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OREN B. HAKER (pro hac vice)

DAVID B. LEVANT (pro hac vice) 

GABRIELLE GLEMANN (pro hac vice) 

STOEL RIVES LLP

600 University Street, Suite 3600 

Seattle, WA 98101 

Telephone: 206.386.7530 

Facsimile: 206.386.7500 

gabrielle.glemann@stoel.com 

Attorneys for Party in Interest 

Enel Green Power North America, Inc.

UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN FRANCISCO DIVISION

In re:

PG&E CORPORATION

- and - 

PACIFIC GAS AND ELECTRIC 

COMPANY,

Debtors.

Bankruptcy Case

No. 19 - 30088 (DM) 

Chapter 11 

(Lead Case)

(Jointly Administered)

MOTION AND MEMORANDUM OF 

ENEL GREEN POWER NORTH 

AMERICA FOR ENTRY OF AN

ORDER CONFIRMING SAFE 

HARBOR PROTECTION UNDER 

11 U.S.C. §§ 362(b)(6) AND 556 

 

 

 Affects PG&E Corporation 

× Affects Pacific Gas and Electric 

Company 

 Affects both Debtors 

*All papers shall be filed in the Lead Case, 

No. 19-30088 (DM).

Hearing Date: March 12, 2019 

Time: 9:30 a.m.

Courtroom: Hon. Dennis Montali 

Objections Due: March 5, 2019, 4 p.m. 

 

Case: 19-30088 Doc# 481 Filed: 02/19/19 Entered: 02/19/19 17:37:22 Page 1 of

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TABLE OF CONTENTS

Page

Enel’s Motion To Confirm Safe Harbor Protection - Case No. 19-30088 (DM)

i

TABLE OF AUTHORITIES .......................................................................................................... ii

JURISDICTION.............................................................................................................................. 1

RELIEF REQUESTED................................................................................................................... 1

FACTS ............................................................................................................................................ 3

LEGAL ARGUMENT.................................................................................................................... 6

A. The Safe Harbor Protections Of Sections 362(b)(6) And 556 Apply To 

Allow Enel to Enforce Its Contractual Rights Under The CSAs 

Notwithstanding PG&E’s Bankruptcy.................................................................... 6

a. The Forward Contract Test ......................................................................... 7

b. The CSAs are Forward Contracts ............................................................... 9

c. The Forward Contract Merchant Test....................................................... 11

d. Enel is a Forward Contract Merchant ....................................................... 12

e. The CSAs are Entitled to the Safe Harbor Protections of the 

Bankruptcy Code as Forward Contracts Executed by Forward 

Contract Merchants................................................................................... 13

NOTICE........................................................................................................................................ 13

CONCLUSION............................................................................................................................. 13

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TABLE OF AUTHORITIES

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Enel’s Motion To Confirm Safe Harbor Protection - Case No. 19-30088 (DM)

ii

Cases

Calpine Energy Servs., L.P. v. Reliant Energy Elec. Sols., L.L.C. (In re Calpine 

Corp.),

No. 08-1251(BRL), 2009 WL 1578282 (Bankr. S.D.N.Y. May 7, 2009) ..................................7

Clear Peak Energy, Inc. v. S. Cal. Edison Co. (In re Clear Peak Energy, Inc.),

488 B.R. 647 (Bankr. D. Ariz. 2013)................................................................................ passim

In re FirstEnergy Sols. Corp.,

No. 18-50757, 2019 WL 211807 (Bankr. N.D. Ohio Jan. 15, 2019)..........................................9

In re MBS Mgmt. Servs., Inc.,

432 B.R. 570 (Bankr. E.D. La. 2010) .........................................................................................9

In re Mirant Corp.,

303 B.R. 319 (Bankr. N.D. Tex. 2003)...........................................................................7, 11, 13

In re Mirant Corp.,

310 B.R. 548 (Bankr. N.D. Tex. 2004)...............................................................................11, 12

In re National Gas Distributors, LLC,

556 F.3d 247 (4th Cir. 2009).......................................................................................................8

Statutes

7 U.S.C. § 1(a)(9)..............................................................................................................................7

11 U.S.C. § 101(25) .....................................................................................................................7, 9

11 U.S.C. § 101(26) ............................................................................................................11, 12, 13

11 U.S.C. § 362(b)(6).............................................................................................................. passim

11 U.S.C. § 365(e)(1)........................................................................................................................7

11 U.S.C. § 556....................................................................................................................... passim

11 U.S.C. § 761(1) ............................................................................................................................7

11 U.S.C. § 761(8) ........................................................................................................................7, 9

28 U.S.C. § 157.................................................................................................................................1

28 U.S.C. § 157(b) ............................................................................................................................1

