ML031480618

Sixth Interim Application of FTI Consulting Inc. for Allowance and Payment of Compensation and Reimbursement of Expenses (December 1, 2002 Through March 31, 2003); Declaration of Thomas E. Lumsden in Support Thereof

ML031480618
Person / Time
Site:	Diablo Canyon
Issue date:	05/14/2003
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: ML031480618 (34)

Text

Thomas E. Lumsden FTI Consulting Inc.

199 Fremont Street San Francisco, CA 94105 Telephone:

(415) 498-5000 Facsimile::

(415) 498-6699 Accountants and Financial Advisors for Official Committee of Unsecured Creditors UNITED STATES BANKRUPTCY COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION Inre PACIFIC GAS AND ELECTRIC COMPANY, a California corporation, Debtor.

Case No. SF 01-30923 DM Chapter 11 SIXTH INTERIM APPLICATION OF FTI

'CONSULTING' INC. FOR ALLOWANCE

,AND PAYMENT OF COMPENSATION AND REIMBURSEMENT OF EXPENSES (DECEMBER 1, 2002 THROUGH MARCH r,31, 2003); DECLARATION OF THOMAS E.

LUMSDEN IN SUPPORT THEREOF HearnR:

Date: July 7, 2003 Time: 1:30 PM Place: 235 Pine Street, 22nd Floor San Francisco, CA 2

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TO THE HONORABLE DENNIS MONTALI, UNITED STATES BANKRUPTCY JUDGE, THE OFFICE OF THE UNITED STATES TRUSTEE, THE DEBTOR, AND OTHER PARTIES IN INTEREST:

As previ`busly disclosed to this Court through the Eighth Supplemental Declaration of Mr. Thomas E. Lumsden and FTI's retention pleadings, on August 30, 2002 (the "Closing Date"), the Business Recovery Services practice (the "BRS Practice") of PricewaterhouseCoopers LLP ("PwC") was transferred to FTI Consulting, Inc. ("FTI"). This transfer included the business, receivables and employees comprising the BRS Practice of PwC.

Effective upon the Closing Date, Mr. Lumsden, as well as all of the BRS Practice professionals working on behalf of the Committee in this matter became employees of FTI.

As disclosed in FTI's retention pleadings filed on September 27, 2002 and approved by the Court on October 31, 2002, nunc pro tunc to September 1, 2002, FfI, as successor to the BRS Practice, will be responsible for filing appropriate fee applications regarding previously unbilled services provided by PricewaterhouseCoopers LLP ("PwC") prior to the Closing Date.

Further, FTI will be entitled to all payments to be made by the Debtors after the Closing Date for any outstanding receivables related to BRS services. It is'anticipated that FTI would assume the responsibility for filing a single, final fee application for pre-Closing Date BRS services and post-Closing Date FTI services at the conclusion of these proceedings. As such, as outlined above, FTI respectively submits this Sixth Interim Fee Application for services rendered by FTI for the period from December 1, 2002 through March 31, 2003 to the Official Committee of Unsecured Creditors (the "Committee").

I.

INTRODUCTION This is the sixth long-form interim application filed by FTI for approval of compensation and reimbursement of related expenses for services rendered on behalf of the Committee during PG&E's chapter I 1 case. FTI submits this Sixth Interim Application in accordance with Bankruptcy Code sections 330 and 331, Rule 2016 of the Federal Rules of Bankruptcy Procedure 2

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(the "Bankruptcy Rules"), the Office of the United States Trustee for the Northern District of California Guidelines (the "UST Guidelines"), and the United States Bankruptcy Court Northern District of Califomia Guidelines for Compensation and Expense Reimbursement of Professionals and Trustee ("Court Guidelines")., Through this Sixth Interim Application, FTI seeks (i) interim approval and allowance of $777,874 in fees accrued and $20,240 in expenses incurred for services rendered by FTI on behalf of the Committee during the period December 1, 2002 through and including March 31,2003.

During the Sixth Application Period,;FTI professionals spent a total of 1,948 hours0.011 days <br />0.263 hours <br />0.00157 weeks <br />3.60714e-4 months <br /> rendering services to the Committee in connection with the PG&E bankruptcy case at a blended hourly rate of $399.32.- FTI also incurred $20,240 in costs and expenses in connection with those services, for which FTI is requesting reimbursement. Accordingly,

_,FTI seeks allowance and payment of a total of $798,114 for services rendered and reirnbursemrit of costs'and expenses incurred during the Sixth Application Period. To date, PG&E has made payments for fees in the amount of $503,505 and expenses in the amount of $17,483 on account;of the Monthly Cover Sheet Applications for the period of December 1, 2002 through March 31, 2003. These amounts reflect the cover sheet applications for December 1,'2002 throughFebruary 28, 2003; the March 31, 2003 application has ;not:yet been paid reflecting $157,689. in:fees and $2,758 in expenses. The services and costs for the Sixth;Application Period are described below and are detailed in the exhibits'filed concurrently herewith.

SUMMARY

OF DEVELOPMENTS IN THE CASE On April 6, 2001 (the "Petition Date"), Pacific Gas and Electric Company (the "Debtors") filed voluntary petitions for reorganization under Chapter 11 of title 11 of the United States Bankruptcy Code ("Bankruptcy Code"). The Debtors continue to operate their business and manage their properties as debtors-in-possession pursuant to Sections 1107(a) and 1108 of 3

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1 the Bankruptcy Code.

2 On July 2, 2001 this Court entered an order authorizing, nunc pro tunc, employment of PwC as of April 11, 2001, as Accountants and Financial Advisors for the Committee.. On 5

October 31, 2002, an order (the "Retention Order") was entered to extend this employment to 6 l FTI as successor to the PwC BRS Practice, nunc pro tunc to September 1, 2002, 7

8 The Retention Order authorized the retention of FTI to render to the Committee the following essential services, which include but are not limited to the following:

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(a)

Assistance.to the Committee in the review of financial related disclosures 12 required by the Court, including the Schedules of Assets and Liabilities, 13 l

, the Statement of Financial Affairs and Monthly Operating Reports; 14 l(b)

Assistance with a review of the Debtor's short-term cash managerment l15 l

practices; 16 u

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Advice and guidance to the.Committee.with respect to utility accounting 17-l

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s and electric and gas utility operating elements, including elements' of rate 18-l

.making, cost recovery and the financial impact of regulatory decisions; 1 9

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Assistance and advice to the Committee with respect to the value of the 20 l

..; ; Debtor's operating assets and make reconmendations regarding the 2

l highest and best use, operation, and ultimate disposition of such assets; 22 l (e)

Assistance in the review of financial information distributed by the Debtor 23 to creditors and others, including, but not limited to, cash flow projections 24 and budgets, cash receipts and disbursement analysis, analysis of various 25 asset and liability accounts, and analysis of proposed transactions for 26

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which Court approval is sought; 27 (f)

Attendance'at meetings and assistance in discussions with the Debtor, 28 regulators, State agencies, mortgage holders and ther secured lenders in 4

this chapter 11 case, the U.S. Trustee, other parties in interest and professionals hired by the same, as requested; (g)

Assistance in the review and/or preparation of information and analysis necessary for the confirrnation of a Plan of Reorganization in this chapter 11 case; (h)

Assistance to the Committee and its counsel in the preparation and evaluation of potential litigation;

'(i) -'Assistance in the discharge of the Committee's duties and functions in this case, including, but not limited to, compilation of material required for court testimony; and (J)~ Render such other general business consulting or such other assistance as the Committee or its counsel may deem necessary that are not duplicative of services provided by other professionals in this proceeding.

