Thomas R. Slome Hearing Date and Time: August 12, 2010 at 2:00 p.m.

Jil Mazer-Marino Objection Deadline: August 5, 2010 at 4:00 p.m. MEYER, SUOZZI, ENGLISH & KLEIN, P.C. 990 Stewart Avenue, Suite 300 P.O. Box 9194 Garden City, New York 11530-9194 Telephone: (516) 741-6565 Facsimile: (516) 741-6706 and Russell R. Johnson III John M. Craig LAW FIRM OF RUSSELL R. JOHNSON III, PLC 2258 Wheatlands Drive Manakin-Sabot, Virginia 23103 Telephone: (804) 749-8861 Facsimile: (804) 749-8862 Co-Counsel for Virginia Electric and Power Company d/b/a Dominion Virginia Power, Florida Power Corporation d/b/a Progress Energy Florida, Georgia Power Company, Jersey Central Power & Light Company, Southern California Edison Company, San Diego Gas & Electric Company, New York State Electric and Gas Corporation, Southern California Gas Company, Public Service Electric and Gas Company, Rockland Electric, and The Connecticut Light and Power Company UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ________________________________________________ ) In re: ) Chapter 11 ) INNKEEPERS USA TRUST, et al., ) Case No. 10-13800 (SCC) ) Debtors. ) (Jointly Administered) ) ________________________________________________)

OBJECTION OF CERTAIN UTILITY COMPANIES TO THE DEBTORS MOTION FOR ENTRY OF AN ORDER DETERMINING ADEQUATE ASSURANCE OF PAYMENT FOR FUTURE UTILITY SERVICES Virginia Electric and Power Company d/b/a Dominion Virginia Power (DVP), Florida Power Corporation d/b/a Progress Energy Florida (PEF), Georgia Power Company (Georgia Power), Jersey Central Power & Light Company (JCP&L), Southern California Edison Company (SCE), San Diego Gas & Electric Company (SDG&E), New York State Electric and Gas Corporation (NYSEG), Public Service Electric and Gas Company (PSE&G), Southern California Gas Company (SoCalGas), Rockland Electric, a subsidiary of Orange and Rockland Utilities, Inc. (RE), and The Connecticut Light and Power Company (CL&P) (collectively, the Utilities), by counsel, hereby object to the Debtors Motion For Entry of an Order Determining Adequate Assurance of Payment For Future Utility Services (the Utility Motion), and set forth the following: Introduction Section 366(c)(2), as amended, requires a Chapter 11 debtor to provide utilities with adequate assurance of payment that is satisfactory to the utility within 30 days of the Petition Date. If a debtor believes the amount of the utilitys request pursuant to Section 366(c)(2) needs to be modified, the debtor can file a motion pursuant to Section 366(c)(3) seeking to modify the amount of the utilitys request. Despite the foregoing, the Debtors filed the Utility Motion at the outset of this case that sought to establish that the Debtors offer to provide a two-week deposit, only to their utilities that request such a deposit, constitutes adequate assurance of payment. The Debtors, as customers of the Utilities, are or should be aware that, pursuant to the Utilities applicable tariffs and state laws (collectively, the Tariffs) that govern both the 2

prepetition and post-petition relationship between the Utilities and the Debtors, the Utilities: (1) bill their customers on a monthly basis in arrears and provide the Debtors with generous trade terms; and (2) are allowed to obtain deposits to cover the billing exposure created by the Tariffmandated billing cycles. With the foregoing knowledge, the Debtors should be required, at a minimum, to set forth a factual and evidentiary basis why this Court should consider modifying the amount that the Utilities are entitled to request under applicable state law. In this case, the Utilities are requesting adequate assurance of payment in the form of cash deposits that they are permitted to request from their customers pursuant to the applicable Tariffs. This Court should deny the Utility Motion as not being properly before the Court because: (1) the Utility Motion does not address the Utilities deposit requests; (2) the Utility Motion does not seek to modify the amount of the Utilities deposit requests; and (3) the Debtors fail to provide the Utilities with adequate assurance of payment pursuant to Section 366(c) of the Bankruptcy Code. Facts Procedural Facts 1. On July 19, 2010 (the Petition Date), the Debtors commenced their cases under

Chapter 11 of title 11 of the United States Code (the Bankruptcy Code) that are now pending with this Court. The Debtors continue to operate their businesses and manage their properties as debtors in possession pursuant to Bankruptcy Code sections 1107(a) and 1108. 2. The Debtors cases are being jointly administered. The Utility Motion 3. On the Petition Date, the Debtors filed the Utility Motion. 3

4.