28 U.S.C. § 1334...............................................................................................................................1

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TABLE OF AUTHORITIES

(continued)

Page

Enel’s Motion To Confirm Safe Harbor Protection - Case No. 19-30088 (DM)

iii

28 U.S.C. § 1408...............................................................................................................................1

28 U.S.C. § 1409...............................................................................................................................1

Public Utilities Code Section 380 .....................................................................................................2

Rules

Fed. R. Bankr. P. 2002 ....................................................................................................................14

Fed. R. Bankr. P. 4001(a)(3).............................................................................................................1

Fed. R. Bankr. P. 6006 ......................................................................................................................1

Local Rule 4001-1.............................................................................................................................1

Other Authorities

California Assembly Bill 2514 .........................................................................................................4

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Enel’s Motion To Confirm Safe Harbor Protection - Case No. 19-30088 (DM)

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Enel Green Power North America, Inc. (“Enel”) by and through its undersigned counsel, 

submits this motion and memorandum of points and authorities for entry of an order confirming 

that the Capacity Storage Agreements (the “CSAs,” as defined below) are protected by the safe 

harbor provisions codified in Sections 362(b)(6) and 556 of title 11 of the United States Code (the 

“Bankruptcy Code”) and that the automatic stay does not apply to bar Enel from exercising its 

contractual rights under the CSAs, including its contractual right to cause the liquidation, 

termination or acceleration of the CSAs or to offset or net out any termination value, payment 

amount or other transfer obligation arising under or in connection with the CSAs. This motion is 

supported by the declaration of Giovanni Bertolino (the “Bertolino Declaration”) filed 

contemporaneously herewith and the files and records referenced herein. Enel respectfully 

represents the following in support of this motion:

JURISDICTION

1. The Court has jurisdiction over this Motion pursuant to 28 U.S.C. §§ 157 and 

1334, the Order Referring Bankruptcy Cases and Proceedings to Bankruptcy Judges, General 

Order 24 (N.D. Cal.), and 5011-1(a) of the Bankruptcy Local Rules for the United States District 

Court for the Northern District of California (the “Bankruptcy Local Rules”). 

2. This is a core proceeding pursuant to 28 U.S.C. § 157(b). 

3. Venue is proper in this Court pursuant to 28 U.S.C. §§ 1408 and 1409.

4. The statutory predicates for this Motion are 11 U.S.C. §§ 362(b)(6) and 556, Rule 

4001(a)(3) of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”), and 

Bankruptcy Local Rule 4001-1.

RELIEF REQUESTED

5. By this motion (the “Safe Harbor Motion”), Enel requests an order confirming that 

the safe harbor protections under Sections 362(b)(6) and 556 of the Bankruptcy Code apply to 

allow Enel to enforce its contractual rights under the CSAs. 

6. Pursuant to the CSAs, Enel is contracted to construct three energy storage facilities 

and provide all capacity attributes, or resource adequacy capacity, from each facility to Pacific 

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Gas & Electric Company (“PG&E,” and together with PG&E Corporation, the “Debtors”).1

 Each 

of the CSAs is currently in the development phase and Enel continues to incur additional 

development costs on an ongoing basis. Enel faces imminent requirements to post security in the 

amount of $ (the “Project Development Security”) to secure Enel’s obligations under 

the CSAs. Enel’s deadline to post the Project Development Security depends upon the CPUC’s 

approval of the CSAs becoming final and non-appealable, which may occur at any time in the 

coming days or weeks. 

7. Additionally, in reliance on the CSAs, Enel has entered into two interconnection 

agreements with PG&E and the CAISO, with a third interconnection agreement expected to be 

executed in December 2020 (the “Interconnection Agreements,” as defined below).2

 Under the 

two executed Interconnection Agreements, Enel is required to post security to fund the 

interconnection facilities and network upgrades required for interconnecting each facility (the 

“Interconnection Financial Security”). Enel’s deadline to post the Interconnection Financial 

Security would have been February 28, 2019 and March 1, 2019, respectively. However, as 

outlined below, Enel has been in discussions with the CAISO and PG&E regarding a possible 

extension to the deadlines, which would permit Enel the time to gain clarity as to its rights under 

the safe harbor provisions and PG&E the time to determine whether construction of these projects 

should proceed. At this point, it is unclear whether that extension will be granted. 