FTI incorporates by reference the overview of case activity presented in Sections II and III of the Sixth Interim Application of Milbank Tweed Hadley & McCloy LLP for Allowance and Payment of Compensation and Reimbursement of Expenses. The Debtor continues to operate its business, and cash flow appears to be neutral pending regulatory decisions by the California Public Utilities Commission. Two competing plans have been filed in the case and confirmation hearings are still proceeding in the matter.

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SUMMARY

OF FTI'S EXPERIENCE FTI, as successor to the BRS practice of PwC, has extensive experience in fmancial reorganizations and bankruptcy consulting services. Our professionals have provided services to a wide variety of industries, and as a result, FTI has accumulated a wealth of knowledge 5

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1 concerning the intricacies in these matters.

2 In bankruptcy restructurings, the FTI has accumulated over a quarter of a century of 3

experience serving Debtors, Creditors, and Trustees in bankruptcy matters.

4 FTI has assisted numerous Debtor and Debtor-In-Possession entities involving, successful 5

development of reorganization plans, numerous valuation projects, sales of assetsin Chapter 11, 6

extensive tax consulting, and other services related to reorganization:

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8 SUMIIVIARY OF SERVICES RENDERED BY Frl 9

10 During the Sixth Application Period, FTI represented and advised the Committee with 1 1 respect to a wide range of issues and challenges. Due to the comprehensive nature of the 12 services rendered by FTI during the Sixth Application Period, no attempt is made herein to detail 13 the totality of such services. The full scope of the services rendered by FTI is set forth in detail 14 in the billing reports filed concurrently herewith under captions entitled "Detail Reporting by 15 Task Code Exhibit for the Period December 1, 2002 to March 31, 2003" (the "Billing Reports").

16 However, in order to assist the Court, the United States Trustee, PG&E and other parties in 17 interest in reviewing this Sixth Interim Application, a brief sunmary of FTI's billing procedures 18 and the services rendered by FTI during the Sixth Application Period with regard to each activity 19 code category, including certain undertakings within each category, is'set forth below.

20 A.

Summary Of FTCI's Billing Procedures.

21 22 It is FTI's normal business practice to charge its clients in full for services rendered and 23 all actual and necessary out-of-pocket costs and expenses incurred by FTI in providing those 24 services.

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In the ordinary course of its practice, FTI maintains records of time expended by 26l professionals in rendering services to its clients. Time records are made substantially 27 contemporaneously with the rendition of these professional services and are prepared by the 28I 6

1 professionals who have rendered the services. In matters such as this, time records are kept in 6 2

minute (.1 hour1.157407e-5 days <br />2.777778e-4 hours <br />1.653439e-6 weeks <br />3.805e-7 months <br />) increments.

This case, which was one of theten largest bankruptcy cases filed'in the United States, has involved significant interaction with outside agencies, including'the'Federal Energy 5 l Regulatory Commission, the Califomia Public Utility Commission ("CPUC"), the California 6

Energy Commission, the Department of Water & Power ("DWR"), the State Legislature, the Govemors Office, as well as taxing authorities and other reporting agencies. The activity in this case has been continuous and intense as the Debtor and Creditors have moved swiftly to grapple with the innumerable issues of a regulated utility in bankruptcy, and parties have sought to 10~

develop a consensual plan of reorganization structure. During the course of this case, we have observed unprecedented action by all of the parties noted above to address the underpinnings of-12.

the energy crisis in Califomia. These have included the filing of two competing plans of 13 reorganization within one year of the case's commencement, proceedings by the legislature and.

the-CPUC to address hardship by the QF generators, proceedings by the Governor, Legislature 15 I

and,FERC on price caps and refunds for energy, action by the Legislature and Energy 1 6 I

.Commission to support development of power plants, proceedings with the CPUC over the DWR 17 power purchases, negotiations and legislative proceedings involving bailout measures for utilities 18 in California, issues involving the State Treasurers office, DWR, CPUC and the Govemor over bond financing for the DWR power purchases, interplay among the utilities in California, the l CPUC and DWR concerning allocation of the costs of power and bond financing as it may affect 2 1Il each utility, and agreement between the CPUC and Southern California Edison (SCE) on a.

22 means to repay SCE's past-due obligations. The issues at stake have been monumental with 23 PG&E's reported debt and claims exceeding $13 Billion, the range of revenue at stake for their 24

-i electricity procurement activities varies from $2.8 Billion to $3.7 Billion per year, the proposed 25 allocation of DWR power and bond finance costs varying from' $2.0 Billion to over $2.2 Billion per year, and QF pre-petition claims on executory contracts exceeding $1 Billion. During the 27

' pendency of this'case,;we have observed electricity prices vary from hundreds of dollars per 28 7

Megawatt to power prices in the $15-30 range. We have seen natural gas prices vary by a factor 2 l of lOx the historic price average. Reported purchases of power by the DWR have varied from over $100 million per day to under $12 million per day during this peiod. There have been numerous legal challenges to actions of the Debtor, CPUC and the State of California in this 5 l case, resulting in pending appeals and legal action on these matters.

6 l The Committee organization structure has been unique for this case, 'with greater time 7

involvement by Committee members than in most any other case. The personal commitment of 8'

Committee members to actively participate on a continuous basis has matched the activity level in the case with over 1 1;500 filings listed in the Court docket through December 31, 2002. The 10 l "Committee has participated in an unprecedented number of meetings of the Committee, advisors, the Debtor and the CPUC. The Committee, in order to address the monumentai workload and myriad of tasks at hand, created four distinct subcommittees: Financial, Legislative, Regulatory and Plan. FTI assembled sub-teams of professionals to address the issues and work assignments

'14 set forth by the Committee, subcommittees and working group. In the course of FTI's 15 "representation of the Committee in this matter, it has been necessary and requested that more 16 ithan one or two professionals participate in meetings and conferences with the Committee 17 1 representatives, the CPUC or with the Debto'r. This is not normally the case for FTI in such matters and has been dictated by the size of the case, the complex nature of the matter§ being 19 discussed, the speed with which matters are being addressed in the case, and requirement to have 20 l vanous specialty skills represented and participating in certain key discussions. In many cases, 21 l these have been high-level meetings or key discussions with the Debtor representatives or the 22 CPUC and its advisors who are not able to make themselves available for repetitive follow-up 23 jdiscussions. In many cases, the participation of multiple professionals by FTI has been dictated 24 by the specific specializations and backgrounds such as those of the following key professionals:

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-26 Michael Hamilton is FTI's senior Utility Specialist in Accounting and Regulatory 27 Matters. He has participated in each of the restructurings that have involved a utility for the Firm 28 over the past 25 years. He has unique knowledge of the regulatory and business environment 8

facing utilities. Mr. Hamilton has coordinated the Committee work on plan structuring, regulatory matters, cash flow projections and legislative matters.