Through the Utility Motion, the Debtors seek to avoid the procedural and

substantive requirements of Section 366. Instead of responding to adequate assurance demands of their utility companies, the Debtors elected to file the Utility Motion and seek Court approval for their own form of adequate assurance in the form of two-week deposits for any utility provider that requests such a deposit. Utility Motion at 9. 5. The Debtors claim that they pay approximately $1.6 million per month for utility

services. Utility Motion at 7. Facts Regarding the Debtors 6. Debtor Innkeepers USA Trust (Innkeepers) is a self-administered real estate

investment trust organized under the laws of Maryland and the direct subsidiary of Debtor Grand Prix Holdings, LLC, and the direct or indirect parent of each of the other Debtors (collectively, the Debtors). Declaration of Dennis Craven, Chief Financial Officer of Innkeepers USA Trust, In Support of First-Day Pleadings at 1 (hereinafter Craven Dec. at __). 7. Debtor Innkeepers, through its indirect subsidiaries, owns and operates a portfolio

of 72 extended-stay and select-service hotels. The Debtors operate their hotels under brands such as Marriott, Hyatt, Hilton, and others (collectively, the Franchisors). Craven Dec. at 6. 8. The Debtors have an unmanageable debt load, which has impeded their ability to

service funded debt obligations as they become due. As of the Petition Date, the Debtors were in payment default on all 11 of their loan agreements. The Debtors substantial debt burden has impacted their ability to appropriately maintain hotel properties in compliance with Franchise Agreements. Craven Dec. at 7.

9.

As of the Petition Date, the Debtors have incurred approximately $1.29 billion of

secured debt. The Debtors largest secured loan is a securitized mortgage loan with Lehman ALI Inc. (Lehman) as the original lender in the face amount of $825 million, collateralized by 45 of the Debtors hotel properties and serviced by Midland Loan Services, Inc. (Midland). The Debtors second largest secured loan, with Lehman as the current lender, is comprised of a floating rate senior mortgage loan in the face amount of $250 million, collateralized by 20 of the Debtors hotel properties, and a junior mezzanine loan in the face amount of $118 million. Each of the Debtors seven remaining secured mortgage loans, ranging in amounts from approximately $24 million to $48 million, are secured by individual properties. Craven Dec. at 8. 10. The Debtors have negotiated a consensual, integrated restructuring transaction,

which includes three separate, but interrelated, agreements. On June 25, 2010, the Debtors and Marriott International, Inc. (Marriott), the Franchisor of 44 of the Debtors 72 hotels, entered into an agreement (the Marriott Agreement), pursuant to which the Debtors agreed to provide adequate assurance of the future completion of certain property improvement programs (PIPs) on 23 of the Debtors Marriott-branded hotels in compliance with certain Franchise Agreements. As part of the adequate assurance, the Debtors have committed to obtain necessary financing arrangements to complete the PIPs within an aggressive timeframe. In exchange for the Debtors commitment, Marriott has agreed to support the Debtors restructuring and forebear from seeking to exercise potentially significant rights leading up to and during the Debtors Chapter 11 cases. Craven Dec. at 8. 11. The Debtors negotiated two debtor-in-possession financing facilities (collectively,

the DIP Financings), consisting of (a) a $50.75 million Five Mile DIP Facility, the proceeds of 5

which will be used to perform PIPs on certain hotels securing the Debtors obligations under the Fixed Rate Mortgage Loan Agreement, the Capmark Mission Valley Loan Agreement, and the Merrill Tysons Corner Loan Agreement, and (b) a $17 million Lehman DIP Facility, the proceeds of which will be used to perform PIPs and certain other investments on certain hotels securing the Debtors obligations under the Floating Rate Mortgage Loan Agreement. Craven Dec. at 11. 12. The Debtors and Lehman have entered into a plan support agreement (the PSA)