8. Enel respectfully represents that an order from this Court that the CSAs are 

entitled to the safe harbor protections codified in Sections 362(b)(6) and 556 of the Bankruptcy 

Code is necessary to provide clarity on whether Enel may exercise its contractual rights to 

 1 Public Utilities Code Section 380 requires the California Public Utilities Commission 

(“CPUC”) to establish resource adequacy requirements for load serving entities under CPUC 

jurisdiction, including PG&E, in consultation with the California Independent System Operator 

(“CAISO”). Under the requirements of the CPUC, load serving entities must demonstrate they 

have procured sufficient capacity to meet resource adequacy requirements. 2 The CAISO tariff provides for a limited interconnection agreement negotiation period of 

120 days, subject to an extension agreed to by all parties (CAISO Tariff, Appendix DD, 

Generator Interconnection and Deliverability Allocation Procedures (“GIDAP”). The remaining 

unexecuted Interconnection Agreement is in the CAISO Cluster 11 process and expected to 

execute by December 2020. 

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terminate the CSAs without violating the automatic stay. Accordingly, Enel respectfully requests 

that the Court enter an order in the form of the proposed order filed herewith that confirms (i) the 

CSAs are entitled to the statutory safe harbor protections codified in Sections 362(b)(6) and 556 

of the Bankruptcy Code; and (ii) the automatic stay does not apply to bar Enel, in its capacity as 

counterparty to the CSAs, from exercising its contractual rights thereunder. 

FACTS

9. Enel is one of the largest owners and operators of renewable energy plants in 

North America, with projects operating and under development in twenty-four U.S. states and 

two Canadian provinces. In North America, Enel operates more than one hundred power plants 

with a total managed capacity of nearly 5 GW powered by renewable hydropower, wind, 

geothermal and solar energy.

10. PG&E is currently party to three Capacity Storage Agreements (the “CSAs”) with 

three special purpose entities, two of which are wholly-owned by Enel, with the third being 

owned 51% by Enel as managing member.3 

11. The CSAs were executed on November 8, 2017, and by their terms, unless 

otherwise terminated, will continue for a period of ten to twenty years from the initial delivery 

date, depending on the project. At the time of execution, the expected initial delivery date under 

each CSA was set between December 1, 2022 and December 1, 2023, depending on the project. 

12. Each CSA between Enel and PG&E encompasses two phases: (i) development of 

an energy storage facility (each a “Facility,” and together the “Facilities”), and (ii) a delivery 

term, during which each Facility provides resource adequacy capacity to PG&E.

13. Under the CSAs, after development and construction of the Facilities is complete, 

Enel is contracted to provide all resource adequacy capacity to PG&E from each Facility to allow 

PG&E to comply with its regulatory obligations and to provide grid reliability in its territory. 

 3 As the CSAs and Interconnection Agreements contain confidential commercial 

information, Enel has filed concurrently herewith a motion requesting permission to file the CSAs 

and Interconnection Agreements, as well as unredacted versions of this Safe Harbor Motion and 

the Bertolino Declaration, under seal.

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14. The CSAs are the outcome of a competitive procurement process by which PG&E 

ensures compliance with CPUC Decision (“D.”) 13-10-040 implementing California Assembly 

Bill 2514, which requires that PG&E meet certain energy storage procurement targets. 

15. Under the CSAs, PG&E is required to obtain a final and non-appealable order 

from the CPUC approving the CSAs, including payments made thereunder, and confirming that 

the CSAs count toward PG&E’s energy storage procurement obligations established in D.13-10-

040. Once the CPUC decision on approval becomes final and non-appealable, Enel is required 

under the CSAs to post Project Development Security in the total amount of $ to ensure 

Enel’s continuing performance in constructing the energy storage facilities.

16. This Project Development Security is in addition to $ that Enel has 

already posted as security following execution of the CSAs. 

17. On December 1, 2017, PG&E filed an application with the CPUC for approval of 

the CSAs. On October 9, 2018, the CPUC issued D.18-10-009 approving the CSAs, along with 

other agreements resulting from PG&E’s 2016-2017 energy storage solicitation, and finding that 

the CSAs counted towards PG&E’s energy storage procurement targets established by D.13-10-

040. On November 19, 2018, the California Public Advocates Office (the “Public Advocates”) 

filed an Application for Rehearing of D.18-10-009. The CPUC has not yet acted upon the Public 

Advocates’ Application for Rehearing. If the CPUC denies the Public Advocates’ Application 

for Rehearing, D.18-10-003 will become final and non-appealable, and Enel will be required to 

post the Project Development Security. In the interim, Enel continues to incur mounting 

development costs associated with the CSA projects. 

18. In reliance on the CSAs, Enel, through special purpose entities, has entered into 

two interconnection agreements, executed December 3 and 4, 2018, with a third interconnection 

agreement expected to be executed in December 2020 (the “Interconnection Agreements,” and 

together with the CSAs, the “Contracts”). The Interconnection Agreements allow Enel to 

interconnect the relevant Facility to PG&E’s transmission system, controlled by the CAISO, and 

guarantee the ability of Enel to deliver the Facility’s output to PG&E. 