Thomas Lumsden is one of FTI's senior bankruptcy specialists, with specialization in utilities and the California Market, having participated in development of the infrastructure for the electricity deregulation in the State, and has operated and bought and sold electrical generation facilities.' Mr. Lumsden coordinated the Committee work on the financial odeling and analysis of PG&E's 'operations and finances, the DWR power purchases and revenue requirements, the tax issues involving the Plan structure, the retained generation filings with the CPUC, the analysis of claims by class, analysis of the CPUC Plan, and development of alternative plan structures.,

M. Freddie Reiss is a senior bankruptcy specialist for FTI with expertise in serving Committees and dealing with intercreditor matters. He has 'coordinated the Firm's negotiations in ihe areas of e'mployee retention issues, employment of Debtor professionals, ordinary course motions, cornmittee governance and plan negotiations with the Debtor and with the CPUC.

Rocky Ho is a Managing Director for FTI and has been responsible for coordinating staff assignments and projects for the FTI team, review of work product, quality control, and active participation in plan adjustments, and has specialized in review and coordination of all Committee response to Debtor motions and filings, litigation matters and Committee consent on 9

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.i expenditures.

Allison Young is a birector'for FTI nd has specialized in the financial modeling, the statewide grid modeling, the 'ash flow ainalysis, th'e 'assessmenit of Debtor'projections, the assessment of the 'CPUC's projections, alte'rhative plan' structures and feasibility, tax analysis of both plan proIosals and analysis6f ceditor claims by'class.

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A Jennifer Kitchin is a Director for FTI and has specialized in the Rating Agency analysis of PG&E, the DWR power purchases and contract data.

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1 l Margery Neis is a Utilities specialist in the BRS Practice who has coordinated the review 2

and monitoring of all matters with the CPUC, the DWR power'purchases aiid contra6t database 3

and QF contracts.

4 An analysis of meetings with multiple FTI professionals in attendance and an explanation of the role and purpose of each professionals' participation is presented in Exhibit 4 to this'Application.

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Summary Of Exhibits Regarding Services Rendered By IlTI.

8 FTI has attached the-following exhibits as support to its Application:

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Attached to the Declaration of Thomas E. Lumsden'("Lumsden Declaration") is 110 l Exhibit 1 - A sumiary schedule showing the professioi'ls -vho perforned the services, the number of hours spent, the respective professional's billing irate, and the total fees for such services; 13 l ' '

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Exhibit 2 and Exhibit 2 Summary of Fees by Project Category and itemized 14 1 time records, in chronological order, of each specific service for which an award of compensation is sought. The itemized record includes: (1) the date each service was rendered, 16 (2) the professional(s) who performed the service, (3) a description of the services rendered, and 17 (4) the time spent performing the service in increments of tenths of an hour for the Sixth Interim 18 l Application; 19 l

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Exhibit 3 - Expense Summary and Expense Detail reports by individual and 20 itemized total expenses for which reimbursement is sought. All expenses for which 21 reimbursements are sought are disclosed in detail by individual. It should be noted that any 22 airfare charges were incurred as a result of travel in coach class. FTI has not requested 23 1 reimbursement for certain out-of-pocket expenses when it would not be possible to assemble the billing details for reimbursement under the Guidelines. These unbilled out-of-pocket expenses 25 typically include telephone charges for calls placed in its offices, postage costs including Federal 26 Express charges and copying and facsimile charges incurred at the Applicant's offices in i27.

connection with these cases. These unbilled out-of-pocket expenses are real costs that have been 28 10

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incurred by FTI and have benefited the Estate; and

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Exhibit 4 - Summary of Meetings that more than two FTI professionals attended.

The summary highlights the relative importance of each team member and the purpose of their involvement at the meetings.

NARRATIVE

SUMMARY

OF SERVICES PROVIDED BY FTI.

FTI has submitted detailed listings of time incurred by professional by task for the monthly Cover Sheet Applications to the Debtor, Committee, the United States Trustee and the Court for the period covered by this Sixth Interim Application. FTI has reclassified some of the "detailed time into categories that more appropriately reflect the work performed.

Reclassification were made to harmonize the categorization among professionals.

1.

Asset Sales/Valuation Issues (Category 01).

-During the Sixth Applicati6n Period,'FTI professionals spent a total of 194.0 hours0 days <br />0 hours <br />0 weeks <br />0 months <br /> rendering services in this categ6ry, for which: FTI seeks compensation of $59,978. A summary of the FTI professionals' who iendered services in this category and the corresponding amount bf fees requested is included in Exhibit "2." The Billing Record'for this category, which sets forth a detailed description of the services rendered are filed 'oncurrently herewith.

Services rendered by FTI professionals in this category included:

a)

FTI updated its valuation of the proposed business units under the PG&E

' 'Plan 'of Reorganization and o'f PG&E as an integrated utility under the CPUC Plan of Reorganization.

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FTI prepared a' valuation of the Debtor's regulatory assets as well as a liquidation'analysis, both of which were used in the expert testimony of

' Thomas E.'Lurmsden. '-'

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I The purpose for the work performed was to enable the Committee to assess the 2 l solvency of the Debtor, to assess the'ability of the Debtor's assets, at market value, to provide 3

adequate'coverage for the proposed debt to be issued 'ufider both plans of reoiganizaton, and to assess the approximate value of the Debtor's equity under the CPUC lan The valuation of the Debtors business segments involved analysis of each component of the Debtors oerations, 5

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adjusting for the different cost structure, resources, market pricing and regulatory environment in 7

California. This information has assisted the Committee in evaluating the debt capacity and 8

creditworthiness of each of the proposed new entities in the Debtor's Plan of Reorganization and 9

of the integrated utility under the CPUC/OCC Plan of Reorganization. In the process of 10 developing the comparable company data, which is referenced-in valuations, FTI has also utilized the infornation to assess the viability of the Debtors financial projections for plan 12 purposes.

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Bankruptcy Reporting (Category 02).

14 15 During the Sixth Application Period, FTI professionals spent a total of 137.7 16 hours1.851852e-4 days <br />0.00444 hours <br />2.645503e-5 weeks <br />6.088e-6 months <br /> rendering services in this category, for which FTI seeks compensation of $34,826. A 17 l summary of the FTI professionals who rendered services in this category and the corresponding 18 amount of fees requested is included in Exhibit "2." The Billing Report for this category, which 19 sets forth a detailed description of the services rendered is filed concurrently herewith.

20 Services rendered by FTI professionals in this category included:

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FTI reviewed and analyzed various motions and pleadings of the case, and 23 provided comment to the committee on the financial impact of these items.

24 There have been innumerable motions filed in the case by the Debtor and other 25 parties which required review and assessment by FTI to assist counsel to the Committee in 26 determining the necessary response. These included motions on capital expenditures, asset sales, 27 and claim settlements, Power Exchange, lease extensions, POR transition costs, procurement 28 12

plans, as well as document discovery requests. In many cases, the time associated with those 2 lmotions has been posted to a distinct task code, but in other more generic cases, the time has been posted to the Bankruptcy Reporting task.

