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HomeMy WebLinkAbout20161214final_order_no_33668.pdfOffice of the Secretary Service Date December 14, 2016 BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION IN THE MATTER OF THE APPLICATION ) OF PACIFICORP DBA ROCKY MOUNTAIN ) CASE NO. PAC-E-16-12 POWER TO UPDATE BASE NET POWER ) COSTS AND IMPLEMENT A RATE ) ORDER NO. 33668 _S_T_A_B_I_L_IT_Y_P_L_A_N _________ ) On September 1, 2016, PacifiCorp dba Rocky Mountain Power applied to the Commission for an Order authorizing the Company to reduce the base level of net power costs (NPC) in its rates, thereby reducing base rates, and to set a new base NPC to be tracked in the Energy Cost Adjustment Mechanism (ECAM). The Company also asked the Commission for an Order approving a new level of base retail load and authorizing the Company to adjust the Load Change Adjustment Rate (LCAR), Production Tax Credit (PTC) and Renewable Energy Credit (REC) rates. As an alternative to reducing base rates, the Company proposed a Rate Stability Plan under which rates would remain the same and the incremental revenue collected due to the reduced NPC would be used to offset depreciation deferral from the Company's 2013 depreciation study. The Commission issued an Order providing Notice of Application and setting an intervention deadline. Order No. 33597. The Commission received and granted petitions for intervention from PacifiCorp Idaho Industrial Customers (PIIC), Monsanto Company, and Idaho Irrigation Pumpers Association, Inc. (IIPA). Order Nos. 33599, 33600, 33601. The parties conferred informally, agreed to process the Application via Modified Procedure, and agreed on a schedule. The Commission issued an Order providing Notice of Modified Procedure and adopting the parties' agreed-upon schedule. Order No. 33618. The parties met to discuss negotiated solutions regarding the Application and the proposed Rate Stability Plan on October 19, 2016. No consensus was reached. On November 14, 2016, the Company filed a news release, customer notice/bill insert, and revised clean and legislative tariff sheets, as well as supporting workpapers, with the Commission (November 14 Update). The Company stated that it did not issue a news release or bill inserts when it filed the Application on September 1, 2016, because it "wasn't anticipating a change to customers' rates," but that at the October 19 meeting customers had expressed their preference to receive a rate decrease rather than implement the Rate Stability Plan. November ORDER NO. 33668 1 14 Update. Based on its discussions with the Company, Commission Staff explained that the Company intends for the revised clean and legislative tariff sheets provided in the November 14 Update to replace the ones filed with the Application on September 1, 2016. In this Order, as discussed further below, we approve the requested base rate reduction as reflected in the revised clean and legislative tariff sheets filed on November 14, 2016. We also approve the updated NPC of $26.90 per MWh for base rates and for the ECAM. Further, for purposes of the ECAM, we direct that the PTC and REC rates remain unchanged at ($1.99) per MWh and ($0.99) per MWh, respectively. With respect to the LCAR rate in the ECAM, we approve a rate of$6.07 per MWh. APPLICABLE LEGAL AUTHORITY The Idaho Public Utilities Commission has jurisdiction over Rocky Mountain Power, an electric utility, pursuant to the authority and power granted it under Title 61 of the Idaho Code. As described above, Rocky Mountain Power indicated that this filing is a compliance filing in response to Order No. 33440. In that Order, the Commission approved a stipulation in which the parties agreed that [b ]ase rates and base NPC should be updated effective January 1, 201 7. The updated base NPC will be the amount reported in the 2015 annual results of operations report, after appropriate proforma adjustments. For the rate spread and rate design of the update to base rates, the Company will use an equal cents per kWh approach. Rocky Mountain Power will file an application no later than September 1, 2016. Order No. 33440 at 5. The parties also agreed that "[t]he load change adjustment rate ('LCAR') will be updated to reflect base loads ( at sales) corresponding to the period used to set base rates." Id. APPLICATION The Company asked for Commission authorization to use the NPC from the 2015 annual Results of Operations report to update base NPC included in rates and tracked in the ECAM. Application at 4-5. According to the Company, this request complies with the requirements of the stipulation approved in Commission Order No. 33440.1 The Company's proposed base NPC is $91.6 million, which is a reduction of $3.2 million from current base NPC 1 Case No. P AC-E-15-09. Under the stipulation approved in that Order, the updated base NPC was to be the amount reported in the 2015 annual Results of Operations report, after appropriate proforma adjustments. Order No. 33440 at 5. ORDER NO. 33668 2 set in 2015. Id. at 1, 4. This update to NPC would reduce the Company's revenue requirement by approximately $1.1 million and, "if implemented as an adjustment to base