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19. The Interconnection Agreements include a schedule for posting Interconnection 

Financial Security that covers the costs of constructing interconnection facilities and network 

upgrades to ensure the each Facility will have deliverability.4

 Under two of the Interconnection 

Agreements, Enel was initially instructed by the CAISO that it was required to post 

Interconnection Financial Security in the amount of $ on February 28, 2019 and 

$ on March 1, 2019. Under the third Interconnection Agreement, Enel will be required 

to post an additional Interconnection Financial Security in the amount of $ to 

$ by April 15, 2019, depending on which process Enel chooses for the project. 

20. Largely due to uncertainty regarding whether the CSAs will be terminated in 

connection with PG&E’s bankruptcy, Enel has made requests to the CAISO and PG&E to assess 

whether extending the commercial operation date on the corresponding Interconnection 

Agreement, and thus delaying the posting of the Interconnection Financial Security, would be 

possible. This process is currently underway and it is uncertain whether the extension will be 

granted. 

21. Enel’s exposure is not limited to the Project Development Security and 

Interconnection Financial Security. Enel continues to incur others costs in connection with the 

development of the projects, including third party engineering, permitting, and other consulting 

fees and ongoing land lease option payments. 

22. In sum, if Enel is unable to obtain this Court’s ruling on the applicability of the 

statutory safe harbor provisions to the CSAs, Enel stands to lose (i) $ if required to post 

the Interconnection Financial Security; (ii) $ if required to post the Project 

Development Security; plus (iii) additional ongoing costs that Enel continues to incur in the 

development of the Facilities, as required under the Contracts. If the Court concludes that the 

safe harbor provisions apply, Enel can either exercise its contractual right to terminate the 

contracts, or can opt to proceed with the construction with the comfort that should it opt to 

 4 Deliverability, or the ability to delivery energy during peak load conditions, is required 

in order to be eligible to provide resource adequacy capacity. 

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exercise those rights in the future, it can forestall the posting of additional security or secure the 

return of its Project Development Security at any time. 

LEGAL ARGUMENT

23. Enel submits that based upon the foregoing facts, and under applicable law as set 

forth below, the relief requested herein should be granted, and the Court should confirm that the 

CSAs are protected by the safe harbor provisions of Sections 362(b)(6) and 556 of the 

Bankruptcy Code, and that the automatic stay does not apply to bar Enel from exercising its 

contractual rights thereunder. 

A. The Safe Harbor Protections Of Sections 362(b)(6) And 556 Apply To Allow Enel to 

Enforce Its Contractual Rights Under The CSAs Notwithstanding PG&E’s 

Bankruptcy

24. Enel seeks an Order of this Court confirming that the safe harbor provisions of 

Sections 362(b)(6) and 556 of the Bankruptcy Code apply to the CSAs and that the automatic stay 

does not prevent Enel from enforcing its contractual rights under the CSAs, including any 

contractual right to cause the liquidation, termination or acceleration of the CSAs or to offset or 

net out any termination value, payment amount or other transfer obligation arising under or in 

connection with the CSAs. 

25. Section 362(b)(6) of the Bankruptcy Code provides that the automatic stay does 

not bar a forward contract merchant from exercising its contractual rights under any forward 

contract with the debtor entity.5

26. Section 556 of the Bankruptcy Code further defines the contractual rights that may 

be enforced under this safe harbor exception to the automatic stay, specifically allowing a forward 

contract merchant to enforce its contractual right to “liquidate, terminate, or accelerate” a forward 

contract with the debtor according to the provisions in the contract that allow termination, 

liquidation, or acceleration based on (i) the counterparty becoming insolvent or (ii) the 

counterparty filing for bankruptcy under Chapter 11.6

 5 11 U.S.C. § 362(b)(6). 

6 11 U.S.C. §§ 556, 365(e)(1); see also Calpine Energy Servs., L.P. v. Reliant Energy 

Elec. Sols., L.L.C. (In re Calpine Corp.), No. 08-1251(BRL), 2009 WL 1578282, at *7 (Bankr. 