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Cash Flow Analysis (Category 03).

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6 During the Sixth Application Period, FTI professionals spent a total of 35.7 hours8.101852e-5 days <br />0.00194 hours <br />1.157407e-5 weeks <br />2.6635e-6 months <br /> 7

rendering services in this category, for which FTI seeks compensation of $14,231. A summary 8

of the FTI professionals 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 10 detailed description of the services rendered, is filed concurrently herewith.

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-' t Services rendered by FTI professionals in this category included:

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FTI updated its analysis of the Debtors' cash flow forecasts to develop an 14

' understanding of the Debtor's liquidity position and its ability to generate

15. lsufficient cash to fund the proposed Plans of Reorganization.

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FTI analyzed the new capital expenditure' budget and its impact on the 1 7 debtors' cash flow projections.

118 19 The process was critical to understanding the financial projections, both cash based and 20 operating, to' evaluate the liquidity of the debtor, and its parent, to assess the Committee position lwith respect to motions related to ordinary course expenditures, capital expenditures, payments 22 to DWR, payments to ISO, the relationship and sensitivity of the cash flows to changes in natural gas fuel prices, and the Debtor's ability to generate sufficient cash flows to fund either of the 24 l proposed Plans of Reorganization.

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Claims Analysis (Category 04).`

26 27 During the Sixth Application Period, FTI professionals spent a total of 236.0 28 hours3.240741e-4 days <br />0.00778 hours <br />4.62963e-5 weeks <br />1.0654e-5 months <br /> rendering services in this category, for which FTI seeks compensation of$107,115. A 13

1 l summary of the FTI professionals who rendered services in this category and the corresponding 2

amount of fees requested is included in Exhibit "2." The Billing Report for this category, which 3 l sets forth a detailed description of the services rendered is filed concurrently herewith.

Services rendered by FTI professionals in this category included:

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FTI coordinated with the Debtor to summarize and reconcile those claims 7

filed against the company to validate the value of potential. allowed claims 8 l that the Estate is responsible for.

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FTI reviewed and analyzed numerous claims stipulations.

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FTI reviewed the data on application of any generator and pass through 12 claims, and evaluated the FERC ordered refunds to reduce the allowed 13 claims in the case.

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FTI reviewed and analyzed issues surrounding NCPA / City of Palo Alto's 15 I claim.

1 6 17 This work product has involved the review of claims filed by creditors totaling in 18 excess of $44 Billion; reconciling these amounts to those reported by the Debtor, and to 19 information supplied by institutional creditors and in public filings; and evaluating those claims 20 which are subject to estimation or adjustment through the ISO or PX, and those subject to CPUC 21 review. Work in this area has resulted in validation on behalf of the Committee of a large 22 segment of the claims in this case and evaluation of key claims including those for Financial 23 Creditors, QF's, Sempra, ISO/Generators, cities, counties and other claimants where settlements 24 have been proposed or discussed. FTI spent time reviewing NCPA's $1.5 billion claim and 25 continues to closely monitor the claims estimation proceedings as the dollar amount could 26 potentially impact the feasibility of both plans.

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CPUC Review (Category 05).

During the Sixth Application period, FTI professionals spent a total of 174.5 hours5.787037e-5 days <br />0.00139 hours <br />8.267196e-6 weeks <br />1.9025e-6 months <br /> rendering services in this category, forwhich FTI seeks compensation 'of $65,022. A sunmary of the FTI professionals 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-description of the services rendered is filed concurrently herewith.

Services rendered by FTI professionals in this category included:

a)

• . FTI reviewed and monitored CPUC proceedings to determnine the potential financial impact the proceedings could have on the Debtor.

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FTI reviewed the Debtor's, SCE's, SDG&E's, DWR's and TURN's CPUC filings to determine the potential financial impact on the Debtor's estate.

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FTI reviewed the TRA-TCBA and GMA account statemeints to determine correlation with poweir process.

d)

FTI reviewed PG&E General Rate Case 2003 filing documents and evaluated its impact on plan projections.

The work in this area is critical to the determination of future cash flow and funding of the'Debtor to complete a plan of reorganization. As an integrated utility, the Debtor is regulated by the CPUC for all aspects of its owned generation (nuclear and hydro assets); intra-state gas transmission and storage facilities, gas and electric procurement, and distribution of electricity and gas to its wholesale and retail customers through its network of pipes and wires throughout Northern California. The CPUC and PG&E have made filings and conducted

':hearings on such regulatory topics as utility'retained generation rate setting, general rate case, DWR-revenue requirement, net short procurement, attrition, and matters involving transition 15 1

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1 period accounting during deregulation. PG&E has been actively engaged with the CPUC during 2

this period with the setting of the revenue requirements for its nuclear and hydro generation assets and with the revenue requirement for the DWR power purchases and bond financing. FTI has monitored the CPUC hearings, testimonies and developments closely, and has prepared minutes of key hearings and modeled the range of outcomes for the CQmmittee. FTI has also 6 l performed a thorough analysis of the CPUC's settlement with SCE for the recovery of its past-due procurement related obligations and how this agreement compares with the Plan proposed by 8

the CPUC for PG&E Company. FTI also researched elements of the CPUC regulation to assess 9

compliance of the Joint Plan of Reorganization.

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6.

CPUC/OCC Plan of Reorganization (Category 06).

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12 During the Sixth Application period, FTI professionals spent a total of 222.3 13 hours1.50463e-4 days <br />0.00361 hours <br />2.149471e-5 weeks <br />4.9465e-6 months <br /> rendering services in this category, for which FTI seeks compensation of $104,324. A 14 summary of the FTI professionals 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 16 sets forth a detailed description of the services rendered is filed concurrently herewith.

17 l Services rendered by FTI professionals in this category included:

19 a) FTI reviewed and analyzed the altematives to the Joint Plan projections 20 and provided feedback to UBS and the CPUC on the reasonableness of the 21 Plan projections, including-the proposed capital structure, capital 22 expenditures, and creditor recovery analysis.

23 l b) FTI analyzed the projected financial ratios from the Joint Altemate Plan 24l 24 and compared to S&P benchmark ratios for utility investment grade 25 companies.

26-27 c) FTI analyzed the Joint Plan projections prepared by UBS and provided 28 advice and comments to UBS and the Committee on the Joint Plan 16

projections.

d) FTI advised attorneys for the CPUC and the OCC in confirmation hearings for the CPUC/OCC Plan, including preparing financial analyses (1) in support of the CPUC/OCC plan, (2) in defense of PG&E objections to the CPUC/OCC Plan, and (3) in support of UBS in its testimony and delivery of the UBS Highly Confident letter on financing of the Joint Plan.

e)

FTI prepared the expert testimony for Thomas E. Lumsden f)

FTI reviewed and analyzed the UBS Bridge Term Sheet.