which incorporates the terms of a prearranged restructuring and contemplates the Debtors entry into the DIP Financings. The PSA purportedly provides for the significant deleveraging of the Debtors balance sheet and permits the Debtors to maintain their Franchise Agreements and existing portfolio of hotel properties. The Debtors prearranged restructuring includes the following: (a) Lehman will receive, in full and final satisfaction of its approximately $238 million secured claim with respect to the Floating Rate Mortgage Loan Agreement, 100% of the issued and outstanding new shares of common stock issued by Innkeepers (the New Equity), subject to dilution by a management equity incentive program; (b) The remaining secured lenders under the Debtors prepetition credit facilities will receive new secured notes with a value that is not less than the value of the collateral securing their prepetition debt, unless the lenders of such facilities otherwise agree; (c) Unsecured creditors (other than holders of deficiency claims) not paid pursuant to a first day order will receive a share of a cash allocation; and 6

(d) Holders of interests in the Debtors, including common and preferred stock, will be cancelled, and no distributions will be made on account of such interests. Craven Dec. at 12. 13. Lehmans willingness to enter into the PSA is conditioned on its ability to sell a

portion of its distribution of equity in the reorganized enterprise to a third party on or after the effective date of the Debtors confirmed Chapter 11 plan of reorganization, allowing Lehman, which is also in bankruptcy, to liquidate a portion of its plan distributions of New Equity to mitigate the risk of its entire recovery coming in the form of equity. Lehmans ability to consummate the transactions contemplated by the PSA is conditioned on Bankruptcy Court approval of such transactions in Lehmans bankruptcy proceedings. As provided for in the PSA, the Debtors intend to file their plan of reorganization and related disclosure statement within 45 days of the Petition Date. Craven Dec. at 15. 14. In 2009, the Debtors consolidated revenues were approximately $292 million

(down from $348 million in 2008, and 16% drop) and their adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) were approximately $85 million (down from $123 million in 2008, and 31% drop). The Debtors consolidated assets for 2009 totaled approximately $1.5 billion and consolidated liabilities totaled approximately $1.5 billion. Craven Dec. at 22. 15. The tightening of the financial markets have limited the Debtors financial

flexibility. As a result, the Debtors have no real ability to recapitalize or reduce their debt burdens. Strategies that the Debtors may have previously employed to extend maturities and maintain liquidity are no longer available. Such adverse changes have severely limited the Debtors ability to satisfy their obligations as they become due. Craven Dec. at 47. 7

16.

The Debtors level of indebtedness is of significant importance in this case because,

with essentially all cash flow from operations being directed to debt service, the Debtors cash is not available for other purposes, such as maintaining the hotel properties in a condition that complies with the Franchise Agreements and performing other upgrades. Craven Dec. at 51. The Debtors Post-Petition Financing and Use of Cash Collateral 17. On the Petition Date, the Debtors filed the Debtors Motion For the Entry of an

Order Authorizing the Debtors To Obtain Postpetition Financing From An Affiliate of Lehman ALI Inc. on a Priming Basis Pursuant To Sections 364(c)(1), 364(c)(2), 364(c)(3), 364(d)(1), and 364(e) of the Bankruptcy Code (the Lehman ALI Financing Motion). Through the Lehman ALI Financing Motion, the Debtors in part seek Court authorization to obtain a post-petition loan in a principal amount not to exceed $17,498,095.52. The proceeds from the DIP Facility pursuant to the Lehman ALI Financing Motion are to be used solely for (a) payment of the financing fees owed to the DIP Lenders, (b) to fund post-petition PIP Work, and (c) to fund certain fire safety improvements to hotel properties. 18. On the Petition Date, the Debtors also filed the Debtors Motion For the Entry of an

Order Authorizing the Debtors To Obtain Postpetition Financing From Five Mile Capital Partners on a Priming Basis Pursuant To Sections 364(c)(1), 364(c)(2), 364(c)(3), 364(d)(1), and 364(e) of the Bankruptcy Code (the Five Mile Financing Motion). Through the Five Mile Financing Motion, the Debtors in part seek Court authorization to obtain approximately $68 million in DIP Financing for the specific purpose of funding the property improvement programs (PIPs) required under the Franchise Agreements.