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27. In other words, under the Bankruptcy Code, a party may act on a contractual ipso 

facto clause to terminate contracts with the debtor if the party can demonstrate that it falls under 

one of the safe harbor exceptions to the automatic stay.7 A party seeking to establish its 

qualification for the forward contract safe harbor is required to show that (i) the contract satisfies 

the requirements of a “forward contract,” and (ii) a party to the contract falls under the definition 

of a “forward contract merchant” under the Bankruptcy Code.8

a. The Forward Contract Test

28. Section 101(25) of the Bankruptcy Code defines a “forward contract” as a contract 

for the purchase, sale, or transfer of a commodity (as defined in Section 761(8)) or any similar 

good, service, article, right, or interest, which is presently or in the future becomes the subject of 

dealing in the forward contract trade, with a maturity date more than two days after the date the 

contract is entered into, including a repurchase or reverse repurchase transaction, consignment, 

lease, swap, hedge transaction, deposit, loan, option or any other similar agreement.9

29. Section 761(8) of the Bankruptcy Code adopts the definition of “commodity” 

found in the Commodity Exchange Act.10 Section 1(a)(9) of the Commodity Exchange Act 

defines “commodity” to include “all services, rights, and interests . . . in which contracts for 

future delivery are presently or in the future dealt in.”11

30. Relatively few cases in the Ninth Circuit have addressed the issue of whether a 

contract qualifies as a forward contract for the purposes of the safe harbor provisions. In the 

primary decision on point within the Ninth Circuit, the Bankruptcy Court for the District of 

Arizona determined that a renewable power purchase and sales agreement for electricity produced 

 

S.D.N.Y. May 7, 2009) (holding that Section 556, by its terms, limits its reach to those clauses 

that trigger termination upon the occurrence of a condition specified in Section 365(e)(1)). 7 See In re Mirant Corp., 303 B.R. 319, 327 (Bankr. N.D. Tex. 2003) (holding that even if 

a contract contains a valid ipso facto clause, the automatic stay still applies to prevent unilateral 

termination of the contract, and the counterparty must seek court’s approval to modify the stay 

before the ipso facto clause may be invoked). 8 See Clear Peak Energy, Inc. v. S. Cal. Edison Co. (In re Clear Peak Energy, Inc.), 488 

B.R. 647, 661 (Bankr. D. Ariz. 2013). 9 11 U.S.C. § 101(25).

10 11 U.S.C. § 761(1), (8). 11 7 U.S.C. § 1(a)(9). 

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by a solar generating facility (a “PPA”) between an electric power company (Southern California 

Edison, “SCE”) and a chapter 11 debtor qualified as a forward contract.12 In Clear Peak, the 

Bankruptcy Court looked to four factors in its determination, namely whether: (i) the subject of 

the contract was a commodity, with substantially all costs of performance attributable to the costs 

of the underlying commodity; (ii) the contract had a maturity date more than two days after the 

contracting date; (iii) the quantity and time elements were fixed at the time of contracting; and 

(iv) the contract had a relationship to the financial markets.13

31. Applying these four factors, the court in Clear Peak found the subject of the PPA 

was a commodity (electricity), the timeline manifested a maturity date more than two days after 

the execution date, and the PPA specified a minimum amount of power to be supplied over a 

specific period of time. 

32. On the fourth factor, the Clear Peak court found a substantial relationship to the 

financial market existed where the principal purpose of the PPA was to hedge the price SCE had 

to pay over the long term, even though the PPA also served the purpose of complying with a state 

law requirement that 33% of California’s energy be sourced from renewable resources by 2020.14 

The court determined that the PPA is part of a broader price-hedging scheme, whereby SCE 

acquires 98% of its power through short- and long-term PPAs with both renewable and 

conventional resources.15 The Court also noted that all of SCE’s PPAs required CPUC approval, 

and one of the factors the CPUC considers is the reasonableness of the price.16 The court 

concluded that, based on the complex mechanism SCE had created to evaluate the contracts that 

supply power to its customers, the primary purpose of the PPA was to allow SCE to hedge the 

price over the long term, thereby satisfying the fourth prong of the forward contract test.17

 12 See Clear Peak, 488 B.R. at 663. 13 Id. at 657. The Clear Peak court followed the test set by the Fourth Circuit Court of 

Appeals in In re National Gas Distributors, LLC, 556 F.3d 247 (4th Cir. 2009). 14 Id. at 659. 15 Id. at 660. 16 Id. 17 Id.

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b. The CSAs are Forward Contracts

33. In this case, the primary subject of the CSAs between Enel and PG&E is also a 

commodity, resource adequacy capacity, which is the primary product of the regulated resource 

adequacy framework in the California electricity market. Capacity is a product traded in various 

capacity markets in parallel with electricity markets throughout other independent system 

operator and regional transmission operator areas. Although courts in the Ninth Circuit have not 

yet considered whether resource adequacy capacity is a commodity within the definition of a 

forward contract under the Bankruptcy Code, resource adequacy capacity falls within the 

statutory definition under Section 761(8) as a service, right, or interest in which contracts for 

future delivery are presently or in the future dealt in, and that is not subject to the rules of a 

contract market or board of trade. 