The work in this area enabled the Creditors Committee to provide meaningful feedback to the CPUC on alterations to their Joint Plan to improve plan feasibility, to assist UBS in developing the Joint Plan projections, and obtaining preliminary indications from ratings agencies for the Joint Plan Securities. This work also enabled the CPUC to defend against objections to the plan filed by the Debtor and helped the CPUC/OCC plan receive preliminary investment grade ratings from the'agencies. Significant work was'performed during plan confirmation hearings, including participating in depositions, monitoring of court activities, and preparation of the Lumsden expert witness report regarding solvency and the regulatory I...,;

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balancing accounts.

7.:-: Debtor Plan for Reorganization (Category 7)

During the Sixth Application Period, FTI professionals spent a total of 284.8 hours9.259259e-5 days <br />0.00222 hours <br />1.322751e-5 weeks <br />3.044e-6 months <br /> rendering services in this-category; for which FTI seeks compensation of

$146,426. A summary of the FTI professionals 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 description of the services rendered, is filed concurrently herewith.

17 2

3 4

.6 7

8 9

10

,11 12 1 3 14.

15 16 17 18 19

-'20 21 22 23

-24 25 26 27 28

ervices renaereu Dy r 1 pruiessiunais I ns categU[y ILcIUUuUe:

2 a)

FTI reviewed and analyzed various filings made by the debtor in support of its Plan of Reorganization for the Plan's confirmation hearings. FTI further participated in various depositions of key financial personnel of the Debtor to obtain a better understanding of the changes to the Debtor's 6 l financial projections.

7 8 l b)

FTI reviewed and analyzed CPUC's opposition to the Debtor's Plan of 9 l Reorganization.

10 c)

FTI attended PG&E's Plan of Reorganization Confirmation hearings.

11I 12 The Committee has continued to monitor the Debtor's financial performance and 13 changes to the Debtor's plan of reorganization. This effort has included a review of underlying 14 detail of all plan assumptions and updates to current and projected financial performance: FTI 15 has attended certain related depositions of experts.

16

8.

DWR Contracts Analysis (Category 08).

17 18 During the Sixth Application Period, FTI professionals spent a total of 124.7 19 l hours rendering services in this category, for which FTI seeks compensation of $48,994. A 20 summary of the FTI professionals who rendered services in this category and the corresponding 21 amount of fees requested is included in Exhibit "2." The Billing Report for this category, which 22 sets forth a detailed description of the services rendered is filed concurrently herewith.

23 Services rendered by FTI professionals in this category included:

24 25 l a)

FTI calculated the potential range of future payments that will be required 26 to be remitted to the DWR by the Debfor to pay for its purchased power, 27 administrative costs, and debt service requirements.

28 18 JA ---

L..

TT It An

+

1 A.

1 b)

FTI evaluated how the revised DWR revenue requirement would impact 2

0 -'

the projected financial statements of both Plans.

c)

FTI reviewed updates to the DWR Revenue' Requirement and the; underiying' Navigant model and settlements amending the underlying contracts.,

6 7 1 Approximately 40% of the electricity that PG&E supplies to its customers has 8

been provided by the DWR through spot and contract purchases under the program initiated by ABx 1. FTI has monitored the power purchases supplied by DWR to PG&E, estimated the costs

.0 f that power, as well as future costs associated with'contractual commitments and spot

.11.

purchases to meet PG&E's net short position, and developed estimates of those future costs.

This information has been compared with financial data supplied by consultants to the DWR and

- 13 has also been shared with PG&E to assist in efforts to influence the structure of the allocation of 14 those costs among the utilities in California. FTI continued its review of the contracts that have 15 been completed by the DWR and updated our database model of those contracts for newly 16 obtained contracts and renegotiated contracts to enable the Conmittee and PG&E to estimate the

17. lvolume and cost of that power and its potential allocation to PG&E.

IT l.

I

, v

- -; j. ?,, '.4 I:

18o, l'

' '9.

Executory Contracts'Analysis (Category'9).

$20

-During the Sixth Application Period, FTI professionals spent a total of 2.1 hours1.157407e-5 days <br />2.777778e-4 hours <br />1.653439e-6 weeks <br />3.805e-7 months <br /> 21 rendering services in this category, for which FTI seeks compensation of $998. A summary of 22 the FTI professionals who rendered services in this category and the corresponding amount of 23 fees requested is included in Exhibit "2." The Billing Report for this category, which set forth a 24 detailed description of the services rendered are'filed concurrently herewith.

25 1 i : ; *

- '- Services rendered by FTI in this category included:

26 l 27 a)

FTI reviewed and analyzed proposed stipulation between the debtor and 28 the Power Exchange to assume power contracts subject to certain 1 9

iimitations.

2 3 l This work involved review of proposed QF and other various settlement 4

agreements, and negotiations with the Debtor on structures for assumption and modification of these executory contracts. The more than 300 QF generators supply approximately 1/3 of the 6

power PG&E delivers to its customers, and pre-petition claims approximated $1 Billion: FTI's 7

work in this area helped the Committee to understand the financial consequences of the proposed 8

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

10

10.

Fee Application (Category 10).

10 11 During the Sixth Application Period, FTI professionals spent a total of 89.6 hours6.944444e-5 days <br />0.00167 hours <br />9.920635e-6 weeks <br />2.283e-6 months <br /> 12 rendering services in this category, for which FTI seeks compensation of $24,444. A summary 13 of the FTI professionals who rendered services in this category and the corresponding' armount of 14 fees requested is included in Exhibit "2." The Billing Report for this category, which sets forth a 15 l detailed description of the services rendered are filed concurrently herewith.

16 Services rendered by FTI professionals in this category included:

17 18 l a)

Time spent preparing FTI's Fifth Interim Fee Application and the monthly 19 Cover Sheet Applications for Allowance and Payment of Interim 20 Compensation and Reimbursement of Expenses in accordance with the 21 requirements established by the United States Bankruptcy Code, the, Court 22 and the U.S. Trustee. Time expended preparing this Sixth Interim 23 Application will be reported in the next interim fee statement.

24

11.

FERC (Category 11).

25 26 l During the Sixth Application Period, FTI professionals spent a total of 52.6 hours6.944444e-5 days <br />0.00167 hours <br />9.920635e-6 weeks <br />2.283e-6 months <br /> 27 rendering services in this category, for-which FTI seeks compensation of $23,655. A summary 28 of the FTI professionals who rendered services in this category and the corresponding amount of 20 11 l;;fof;n

-1 fees requested is included in Exhibit "2." The Billing Report for this category, which sets forth a

.2 detailed description of the services rendered is filed concurrently herewith.

Services rendered by FTI professionals in this category included:

4 5 l a)

FTI monitored FERC proceedings to determine the potential financial 6 l '

impact of regulatory proceedings on the Debtor's Estate, including 7

' < ' possible changes in rates, generator refunds, settlement of the California 8

PX/Generator claims, and progress on the Debtor's filings requesting 9

FERC approval for various aspects of its Plan of Reorganization.

10 b)

FTI reported findings and analysis on FERC proceedings to the 1 1 Committee.