19.

On the Petition Date, the Debtors also filed the Debtors Motion For the Entry of

Interim and Final Orders (A) Authorizing the Debtors To (I) Use the Adequate Protection Parties Cash Collateral and (II) Provide Adequate Protection to the Adequate Protection Parties Pursuant to 11 U.S.C. 361, 362, and 363, (B) To the Extend Approved In the Final Order, Granting Senior Secured, Priming Liens on Certain Postpetition Intercompany Claims, (C) To the Extent Approved In the Final Order, Granting Administrative Priority Status To Certain Postpetition Intercompany Claims, and (D) Scheduling a Final Hearing Pursuant To Bankruptcy Rule 4001(B) (the Cash Collateral Motion). Through the Cash Collateral Motion, the Debtors in part seek a carve-out of up to $5.5 million to pay the fees and expenses of Debtors counsel and other professionals (the Carve-Out). 20. On July 20, 2010, the Court entered the Interim Order (A) Authorizing the Debtors

(i) Use the Adequate Protection Parties Cash Collateral and (ii) Provide Adequate Protection To the Adequate Protection Parties Pursuant to 11 U.S.C. 361, 362, and 363, and (B) Scheduling a Final Hearing Pursuant To Bankruptcy Rule 4001(b) (the Interim Cash Collateral Order). The Interim Cash Collateral Order approved the Debtors requested Carve-Out. 21. Budget). Facts Concerning the Utilities 22. Each of the Utilities provided the Debtors with prepetition utility goods and/or Attached to the Interim Cash Collateral Order is a 13-week Cash Flow Forecast (the

services and have continued to provide the Debtors with utility goods and/or services since the Petition Date.

23.

Under the Utilities billing cycles, the Debtors receive approximately one month of

utility goods and/or services before the Utility issues a bill for such charges. Once a bill is issued, the Debtors have approximately 15 to 30 days to pay the applicable bill. If the Debtors fail to timely pay the bill, a past due notice is issued and a late fee is subsequently imposed on the account. If the Debtors fail to pay the bill after the issuance of the past due notice, the Utilities issue a notice that informs the Debtors that they must cure the arrearage within a certain period of time or their service will be disconnected. Accordingly, under the Utilities billing cycles, the Debtors could receive at least two months of unpaid charges before the utility could cease the supply of goods and/or services for the post-petition payment default. 24. In order to avoid the need to bring witnesses and have lengthy testimony regarding

the Utilities regulated billing cycles, the Utilities request that this Court, pursuant to Rule 201 of the Federal Rules of Evidence, take judicial notice of the Utilities billing cycles. Pursuant to the foregoing request and based on the voluminous size of the applicable documents, the Utilities are providing the following web site links to the tariffs and/or state laws, regulations and/or ordinances, and/or cooperative service rules: DVP (approximately 2.3 million customers): http://www.dom.com/find-it-fast/rates/terms-and-conditions.jsp PEF (approximately 1.6 million customers): http://www.progress-energy.com/aboutenergy/rates/index.asp#b3 Georgia Power (approximately 2.35 million customers): http://www.georgiapower.com/pricing/gpc_rates.asp JCP&L (approximately 1.1 million customers): http://www.firstenergycorp.com/Residential_and_Business/Customer_Choice/files/Tariff__NJ/BPU_10_Parts_1_%26_2_-_effective_7-27-09.pdf

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SCE (approximately 4.9 million customers): http://www.sce.com/AboutSCE/Regulatory/tariffbooks/rules.htm SDG&E (approximately 1.4 million electricity customers and 830,000 gas customers):
http://sdge.com/regulatory/currentEffectiveTariffs.shtml