34. Even if the Court finds resource adequacy capacity does not itself qualify as a 

commodity within the definition of a forward contract under the Bankruptcy Code, the underlying 

commodity being stored and offered on demand is electricity, which numerous courts have held 

to be a “commodity” for forward contract purposes.18 As the definition of forward contract under 

the Bankruptcy Code includes not only a contract for the purchase, sale or transfer of a 

commodity, but also any “product or byproduct thereof,” a contract for providing resource 

adequacy of electricity, which is indisputably a commodity, clearly qualifies. 11 U.S.C. § 

101(25). Thus, the first prong of the test is satisfied. 

35. The CSAs also satisfy the second and third prongs of Clear Peak, as each CSA has 

a maturity date more than two days after the contracting date, and the quantity and time elements 

of each CSA was fixed at the time of their execution. The CSAs were executed in 2017, with the 

initial delivery date set for dates in 2022 and 2023 and a ten to twenty-year supply period to begin 

 18 See In re MBS Mgmt. Servs., Inc., 432 B.R. 570, 574 (Bankr. E.D. La. 2010) (holding 

that contract which required company to “supply the full requirements” of electricity to debtor 

was a “forward contract,” where the contract involved the sale of electricity, a commodity); see 

also In re FirstEnergy Sols. Corp., No. 18-50757, 2019 WL 211807 (Bankr. N.D. Ohio Jan. 15, 

2019) (in which both parties specifically stipulated that electricity is a commodity under the 

Bankruptcy Code, and the court agreed). 

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on the initial delivery date. The CSAs specify a certain minimum quantity of resource adequacy 

capacity to be supplied over a set period of time. The CSAs each define a specific Resource 

Adequacy Attributes capacity and Flexible Resource Adequacy Attributes capacity, in MW. This 

number may fluctuate, but the CSAs guarantee a minimum percentage of these capacity numbers. 

Payment is made over the twenty years of the contract term using an escalating schedule, priced 

per kW.

36. Finally, the CSAs also satisfy the fourth factor, in that each CSA has a relationship 

to the financial markets. In procuring the CSAs, PG&E used long-term procurement of resource 

adequacy capacity as a way to both comply with its statutory obligations regarding resource 

adequacy and, more importantly, to make new storage capacity viable and available for future 

capacity needs.19 PG&E’s long-term approach is fundamental to its strategy to hedge prices in its 

procurement of resource adequacy capacity. Because the CSAs play an integral part in PG&E’s 

broad price-hedging scheme, they therefore have a direct relationship to the financial markets. 

Like SCE in Clear Peak, PG&E has created a complex network of supply and capacity 

agreements, utilizing tools like resource adequacy in order to continuously provide power to its 

customers at stable rates. The CSAs were executed as an essential component of that hedging 

network, to ensure availability of resources during times of peak demand and to reduce the need 

to purchase higher priced backstop capacity. Just as with the PPA in Cleak Peak, the CSAs must 

also be approved by the CPUC, and the primary factor in obtaining regulatory approval is that the 

CSAs provide reasonable terms and conditions, including price. Therefore, the CSAs have a 

substantial connection to the financial markets and satisfy the fourth prong of the forward 

contract test.20

 19 PG&E Opening Brief, Application of PG&E Company (U39E) for Authorization to 

Procure Energy Storage Systems During The 2016-2017 Biennial Procurement Period Pursuant to 

Decision 13-10-040, California Public Utilities Commission Docket A.16-03-001, requesting 

approval of its 2016 energy storage procurement plan, stating that “PG&E’s 2016 ES RFO builds 

off of its earlier ES RFO cycle” by allowing for specific resource adequacy-only contracts. At 9. 20 Additionally, the CSAs each contain a provision stating that the parties acknowledge 

that the agreement is a forward contract within the meaning of the Bankruptcy Code. 

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37. For all of the foregoing reasons, the CSAs satisfy each of the four factors of the 

forward contract test identified by the court in Clear Peak, and are precisely the type of contracts 

meant to be protected under Sections 362(b)(6) and 556 of the Bankruptcy Code so as to avoid a 

negative impact on the financial markets due to the imposition of the automatic stay. 

c. The Forward Contract Merchant Test 

38. Section 101(26) of the Bankruptcy Code defines a forward contract merchant as an 

entity in the business of entering into forward contracts as a merchant (or with a merchant) in a 

commodity or any similar good, article, service, right, or interest which is presently or in the 

future becomes the subject of dealing in the forward contract trade. 

