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Before there was Enron, there was Pacific Gas and Electric. When California’s largest utility, San Francisco�based Pacific Gas and Electric Co., filed for Chapter 11 protection in April 2001, it jolted northern California, put Gov. Gray Davis into a tizzy, and killed utility stocks’ reputation as the ultimate widow-and-orphan investment. Californians feared the worst. But James Lopes, the partner at San Francisco’s Howard, Rice, Nemerovski, Canady, Falk & Rabkin representing the utility, kept his cool. Given California’s energy crisis, the millions of customers served by the utility, and the national debate over energy deregulation, doing so was a feat. Listing assets of $21.5 billion, the utility’s filing was 2001′s second-largest (after that of Enron Corp.), according to the Web site BankruptcyData.com. That makes Pacific Gas Lopes’ biggest client to date, and the work has scored Howard Rice some hefty fees. In fact, according to fee applications filed with the San Francisco bankruptcy court, the firm had received $7.6 million through November 2001 and has requested an additional $2 million for work done in December and January. That’s not a bad take for a 125-lawyer general practice shop with just five bankruptcy partners. Counting both bankruptcy and litigation components, the firm has from 20 to 25 attorneys working on the Pacific Gas filing. Pacific Gas senior vice president and general counsel Roger Peters retained Lopes in December 2000, when the utility was rapidly running out of cash to pay its expenses. Peters and Lopes had worked together in the late seventies on a small bankruptcy in which Pacific Gas was a creditor. Peters says he chose Lopes because of his general reputation and his knowledge of bankruptcy law. (The utility’s parent company, PG&E Corp., did not file for bankruptcy protection. It is being represented by a pair of New York firms — Weil, Gotshal & Manges and Dewey Ballantine.) Lopes, 55, has spent his 26-year career in California. Before joining Howard Rice as a partner 20 years ago, the bankruptcy specialist was at Los Angeles’ Gendel, Raskoff, Shapiro & Quittner. He then opened his own firm, Gordon, Peitzman & Lopes, in San Francisco. Prior to the Pacific Gas bankruptcy, one of Lopes’ highest-profile cases involved his representing The Charles Schwab Corp. as a creditor in Orange County, Calif.’s Chapter 11 filing in 1996. Lopes’ style suits such politically charged cases; colleagues invariably describe him as calm. Howard Rice managing partner Stuart Lipton says that Lopes has the ability to “balance business exigencies with the political climate.” In the Pacific Gas case, Lopes needed to do just that — while whisking the company out of bankruptcy. Pacific Gas announced its reorganization plan on Sept. 20, just five months after it had filed for Chapter 11 protection on April 6. “That’s warp speed in bankruptcy time,” Lopes says. Adds Peters: “We wanted to make it clear to the world that bankruptcy was not a destination, but a place we were moving through.” As a so-called solvent debtor, Pacific Gas intends to pay all its debts back in full and with interest, which gives it further reason to speed through the process, says Alan Gover, of the Houston office of Dewey Ballantine, a counsel to PG&E. A further consideration: Pacific Gas wanted to make sure that service to its 4.6 million electricity and 3.8 million gas customers was not interrupted while the utility was under Chapter 11 protection. Lopes secured permission from the bankruptcy court to make $1.5 billion in capital expenditures to keep the utility operational through 2001, seeking approval for large expenses from the creditors committee and the bankruptcy court. Service has continued uninterrupted, Lopes says. In piecing together the reorganization plan, Lopes started a bit unconventionally, by working with creditors on the plan before submitting it to the court. Often the debtor and creditor are tied up in court over the terms of reorganization, says Paul Aronzon, a partner in the Los Angeles office of New York’s Milbank, Tweed, Hadley & McCloy, counsel to the committee of official creditors in this case. “Jim short-circuited that by putting us at the table with him from the beginning,” Aronzon says. The state government and utility commission, though, are another matter. The plan proposes splitting Pacific Gas into four entities. Only one — the reorganized debtor — would be under state regulation, through the California Public Utilities Commission. The other three entities would be regulated by the Federal Energy Regulatory Commission. Due to the haphazard nature of California energy regulation, arranging assets under federal control will, it is hoped, give the faltering company a better credit rating and a more viable future, says William Lafferty, a Howard Rice partner working on the Pacific Gas case with Lopes. The state and CPUC have resisted the switch in control, and the company has brought the battle before the bankruptcy court, enlisting Harvard Law School professor and constitutional scholar Laurence Tribe to argue that federal bankruptcy code provisions allowing for such reorganization pre-empt the California laws prohibiting them. At press time, the issue was pending before bankruptcy judge Dennis Montali. Despite the opposition, Lopes says, he fully expects the crux of the reorganization plan to stick. But with a state government, a utility commission, and a judge to please, that will require some calm diplomacy — just Lopes’ specialty.

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