SoCalGas (approximately 20.5 million customers): http://www.socalgas.com/regulatory/tariffs/tariffs_rates.shtml NYSEG (approximately 1 million customers): http://www.nyseg.com/SuppliersAndPartners/pricingandtariffs/default.html PSE&G (approximately 2 million electric customers and 1.7 million gas customers): Electric http://www.pseg.com/companies/pseandg/schedules/pdf/electric_tariff.pdf Gas - http://www.pseg.com/companies/pseandg/schedules/pdf/gas_tariff.pdf RE (approximately 300,000 customers): http://www.oru.com/aboutoru/tariffsandregulatorydocuments/newjersey/scheduleforelectric service.html CL&P (approximately 1.2 million customers) http://www.cl-p.com/esuppliers/rates.aspx 25. Subject to a reservation of the Utilities rights to supplement their post-petition

deposit request if additional accounts belonging to the Debtors are subsequently identified, the Utilities estimated prepetition debt and post-petition deposit requests are as follows: Utility DVP PEF Georgia Power JCP&L SCE SDG&E No. of Accts. 14 12 2 3 20 2 Est. Prepet. Debt $23,631.29 $22,059.46 $32,024.63 $15,854.01 $102,757.61 $31,333.00 11 Dep. Request $48,398 (2-month) $26,955 (2-month) $55,760 (2-month) $43,966 (2-month) $225,000 (2-month) $55,457 (2-month)

RE NYSEG PSE&G SoCalGas CL&P TOTAL: 26.

9 4 22 5 3

$90,818.09 $2,948.04 $33,593.76 $8,189 n/a

$142,294.70 (2-month) $9,425 (2-month) $29,406 (2-month) $17,270 (2-month) $44,450 (45 days) $698,381.70

DVP holds a surety bond in the amount of $23,000 (the DVP Surety Bond) on the

Debtors prepetition accounts. The estimated prepetition debt owed by the Debtors to DVP will probably exceed the amount of the DVP Surety Bond. 27. PEF holds a surety bond in the amount of $22,865 on the Debtors prepetitition

accounts (the PEF Surety Bond). PEF will make a claim upon the PEF Surety Bond for payment of the Debtors prepetition debt. Discussion A. THE UTILITY MOTION SHOULD BE DENIED AS TO THE UTILITIES.

Sections 366(b) and (c) of the Bankruptcy Code, in pertinent part, provide: (b) Such utility may alter, refuse, or discontinue service if neither the trustee nor the debtor, within 20 days after the date of the order for relief, furnishes adequate assurance of payment, in the form of a deposit or other security, for service after such date. (c)(1)(A) For purposes of this subsection, the term assurance of payment means (i) a cash deposit; (ii) a letter of credit; (iii) a certificate of deposit; (iv) a surety bond; (v) a prepayment of utility consumption; or (vi) another form of security that is mutually agreed upon between the utility and the debtor or the trustee.

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(B) For purposes of this subsection an administrative expense priority shall not constitute an assurance of payment, (2) Subject to paragraphs (3) and (4), with respect to a case filed under chapter 11, a utility referred to in subsection (a) may alter, refuse, or discontinue utility service, if during the 30-day period beginning on the date of the filing of the petition, the utility does not receive from the debtor or the trustee adequate assurance of payment for utility service that is satisfactory to the utility; (3)(A) On request of a party in interest and after notice and a hearing, the court may order modification of the amount of an assurance of payment under paragraph (2). (B) In making a determination under this paragraph whether an assurance of payment is adequate, the court may not consider (i) the absence of security before the date of the filing of the petition; (ii) the payment by the debtor of charges for utility service in a timely manner before the date of the filing of the petition; or (iii) the availability of an administrative expense priority. (4) Notwithstanding any other provision of law, with respect to a case subject to this subsection, a utility may recover or set off against a security deposit provided to the utility by the debtor before the date of the filing of the petition without notice or order of the court. 11 U.S.C. 366. As set forth by the United States Supreme Court, [i]t is well-established that when the statute's language is plain, the sole function of the courts--at least where the disposition required by the text is not absurd--is to enforce it according to its terms. Lamie v. United States Trustee, 540 U.S. 526, 534, 124 S. Ct. 1023, 157 L. Ed. 2d 1024 (2004) (quoting Hartford Underwriters Ins. Co. v. Union Planters Bank, N. A., 530 U.S. 1, 6, 120 S. Ct., 1942, 147 L. Ed. 2d 1 (2000)). Rogers v. Laurain (In re Laurain), 113 F.3d 595, 597 (6th Cir. 1997) (Statutes . . . must be read in a straightforward and commonsense manner.). A plain reading of Section 366(c)(2) makes clear that a debtor is required to provide adequate assurance of payment satisfactory to its utilities