39. In Clear Peak, the court found that SCE qualified as a forward contact merchant 

because it regularly entered into contracts with short- and long-term maturity dates for the future 

delivery of electricity for hedging purposes.21 

40. The Clear Peak court reasoned that the language of Section 101(26) requires only 

one party to the contract to be a merchant, and that only contracts to which neither counterparty is 

a merchant would fail to satisfy the statutory requirement in the definition of a forward contract 

merchant.22 Finding that SCE qualified as a forward contract merchant, the Clear Peak court 

held this factor under the 362(b)(6) safe harbor satisfied.23 

41. Faced with a similar issue in In re Mirant Corp., the Bankruptcy Court for the 

Northern District of Texas looked to whether a customer who had entered into natural gas supply 

agreements with the Chapter 11 debtor sought to profit in the forward contract trade in 

determining whether the customer qualified as a forward merchant.24 In its analysis, the court 

placed particular emphasis on the terms “business” and “merchant,” stating that without these 

references, the definition of “forward contract merchant” could easily be applied to encompass 

anyone who enters into forward contracts.25 The court concluded that a “merchant” is a person 

 21 See Clear Peak, 488 B.R. at 661. 22 Id. 23 Id. 24 In re Mirant Corp., 310 B.R. 548, 567 (Bankr. N.D. Tex. 2004). 25 Id.

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that buys, sells or trades in a market, but not a person who acts merely as an end-user or a 

producer.26 The court further held that to be “in the business” of a particular trade means 

something one engages in to generate a profit.27 Therefore, the court held that a forward contract 

merchant is a person that, in order to make a profit, engages in the forward contract trade as a 

merchant or with merchants.28 

d. Enel is a Forward Contract Merchant

42. The CSAs each contain a provision expressly stating that “[e]ach Party represents 

and warrants to the other Party that as of the Execution Date ... it is a “forward contract 

merchant” within the meaning of the United States Bankruptcy Code[.]” The inclusion of this 

language in the CSAs operates as an acknowledgement on behalf of the parties that both PG&E 

and Enel operate as merchants in the business of the forward contract trade. 

43. In addition to entering into the three CSAs with PG&E, Enel operates a vast 

network of more than one hundred power plants in North America and is party to numerous 

power purchase and capacity storage agreements with utility companies across the country that 

rely upon Enel’s network to maintain stability through price hedging. 

44. Operating as an integral part of a nationwide price hedging scheme, Enel is “in the 

business” of regularly entering into forward contracts, for profit, with utility companies acting as 

merchants, who buy, sell, or trade the energy supplied and stored by Enel’s facilities. Therefore, 

Enel falls squarely within both the statutory definition of a “forward contract merchant” under 

Section 101(26) and Mirant’s test that a forward contract merchant engage in the forward contract 

trade as a merchant or with merchants, in order to generate a profit. 

45. Even were this Court to conclude that Enel is not a forward contract merchant, 

Section 101(26) only requires that one party to the contract be so designated29 and PG&E is 

 26 Id. 27 Id. 28 Id. at 569. 

29 See Clear Peak, 488 B.R. at 661 (concluding that because at least one of the parties to 

the PPA is clearly a Forward Contract Merchant (SCE), the requirement under Section 362(b)(6) 

had been met and the safe harbor applied). 

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indisputably a forward contract merchant. Just as the Clear Peak court found SCE to be a 

forward contract merchant for safe harbor purposes, PG&E is also a utility company that is in the 

business of entering into forward contracts to hedge against price fluctuations in the energy 

market, and fits the statutory definition of a forward contract merchant under Section 101(26) and 

the Mirant test. 

e. The CSAs are Entitled to the Safe Harbor Protections of the Bankruptcy 

Code as Forward Contracts Executed by Forward Contract Merchants

46. Because (i) the CSAs are forward contracts, and (ii) Enel and PG&E are forward 

contract merchants, Enel respectfully requests that the Safe Harbor Motion be granted and the 

Court enter an order in the form attached hereto that finds the CSAs are protected by the safe 

harbor provisions codified in Sections 362(b)(6) and 556 of the Bankruptcy Code and determines 

that the automatic stay does not apply to the CSAs or to Enel as counterparty to the CSAs. 

NOTICE 

Notice of the Safe Harbor Motion will be provided to (i) the Debtors and counsel to the 

Debtors; (ii) counsel to the Office of the United States Trustee for Region 17; (iii) counsel to the 

administrative agent under the Debtors’ debtor-in-possession financing facility; (iv) counsel to the 

collateral agent under the Debtors’ debtor-in-possession financing facility; (v) counsel to the 

CPUC; (vi) the U.S. Nuclear Regulatory Commission; (vii) the U.S. Department of Justice, as 

counsel for the United States on behalf of the Federal Energy Regulatory Commission; (viii) each 

member of the Official Committee of Unsecured Creditors specified in the Notice of 

Appointment of the Official Committee of Unsecured Creditors [Docket 409]; (ix) each member 

of the Official Committee of Tort Claimants specified in the Notice of Appointment of the 

Official Committee of Tort Claimants [Docket 453]; and (x) those parties who have requested 

notice pursuant to Fed. R. Bankr. P. 2002. Enel respectfully submits that no further notice is 

required. 