12 This analysis and monitoring, in concert with regulatory counsel for the' Committee, has been critical to assessmrent of potential refunds on claims that may be awarded to 14 Chmt'.h foet s

a 15 PG&E, potentially reducing the pre-petition obligations, and analyzing the potential claim PG&E 16 will have from'the settlement Generator claims against the now defunct California Power 1 7 l Exchange. We have also advised the Comrnittee with respect to the impact of FERC market price 1 8 caps and the impact of the retroactive application of those caps to the PX, ISO and DWR 19 purchases as they may affect ilie Debtor:

20

^

2 1

12.

Financial Statement Modeling (Category 12).

21

. t......, +.t..

..~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~-

i,p 22 During the Sixth Application Period, FTI professionals spent a total of 121.0 23 hours2.662037e-4 days <br />0.00639 hours <br />3.80291e-5 weeks <br />8.7515e-6 months <br /> rendering services in this category, for which FTI seeks compensation of $44,194. A 24l summary of the FTI professionals who rendered services in this category and the corresponding

'25 amount of fees 'requesed is'included in Exhibit'"2." The' Billing Report for this category, which 26 sets forth a detailed descriptiorn of the services rendered is filed concurrently herewith.

27

-^-

' - '- Services rendered by FTI professionals listed in this category included:

28 21

1 a)

FTI continued to refine its integrated financial statement model to support 2

various alternative plans under consideration by the committee. This 3

integrated model enabled the committee to create financial projections to 4 l support the joint CPUC/OCC plan of reorganization that has been filed 5

with the court.

6 b)

FTI created a model to analyze the new financial projections of the PG&E Plan of Reorganization as filed with the court in November 2002.

8 9

c)

FTI reviewed GRC filings to model future rates of PG&E.

10 l FTI's financial modeling effort has enabled the Committee to assess the feasibility of the Debtor's and the CPUC's proposed plans of reorganization and to model various 12 altemative plan scenarios. This model proved integral in calculating the cash flows of multiple 13 alternative plans and assessing the feasibility of various capital structures. The joint CPUC/OCC 14 plan before the court is supported by the financial projections generated from FTI's financial modeling efforts.

16 17 l

13.

Financial Statements (Category 13).

18 During the Sixth Application Period, FTI professionals spent a total of 89.6 hours6.944444e-5 days <br />0.00167 hours <br />9.920635e-6 weeks <br />2.283e-6 months <br /> 19 rendering services in this category, for which FTI seeks compensation of $41,397. A summary 20 of the FTI professionals who rendered services in this category and the corresponding amount of 21 1 fees requested is included in Exhibit "2." The Billing Report for this category, which sets forth a 22 detailed description of the services rendered is filed concurrently herewith.

23 24 Services rendered by FTI professionals in this category included:

25 a)

FTI reviewed the Debtor's historical financial statements filed durin ghtis 26 period, including SEC, FERC and bankruptcy filings.