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on or within thirty (30) days of the filing of the petition. If a debtor believes the amount of the utilitys request needs to be modified, then the debtor can file a motion under Section 366(c)(3) requesting the court to modify the amount of the utilitys request. In this case, the Debtors completely ignore the Utilities adequate assurance requests. Instead, the Debtors filed the Utility Motion to improperly shift the focus of their obligations under Section 366(c) from modifying the form of the Utilities adequate assurance requests to establishing adequate assurance of payment acceptable to the Debtors. Accordingly, this Court should not reward the Debtors for their failure to comply with the requirements of Section 366(c) and deny the Utility Motion as to the Utilities. See In re Viking Offshore (USA), Inc., 2008 WL 782449 at *3 (Bankr. S.D. Tex. Mar. 20, 2008) (The relief requested by Debtors would reverse the burden, by making an advance determination that the proposed assurance was adequate. . . . the court lacks the power to reverse the statutory framework for provision of adequate assurance of payment.); see also In re Pilgrims Pride Corporation, Case No. 08-45664 (DML)(Docket No. 447), United States Bankruptcy Court For the Northern District of Texas, Memorandum Order entered on January 5, 2009 (Denying debtors motion seeking to establish adequate assurance of payment); see also In re Ramsey Holdings, Inc., Case No. 09-13998-M (TLM), United States Bankruptcy Court For the Northern District of Oklahoma, Order Denying Debtors Amended Motion For Entry of an Order Pursuant To Section 366 of the Bankruptcy Code Deeming Utility Companies Adequately Assured of Future Performance entered on December 21, 2009 (Denying debtors motion seeking to establish adequate assurance of payment, and holding that the debtor is required by Section 366 to first approach its utility providers and attempt to arrange a mutually agreeable form of adequate assurance of payment, and if such attempts are unsuccessful, the debtor 14

can then petition the Court to establish adequate assurance.). In addition, the Utility Motion fails to address why this Court should modify the Utilities requests for adequate assurance of payment. Under Section 366(c)(3), the Debtors have the burden of proof as to whether the Utilities adequate assurance of payment requests should be modified. See In re Stagecoach Enterprises, Inc., 1 B.R. 732, 734 (Bankr. M.D. Fla. 1979) (holding that the debtor, as the petitioning party at a Section 366 hearing, bears the burden of proof). The Debtors, however, offer the Court no evidence nor factually supported documentation to explain how or why the Utilities adequate assurance requests should be modified. Indeed, the Debtors do not address the matter in the Utility Motion because the Debtors failed to contact the Utilities regarding their adequate assurance requests before filing the Utility Motion. Accordingly, the Court should deny the relief requested by Debtors in the Utility Motion and require the Debtors to comply with the requirements of Section 366(c) with respect to the Utilities. See In re Lucre, Inc., 333 B.R. 151, 154 (Bankr. W.D. Mich. 2005) (holding that the right of a debtor or trustee to seek modification of a utilitys deposit request arises only after the adequate assurance payment has been agreed upon by the parties.). B. THE COURT SHOULD ORDER THE DEBTORS TO PROVIDE THE ADEQUATE ASSURANCE OF PAYMENT REQUESTED BY THE UTILITIES PURSUANT TO SECTION 366 OF THE BANKRUPTCY CODE.

