelines, the UST Guidelines and the standards adopted FTI CONSULTING INC 2 2 by courts in awarding accountants' and financial advisors' fees and costs, FTI submits that the 3 3 By- .9-/

fees for services rendered and costs and expenses incurred on behalf of the Committee during the Thomas E. Lumsden 4 Final Application Period in the total amount ofS8,349,875 are reasonable and should be allowed 4

Accountants and Financial Advisors to Official Committee 5 5 of Unsecured Creditors and paid in full.

6 6 As previously mentioned, FTI purchased all outstanding receivables of the BRS 7 7

Practice, including receivables related to FTM's work as accountants and financial advisors to the 8 8

Official Committee of Unsecured Creditors in the Pacific Gas and Electric bankruptcy case. No 9 9 agreement or understanding of any kind or nature exists between FTI and any other person or 10 10 entity for the sharing, division, or payment of any portion of the compensation awarded for our 11 11 services rendered or expenses incurred in connection with the representation of the Committee in 12 12 the bankruptcy case. 13 13 14 WHEREFORE FTI respectfully requests that this Court enter an order 14 15 15 I. Approving this Ninth Interim and Final Application in its entirety, 16 16 17 17

2. Approving a final award of compensation in the amount ofS8,061,646 for 18 18 professional services rendered (including Unbilled Fees) and reimbursement of costs and 19 19 expenses incurred in the amount of $288,229 for a total amount of S8,349,875; 20 20

3. Authorizing and directing PG&E to immediately pay to FTI the allowed 21 21 amounts, less any such amounts already paid pursuant to the Order Establishing Interim Fee 22 22 Application and Expense Reimbursement Procedure; and 23 23 24 24

4. Granting such other and further relief as the Court deems just and proper.

25 25 26 26 27 27 28 28 51 52

CERTIFICATION DECLARATION OF THONIAS E. LUISDEN 1

2 1,Thomas E. Lumsden, am the professional designated by MT!Consulting, Inc. to 2 1,Thomas E. Lumsden, declare:

3 ensure compliance with the United States Bankruptcy Court Northern District of California 3

1. I am over eighteen years of age and, if called upon, I could and would 4 Guidelines for Compensation and Expense Reimbursement of Professionals and Trustee ("Court 4 testify competently to the matters set forth herein. lam a senior managing director in the 5 Guidelines"). I served as the senior managing director for FTI Consulting Inc. in connections 5 10 professional services firm of FT! Consulting, Inc. (IFIT ), successor to 16 with this matter. I certify that (a) I have read the Final Interim Application; (b) to the best of my 6 PricewaterhouseCooper's (CPwC") BRS Practice, and one of the senior managing directors 7 knowledge, information and belief, formed after reasonable inquiry, the compensation and 7 responsible for FTI's services as accountant and financial advisor to the Official Committee of 8 expense reimbursement sought is in conformity with the Court Guidelines, except as specifically 8 Unsecured Creditors Committee") in the Pacific Gas and Electric Company ('PG&E") chapter 9 noted in the Application; and (c) the compensation and expense reimbursement requested are 9 11 case. In preparing this declaration I have relied on my personal knowledge and on my 10 billed at rates, in accordance with practices, no less favorable than those customarily employed 10 review of the billing records and files maintained by FTI in the ordinary course of business and it by FTI and generally accepted by FTrs clients. 21 made by FT! professional staff substantially contemporaneous with that person's performance of 12 12 services or incurrence bf costs on behalf of the Committee.

13 DATED: 4 la , '" 13 Thomas E. Lumlsden 14 .. . . I * . - . : 14 2. - This declaration is submitted in support of the "Ninth Interim and Final 15 I . .. I . ... I . . . ..

15 Applicaion of FTI Consulting Inc. For Alloivance and Payment of Compensation and 16 16 Reimbursement of Expenses (April 11,2001 through April 12,2004)" (the "Final Interim 17 .17 Application"). Capitalized terms not otherwise defined herein shall have the meanings ascribed

, 'I1 . .. . . . ...

18 18 to them in the Final Application. This Final Application covers the period from April 11, 2001 19 19 through and including April 12,2004 (the "Final Application Period'). I have read the Final 20 20 Application and reviewed the exhibits thereto, and each ofthe facts contained therein is true and 21 21 correct.

22 22

3. FIT Consulting's Time Records Exhibit for the Period April 11, 2001 to 23 23 April 12, 2004, filed concurrently herewith, attaches true and correct copies of records 24 24 maintained by PT!in the ordinary course of FTM's business operations and reflects entries that 25 *25 were made substantially contemporaneously with the rendering of the services.

26 26 27 *27 4. Pursuant to the Final Application, PT!seeks allowance of compensation 28 28 covering 19,319.7 hours8.101852e-5 days 0.00194 hours 1.157407e-5 weeks 2.6635e-6 months of professional time devoted to advising the Committee in PG&E's 53 54

bankruptcy case, resulting in the accumulation ofS7,917,497 in fees for professional services 11. Attached hereto as Exhibit "2" and "Exhibit 2.1" and "Exhibit 2-2"and rendered plus a request for Unbilled Fees in the amount of $144,149 and S288,229 for expenses "Exhibit 2-3" is a summary of each category of services, setting forth the name of each 2 2 incurred, for a total amount of S8,349,875. professional who expended time in that category and the total hours and amount billed by each 3 3 professional in that category during the Final Application Period.

4 S. It is FTI's normal business practice to charge its clients in full for services 4 5 rendered and for all actual and necessary costs and expenses incurred in connection with such 12. Attached hereto as Exhibit "3" are Expense Summary and Expense Detail S

6 services. 6 reports by individual and itemized total expenses for which reimbursement is sought.

7 7

6. Fr! received no pre-petition retainer in connection with this bankruptcy 13. Attached hereto as Exhibit "4", is a summary of meetings that more than 8 8 case. two FTI professionals attended with a description of the relative importance of each team 9 9 member and the purpose of their involvement at the meetings.

10 7. MT! has submitted monthly fee notices and interim fee applications in 10 I1 accordance with the interim fee procedures that were established by the Court. FTI has received 14. Attached hereto as Exhibit "5", is a copy of the Declaration of Clara Yang 11 12 payments totaling S8,120,285 in connection with the Monthly Cover Sheet and Fee Applications 12 Strand, executed on, in support of the Final Application of FTI Consulting.

13 covering the period April 11,2001 to April 12,2004. 13 I declare under penalty of perjury under the laws of the United States of America 14 14

8. No agreement or understanding of any kind or nature exists between FTI that the foregoing is true and correct.

is 15 and any other person or entity for the sharing, division, or payment of any portion of the 16 Executed this 12*' day of July, 2004 at San Francisco, California.

16 compensation awarded to F?! or the BRS Practice for services rendered or expenses incurred in 17 17 connection with our representation of the Committee in this chapter 11 proceeding, except as i8 18 among the employees and shareholders of FTI.

19 19 Thomas E. Lumsden 20 9. 1am one of the designated professionals responsible for overseeing the 20 21 billing in this matter and for assuring compliance with the Guidelines of the Office of the United 21 22 States Trustee for the Northern District of California relating to billing (the "Guidelines'). 22 23 Based upon my review of the Final Application submitted by FTI for the Final Application 23 24 Period, I believe that the Final Application complies with the Court Guidelines and the UST 24 25 Guidelines. 25 26 26

10. Attached hereto as Exhibit "I" is a summary of the total hours expended, 27 27 billing rate, and fees incurred by each FT! professional during the Final Application Period.

28 28 55 56

ML042030269

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