27 28

~~~b) FTI used its research of the Debtor's historical performance in performning 22

various financial analyses on the Debtor's financial condition and ability to reorganize, including assessment of changes in the parent financial condition.

As.a regulated utility, the Debtor's financial statement filings include submissions to the SEC, FERC, and the CPUC that outline the accounting for GAAP (generally accepted accounting principals) presentation and regulatory accounting purposes. These financial statements present voluminous information on the historical performance and financial health of the Debtor' FTI reviewed certain public filings to verify financial projections in the plan of r reorganization'and to summarize the financial performance of the utility post-petition for the creditors committee.

14.

General Committee Matters (Category 14).

During the Sixth Application Period, FTI -professionals spent a total of 51.5 hours5.787037e-5 days <br />0.00139 hours <br />8.267196e-6 weeks <br />1.9025e-6 months <br /> rendering'services in this category, for which FTI-seeks compensation of $26,139. A summary of the FTI professionals 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 description of the services rendered is filed'concurrently here'with.

Services rendered by FTI professionals listed in' this category included:

a)

FTI prepared for and attended numerous meetings and conference calls including the full 'Committee on various issues, including general case adminisraition' financial issues, regulatory issues, litigation issues, Plan v

issues and confirmation hearing matters. -

b)

FTI personnel prepared for and participated in various formal and informal conference calls between Committee members, Connittee working group members, Conmittee advisors and PG&E regarding the financial impact of various motions brought by PG&E, the Debtor's and the CPUC/OCC's 23

.2 3

4 5

6 7-8 9

10

.11.

12 13 14 15, 16 17 18 19 20

-:21 22

23

.24 25 26 27 28

Ii lproposed plans of reorganization, confirmation hearings, and other issues 2

surrounding the Debtor's estate.

c)

FTI prepared numerous presentations for distribution to the Committee regarding a the financial impact of various matters affecting the Debtor's Estate, and addressed questions from individual creditors on aspects of the 6

Plan of Reorganization.

7.

8 l As has been mentioned earlier, the Committee has participated in a significant 9 l number of meetings and conferences to address the volume of issues facing the Debtor and to 10 accelerate the process of reorganization of this Debtor. FTI has structured its team into 1 1 l subgroups with partners and staff splitting responsibility for various areas. This category 12 l captures the time spent associated with the myriad of meetings and conferences that FTI has 13 participated in which do not address any one particular task code topic. FTI has attempted to 14 minimize the participation of more than one or two professionals in these meetings and 15 conferences, but in many cases, the variety and complexity of the issues addressed, the speed 16 with which activities in the case have progressed, and the particular specialties of the FTI 17 professionals involved have dictated the need to have more than one or tvo professionals in 18 attendance. For meetings where more than two FTI professionals were present, Exhibit 4 19 summarizes the role of each team member and the purpose of their involvement at the meeting.

20

15.

Legislative Review (Category 15).

2 1 22 During the Sixth Application Period, FTI professionals spent a total of 0.3 hours3.472222e-5 days <br />8.333333e-4 hours <br />4.960317e-6 weeks <br />1.1415e-6 months <br /> 23 l rendering services in this category, for which FTI seeks compensation of $104. A summary of 24 the FTI professionals who rendered services in this category and the corresponding amount of 25 fees requested is included in Exhibit "2." The Billing Report for this category, which sets forth a 26 detailed description of the services rendered is filed concurrently herewith.

27 Services rendered by FTI professionals listed in this category included:

28 24

a)

FTI performed a general review and analysis of financial implications of potential and passed legislation affecting the Debtor's estate.

This utility bankruptcy has involved not just the interplay of the Debtor, creditors and regulators' but has also drawn in-the legislative element as the governor and state legislators

,seek a resolution to the crisis that affected the energy supply in Califomia. IFTI has monitored, in concert with Saybrook Capital representatives, the various alternatives being presented by the governor and legislators to Iassess if these may serve as a proxy for a plan of reorganization for PG&E, and to determine if any of these proposals would have detrimental impact to the Debtor or the two proposed Plans of Reorganization.

16.

Professional Compensation Matters (Category 16).

During the Sixth Application Period, FTI professionals spent a total of 79.6 hours6.944444e-5 days <br />0.00167 hours <br />9.920635e-6 weeks <br />2.283e-6 months <br /> rendering services in this.category, for which ETI seeks compensation of $6,724. A summary of the FTI professionals 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 description of the services rendered is filed concurrently herewith.

Services rendered by FTI professionals listed in, this category included:

a)

FTI Reviewed and analyzed the Fifth Interim Fee Application of other professionals.

b)

FTI aftended fee app lication hearings for the Fifth Interim Fe plcto and reviewed liST objections to various professionals' fee applications.

17.

Subcommitteem es M atters (Category 17) 25

..1 2

3 4

5 6

7 8-9 10 I

11-12 13 14 15

• 16 17 18 19 20 21l

• 22 23 24 25 26 27-28

During the Sixth Application Period, FTI professionals spent a total of 37.6 hours6.944444e-5 days <br />0.00167 hours <br />9.920635e-6 weeks <br />2.283e-6 months <br /> rendering services in this category, for which FTI seeks compensation of $21,280. A summary of the FTI professionals 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 description of the services rendered is filed concurrently herewith.

Services rendered by FTI professionals listed in this category included:

a)

FTI prepared for and participated in numerous meetings and teleconferences with the OCC's Plan Subcommittee to evaluate plan altematives, discuss the reasonableness of supporting plan assumptions, and strategize on steps for achieving confirmation of the joint CPUC/OCC Plan of Reorganization.

FTI played an active role in developing and evaluating alternative plan scenarios with the OCC Plan Subcommittee. FTI's in-depth knowledge of PG&E's operations and the CPUC regulatory framework aided the committee in rapidly creating a plan which should face fewer legal and financing challenges than either of the previous plans filed in the case. This effort involved activities with Committee Counsel and Saybrook representatives.

a~~~~~~~~~~~~~~~

18.

Tax Review (Category 18)

During the Sixth Application Period, FTI professionals spent a total of 10.7 hours8.101852e-5 days <br />0.00194 hours <br />1.157407e-5 weeks <br />2.6635e-6 months <br /> rendering services in this category, for which FTI seeks compensation of $5,406. A summary of the FTI professionals 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 description of the services rendered is filed concurrently herewith.

Services rendered by FTI professionals listed in this category included:

a)

FTI reviewed and analyzed tax related matters between PG&E Corp and 26 I

2 3

4 5

6 7

8 9

10 11 12 13 14 15 16 17 18 19 20 21 22

'23 24 25 26 27 28

its subsidiaries.

FTI researched and summarize'd key tax issues of the Debtor's Plan of reorganization for the'Committee and the tax impact of altemative plan proposals, highlighting the potential financial impact on the Debtor and any potential tax liabilities to the creditor. FTI also kept the Committee appraised'of the status on IRS submissions and the implications of the CPUC's proposed tax sharing agreement.

19.

Travel Time (Category 19).

During the Sixth Application Period, FTI professionals spent a total of 3.5 hours5.787037e-5 days <br />0.00139 hours <br />8.267196e-6 weeks <br />1.9025e-6 months <br /> rendering services in this category, for which FTI seeks compensation of $2,083. A sunmary of the FTI professionals 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 descinptionof the services rendered is filed concurrently herewith.

Services rendered by FTI professionals listed in this category included:,

a)

This category includes the time required for FTI professionals to travel to case related meetings after September 11, 2001.

IV.;

SUMMARY

OF ACTUAL AND NECESSARY EXPENSES INCURRED BY FTI l.

.~~~

FTI maintains records of all actual and necessary out-of-pocket expenses incurred and typically charged in connection with rendering professional services to its clients in the ordinary course of its business practice. As is typical of FTI's practice when representing creditor committees, FTI has reduced to cost or not charged certain of these out-of-pocket.

expenses to the estate in accordance with the UST Guidelines and the Court Guidelines and to 27 1.

2 3

4 5.

6 7

8

.10 11 12 13

'14 16 17 18 19

.20.

21 22

'23 24 25 26 27 28

1 ensure the reasonableness of FTI's fee and expense request. A brief explanation of certain costs 2 l incurred and charged to the estate is set forth below:

a) FTI does not charge its clients for photocopying done in-house; copying done by third-party services is charged at cost; 5

6 b) FTI charges its clients for document retrieval services, computer research and other 7

specialized searches and services, such as messengers and library retrievals, at cost; 8

c) FTI charges its clients for mileage ($0.36 per mile, if sought) and parking costs 10 l incurred by its professionals in connection with services rendered, at cost; 1 0 d) FTI charges its clients-for transportation and travel-related costs including out-12 of-town meals, excluding lunches, incurred by its professionals when working 13 l on specific client matters, at cost; and 14 e) FTI normally charges its clients for the cost of overtime and weekend meals 15 and transportation when pressing client matters require the professional to 16 work past normal office hours; however, in accordance with the UST 17 Guidelines and the Court Guidelines, no such charges are included in this Sixth 18 1 Interim Application.

19 20 V.

21 COMPENSATION REQUESTED AND RELEVANT LEGAL STANDARD 22 To grant a request for compensation pursuant to Bankruptcy Code section 330, 23 the Court must find that such request is reasonable. The reasonableness of a compensation 24 request is determined by the "lodestar" method. See In re Yernakov, 718 F.2d 1465, 1471 (9t Cir. 1983). Under the lodestar approach, "reasonable" compensation is calculated by 26 multiplying the number of hours reasonably expended by the hourly rate of the professional. In 27 re Rheuban, 121 B.R. 368, 383 (Bankr. C.D. Cal. 1990). There is a strong presumption that the 28 28

lodestar product is reasonable under Bankruptcy Code section 330. See In re Drexel Burnham 2

Lambert Group, Inc. 133 B.R. 13, 22 (Bankr. S.D.N.Y. 1991).

The reasonableness of a professional's hourly rate is based on the cost for comparable services charged in the area, in non-bankruptcy matters. See In re Yermakov, 718 F.2d at 1471. The reas6nableness of the hours expended on a task is based on whether the 6

services provided were actual and necessary. See In re Nucorp Energy. Inc., 764 F.2d 655, 658 (9th Cir. 1985).

8 9 l FTI's fees are reasonable given the size and comiplexity of the bankruptcy case 10 and are commensurate with the fees that FTI has been awarded in comparable chapter 11 cases and that accountants and financial advisors of comparable experience and expertise charge on a 12 l regular basis to represent creditor committees in comparable chapter 11 cases. Accordingly, 12I J-13 utilizing the lodestar method, FTI's fee and expense request is reasonable and should be allowed 14 l and paid pursuant to Bankruptcy Code section 330. See Drexel 133 B.R. at 22.

15

~~~~~~~~~~~~~VI.

16 CONCLUSION 17 18 l For the reasons set forth above and pursuant to Bankruptcy Code sections 330 and 19 331, Bankruptcy Rule 2016, the Court Guidelines, the UST Guidelines and the standards adopted 20 by courts in awarding accountants' and financial advisors' fees and costs, FTI submits that the 21 fees for services rendered and costs and expenses incurred on behalf of the Committee during the 22 Sixth Application Period in the total amount of $798,114 are reasonable and should be allowed 23 on an interim basis and paid in full.