Section 366(c) was amended to overturn decisions such as Virginia Electric and Power Company v. Caldor, Inc., 117 F.3d 646 (2d Cir. 1997), that held that an administrative expense, without more, could constitute adequate assurance of payment in certain cases. Section 366(c)(1)(A) specifically defines the forms that assurance of payment may take as:

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(i) a cash deposit; (ii) a letter of credit; (iii) a certificate of deposit; (iv) a surety bond; (v) a prepayment of utility consumption; or (vi) another form of security that is mutually agreed upon between the utility and the debtor or the trustee. A determination of adequate assurance is within the courts discretion, and is made on a case-by-case basis, subject to the new requirements of Section 366(c). See In re Utica Floor Maintenance, Inc., 25 B.R. 1010, 1016 (Bankr. N.D.N.Y. 1982); In re Cunha, 1 B.R. 330, 332-33 (Bankr. E.D. Va. 1979). Section 366 of the Bankruptcy Code was enacted to balance a debtors need for utility services from a provider that holds a monopoly on such services, with the need of the utility to ensure for itself and its rate payers that it receives payment for providing these essential services. See In re Hanratty, 907 F.2d 1418, 1424 (3d Cir. 1990). The deposit or other security should bear a reasonable relationship to expected or anticipated utility consumption by a debtor. In re Coastal Dry Dock & Repair Corp., 62 B.R. 879, 883 (Bankr. E.D.N.Y. 1986). In making such a determination, it is appropriate for the Court to consider the length of time necessary for the utility to effect termination once one billing cycle is missed. In re Begley, 760 F.2d 46, 49 (3d Cir. 1985). Based on the Debtors anticipated utility consumption, the minimum period of time the Debtors could receive service from the Utilities before termination of service for non-payment of bills is approximately two (2) months. Accordingly, the deposits requested by the Utilities are reasonable. See In re Stagecoach, 1 B.R. at 735-36 (holding that a two month deposit is appropriate where the debtor could receive sixty (60) days of service before termination of services because of the utilities' billing cycle.); see also In the Matter of Robmac, Inc., 8 B.R. 1, 34 (Bankr. N.D. Ga. 1979). 16

As set forth above, the Utilities adequate assurance requests are based on: (1) the Utilities billing exposure created by their applicable Tariffs; and (2) amounts that the applicable public service commission, which is a neutral third-party entity, permit the Utilities to request from their customers. Although the Utilities recognize that this Court is not bound by the applicable Tariffs, the Tariffs are extremely relevant information of a determination made by an independent entity on the appropriate amount of adequate assurance that should be paid to the Utilities. In contrast, the Debtors do not provide an objective or evidentiary basis for their proposed adequate assurance in the form of two-week deposits. Additionally, the Debtors proposed twoweek deposits would not cover their utilities monthly invoices and would be inadequate to cover the exposure that the Utilities would face if the Debtors fail to timely pay for one months service and receive another months service before a Utility could terminate service for the post-petition payment default. Furthermore, it is interesting that the Debtors are willing to secure the payment of their counsel and other professionals with a $5.5 million carve out while denying the Utilities deposits totaling $698,381.70. The bottom line is that if the Debtors want to continue to receive the Utilities generous trade terms established by the Tariffs (i.e. bills issued monthly in arrears with due dates 15 to 30 days thereafter), they need to provide the Utilities with more security than a two-week deposit.

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WHEREFORE, the Utilities respectfully request that this Court enter an order: 1. 2. Denying the Utility Motion as to the Utilities; Awarding the Utilities the post-petition adequate assurance of payment pursuant to Section 366 in the amount and form satisfactory to the Utilities; and 3. Providing such other and further relief as the Court deems just and appropriate. MEYER, SUOZZI, ENGLISH & KLEIN, P.C. By: /s/ Jil Mazer-Marino Thomas R. Slome Jil Mazer-Marino

Dated: Garden City, New York August 4, 2010

990 Stewart Avenue, Suite 300 P.O. Box 9194 Garden City, New York 11530-9194 (516) 741-6565 and Russell R. Johnson III John M. Craig Law Firm of Russell R. Johnson III, PLC 2258 Wheatlands Drive Manakin-Sabot, Virginia 23103 (804) 749-8861 Co-Counsel for Virginia Electric and Power Company d/b/a Dominion Virginia Power, Florida Power Corporation d/b/a Progress Energy Florida, Georgia Power Company, Jersey Central Power & Light Company, Southern California Edison Company, San Diego Gas & Electric Company, New York State Electric and Gas Corporation, Southern California Gas Company, Public Service Electric and Gas Company, Rockland Electric, and The Connecticut Light and Power Company

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