CONCLUSION

For the foregoing reasons, the Court should issue an order confirming that the CSAs are 

protected by the safe harbor provisions codified in Sections 362(b)(6) and 556 of the Bankruptcy 

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Code and that the automatic stay does not apply to bar Enel from exercising its rights under the 

CSAs, and for such other and further relief as the Court may deem just and appropriate. 

DATED: February 19, 2019

STOEL RIVES LLP

 /s/ Gabrielle Glemann

Oren Buchanan Haker (pro hac vice) 

David B. Levant (pro hac vice) 

Gabrielle Glemann (pro hac vice) 

Stoel Rives LLP

600 University Street, Suite 3600 

Seattle, WA 98101 

(206) 386-7530 

gabrielle.glemann@stoel.com

Attorneys for Party in Interest 

Enel Green Power North America, Inc.

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EXHIBIT A

Proposed Order

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OREN B. HAKER (pro hac vice)

DAVID B. LEVANT (pro hac vice) 

GABRIELLE GLEMANN (pro hac vice) 

STOEL RIVES LLP

600 University Street, Suite 3600 

Seattle, WA 98101 

Telephone: 206.386.7530 

Facsimile: 206.386.7500 

gabrielle.glemann@stoel.com 

Attorneys for Party in Interest 

Enel Green Power North America, Inc.

UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN FRANCISCO DIVISION

In re:

PG&E CORPORATION

- and - 

PACIFIC GAS AND ELECTRIC 

COMPANY,

Debtors.

Bankruptcy Case

No. 19 - 30088 (DM) 

Chapter 11 

(Lead Case)

(Jointly Administered)

[PROPOSED] ORDER CONFIRMING 

SAFE HARBOR PROTECTION 

UNDER 11 U.S.C. §§ 362(b)(6) AND 556 

 

 

 Affects PG&E Corporation 

× Affects Pacific Gas and Electric 

Company 

 Affects both Debtors 

*All papers shall be filed in the Lead Case, 

No. 19-30088 (DM).

Hearing Date: March 12, 2019 

Time: 9:30 a.m.

Courtroom: Hon. Dennis Montali 

Objections Due: March 5, 2019, 4 p.m. 

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Upon the Motion, dated February 19, 2019, of Enel Green Power North America, Inc. 

(“Enel”), for Entry of an Order Confirming Safe Harbor Protection Under 11 U.S.C. §§ 362(b)(6) 

and 556 (the “Safe Harbor Motion,” Dkt. [__]);

1 and this Court having jurisdiction to consider the Safe Harbor Motion and the relief 

requested therein pursuant to 28 U.S.C. §§ 157 and 1334, the Order Referring Bankruptcy Cases 

and Proceedings to Bankruptcy Judges, General Order 24 (N.D. Cal.) and Bankruptcy Local Rule 

5011-1(a); and consideration of the Safe Harbor Motion and the requested relief being a core 

proceeding pursuant to 28 U.S.C. § 157(b); and venue being proper before this Court pursuant to 

28 U.S.C. §§ 1408 and 1409; and the Court having found and determined that notice of the Safe 

Harbor Motion as provided to the parties listed therein is reasonable and sufficient under the 

circumstances, and it appearing that no other or further notice need be provided; and this Court 

having reviewed the Safe Harbor Motion and the Bertolino Declaration; and this Court having 

determined that Enel is a forward contract merchant and the CSAs are forward contracts, as 

required under 11 U.S.C. §§ 362(b)(6) and 556 and that the forward contract safe harbor 

protection applies to except the CSAs and Enel as counterparty thereto from the imposition of the 

automatic stay; and upon all of the proceedings had before this Court and after due deliberation 

and sufficient cause appearing therefor,

IT IS HEREBY ORDERED THAT:

1. The Safe Harbor Motion is granted.

2. Enel is hereby authorized to exercise any of it contractual rights pursuant to, in 

connection with and in accordance with the CSAs and 11 U.S.C. § 556. 

3. This Court shall retain jurisdiction to hear and determine all matters arising from 

or related to the implementation, interpretation, or enforcement of this Order.

**END OF ORDER**

 1 Capitalized terms used but not otherwise herein defined shall have the meanings ascribed 

to such terms in the Safe Harbor Motion. 

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EXHIBIT B

The CSAs

[redacted in full]

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EXHIBIT C

The Interconnection Agreements

[redacted in full]

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