24 As previously mentioned, FTI purchased all outstanding receivables of the BRS 25 Practice, including receivables related to PwC's work as accountants and financial advisors to 26 the Official Conmittee of Unsecured Creditors in the Pacific Gas and Electric bankruptcy case.

27 No agreement or understanding of any kind or nature exists between FTI and any other person or 28 29

1 entity for the sharing, division, or payment of any portion of the compensation awarded for our 2 l services rendered or expenses incurred in connection with the representation of the Committee in the bankruptcy case.

WHEREFORE FTI respectfully requests that this Court enter an order:

5 6

1.

Approving this Sixth Interim Application in its entirety;

2.

Approving an interim award of compensation in the amount of $777,874 8

for professional services rendered and reimbursement of costs and expenses incurred in the 9

amount of $20,240, for a total amount of $798,114.

1 0 11

3.

Authorizing and directing PG&E to immediately pay to FTI the allowed 12 amounts, less any such amounts already paid pursuant to the Order Establishing Interim Fee 13 Application and Expense Reimbursement Procedure; and 14 15

4.

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

16 17 DATED: May 14, 2003 Respectfully submitted.

18 FTI CONSULTING INC 19 By:

20 homas E. Lumsdgn 21 Accountants and Financial Advisors to Official Committee of Unsecured Creditors 22 23 24 25 26 27 28 30

1 CERTIFICATION 2

I, Thomas E. Lumsden, am the professional designated by FTI Consulting, Inc. to 3

ensure compliance with the United States Bn ptcy Court Northem District of California

-4 Guidelines for Compensation and Expense Reimbursement of Professionals and Trustee'("Court 5

Guidelines"). I served as the senior mana-ing director 'for FTI Consulting Ic. in connections 6

6 with this matt'er. I certify that (a) I have read the Sixth Interim Application; (b) to the best of my kInowledge, infor-mation' and belief, formied after.reasohable'inquiry'; the compensation and expense reimbursement sought is in conforimity with.the Court Guidelines,rtexcept as specifically 9

noted in the Application; and (c) the compensation and expense reimbursement requested are 10

-billed at rates, in accordance with practices, no' less favorable than those customarily employed by FTI and generally accepted by FTI's ciients:

1 2 13 DATED!,

S

{ t 3

14 Thomas E. Lumsden

'15 16.K.

=

176 19 l.

20 21 22 26 27 28 31

1 DECLARATION OF THOMIAS E. LUMSDEN 2

I, Thomas E. Lumsden, declare:

3 4

1.

I am over eighteen years of age and, if called upon, I could and would 5

testify competently to the matters set forth herein. I am a senior managing director in the 6

professional services firm of FTI Consulting, Inc. ("FTI"), successor to 7

PricewaterhouseCooper's ("PwC") BRS Practice, and one of the senior managing directors 8

responsible for FTI's services as accountant and financial advisor to the Official Conmittee of 9

Unsecured Creditors ("Committee") in the Pacific Gas and Electric Company ("PG&E") chapter 10 11 case. In preparing this declaration, I have relied on my personal knowledge and on my 1 1 review of the billing records and files maintained by FTI in the ordinary course of business and 12 made by FTI professional staff substantially contemporaneous with that person's performance of 13 services or incurrence of costs on behalf of the Committee.

14

2.

This declaration is submitted in support of the "Sixth Application of FTI 1 5 Consulting Inc. For Allowance and Payment of Compensation And Reimbursement of Expenses 1 6 (December 1, 2002 Through March 31, 2003)" (the "Sixth Interim Application"). Capitalized 17 terms not otherwise defined herein shall have the meanings ascribed to them in the Sixth Interim 1 8 Application. This Sixth Interim Application covers the period from December, 2002 through 1 9 and including March 31, 2003 (the "Sixth Application Period"). I have read the Sixth Interim 20 Application and reviewed the exhibits thereto, and each of the facts contained therein is true and 21 correct.

22 23

3.

FTI Consulting's Time Records Exhibit for the Period December 1, 2002 24 to March 31, 2003, filed concurrently herewith, attaches true and correct copies of records 25 maintained by FTI in the ordinary course of FTI's business operations and reflects entries that 26 were made substantially contemporaneously with the rendering of the services.

27

4.

Pursuant to the Sixth Interim Application, FTI seeks allowance of 28 32

compensation covering 1,948.0 hours0 days <br />0 hours <br />0 weeks <br />0 months <br /> of professional time devoted to advising the Committee'in PG&E's bankruptcy case, resulting in the accumulation of $777,874 in fees for professional services rendered and $20,240 for expenses incurred, for a total amount of $798,114.

5.

It is FTI's normal business practice to charge its clients in full for services rendered and for all actual and necessary costs and expenses incurred in connection with such services.

6.

FTI received no pre-petition retainer in connection with this bankruptcy case.

7. -:

FTI has submitted monthly fee notices in accordance with the interim fee procedures that were established by the Court. FTI has received payments totaling $520,988 in connection with the Monthly Cover Sheet Applications covering the period December 1, 2002 to March 31, 2003, comprised of $503,505 in fees and $17,483 in expenses ($157,689 in fees and

$2,758 in expenses related to the March 31, 2003 Cover Sheet Application have not yet been AA l_+

+ A

+ sA1

-f I

-If% A A'\\..

PUU auIIUUIUIg 0 a LULUI 01 - 1 U,440).

8.

No agreement or understanding of any kind or nature exists between FTI and any other persontor entityifor the sharing, division, or payment of any portion of the compen'sation awarded to FTI or the BRS Practice for services rendered or expenses incurred in connection'with our representation of the Comnittee in this chapter 11 proceeding, except as among the employees and shareholders of FTI.

9.

I am one of the designated professionals responsible for overseeing the billing in this matter and for assuring compliance with the Guidelines of the Office of the'United States Trustee for the Northern District of California relating to billing (the "Guidelines").

Based upon my review of the Sixth Interim Application submitted by FTI for the Sixth Application Period, I believe that the Sixth Interim Application complies with the Court Guidelines and the UST Guidelines.

33 2

3 4

5 6

7 8

9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

1

10.

Attached hereto as Exhibit "I" is a summary of the total hours expended, billing rate, and fees incurred by each FTI professional during the Sixth Application Period.

3 l-

11.

Attached hereto as Exhibit "2" and "Exhibit 2-1" is a surmary of each 4

category of services, setting forth the name of each professional who expended time in that 5

category and the total hours and amount billed by each professional in that category during the 6 l Sixth Application Period.

7 8

12.

Attached hereto as Exhibit "3" are Expense Summary and Expense Detail 9

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

10

13.

Attached hereto as Exhibit "4", is a summary of meetings that more than two FTI professionals attended with a description of the relative importance of each team 12 member and the purpose of their involvement at the meetings.

1 3 14 l

14.

Attached hereto as Exhibit "5", is a copy of the Declaration of Clara Yang 15 l Strand, executed on, in support of the Sixth Interim Application of FTI Consulting.

16 I declare under penalty of perury under the laws of the United States of America 17 that the foregoing is true and correct.

18 19 Executed this 14 th day of May, 2003 at San Francisco, Califomia.

20 2 1 22 Thomas E. Lumsden 23 24 25 26 27 28 34