rates, it represents a reduction of approximately four tenths of one percent." Id. at 1. The Company provided updated tariff sheets showing the revised rates. November 14 Update. The updated base NPC would also be used for tracking in the ECAM. Application at 1. In addition, the Company asked for Commission authorization to update base retail load in light of the 2015 annual Results of Operations report. Id. at 4. The Company's proposed update to retail load would result in a base retail load of 3,407,488 MWh, a reduction of 75,992 MWh from current base retail load. Id. at 5. The Company requested approval of this updated retail load, and authorization to adjust the PTC, REC, and LCAR rates using the updated retail load. Id. at 7; Wilding Direct at 4. The Company provided the following table to illustrate the proposed changes to ECAM rates as a result of the updated base retail load: ECAM Base ($/MWh) January 1, 2016 January 1, 2017 NPC $ 27.21 $ 26.90 LCAR $ 5.68 $ 5.80 PTC $ (1.99) $ (2.04) REC $ (0.09) $ (0.09) Wilding Direct at 4. As an alternative to reducing rates, the Company proposed a Rate Stability Plan, which "would keep rates at the current level and utilize the incremental revenue collected to offset other regulatory assets mitigating customers' future rate impact." Application at 4-5. Specifically, the Company stated that the incremental revenue would be applied "against the depreciation deferral from the 2013 depreciation study." Id. at 6 (citing Order No. 32910). The Company indicated that it intended to discuss the Plan, including the potential to treat any rate reduction associated with the 201 7 ECAM filing in the same manner, with parties. Id. The Company requested that the Commission issue an Order approving the new base NPC, base retail load, and the new LCAR, PTC and REC rates no later than December 15, 2016, to be effective January 1, 2017. Id. at 7. If the parties do not reach agreement on the Rate Stability Plan, the Company requested approval of the tariff revisions included in Attachment A to the Application, as replaced by the November 14 Update. Id. ORDER NO. 33668 3 COMMENTS, REPLY AND FINDINGS The parties' comments, including the Company's reply, generally address the following issues: (1) the proposed reduction to NPC and base rates and the proposed alternative Rate Stability Plan; (2) the proposed updates to the PTC and REC rates; (3) the proposed update to the LCAR; and ( 4) the Company's provision of notice to customers. Each of these issues is discussed below. (1) The proposed reduction to NPC and base rates and the alternative proposed Rate Stability Plan Commission Staff: Staff evaluated whether the Company's adjustment to NPC was reasonable and consistent with Order No. 33440, and concluded that the NPC adjustment is reasonable and consistent with that Order. Staff Comments at 2-4. Staff also reviewed the Company's methodology to ensure the new rates and tariff sheets (those filed on November 14, 2016) properly reflect the NPC adjustment, and concluded that they did. Id. at 2, 4. Staff explained that the parties met and discussed the Rate Stability Plan but that no consensus was reached. Id. at 6-7. As a result, Staff believes the reduction in NPC should be reflected in base rates via a rate reduction effective January 1, 2017, and that such a reduction is reasonable at this time. Id. at 7. However, Staff encouraged the parties to consider the impact on rates from the continued deferral of the depreciation expense if there are reductions in upcoming ECAM cases. Id. Monsanto: Monsanto reviewed the Application and proposed Rate Stability Plan and commended the Company for providing advanced notice and information regarding anticipated rate reductions. Monsanto Comments at 3. Monsanto found the additional one-year "stay-out" envisioned with the Rate Stability Plan attractive, but stated that receiving an actual base rate reduction is "unprecedented and long hoped for" by customers but "never received previously." Id. After evaluating the alternatives and "as a prudent business decision," Monsanto chose to not accept the Rate Stability Plan and instead "receive the anticipated benefit of the NPC reduction January 1, 2017 and the anticipated ECAM rate reduction June 2, 2017." Id. Monsanto recognized that the Company's 2013 depreciation deferral balance "will remain one of the many issues to be addressed in the next general rate case." Id. ORDER NO. 33668 4 PIIC: PIIC expressed appreciation for the Company's open and transparent process associated with the proposed Rate Stability Plan. PIIC Comments at 1. PIIC's members seriously discussed and considered the Rate Stability Plan but their preference would be for the base rate adjustment to be implemented. Id. at 2. Company Reply: With respect to Monsanto's assertion that a rate decrease has been long hoped for but never received, the Company clarified that "between 1988 and 2005 Rocky Mountain Power had nine separate rate decreases totaling over 20 percent in reductions to customers' base rates." Company Reply at 5. The Company also discussed the proposed Rate Stability Plan, explaining that its purpose was to benefit customers-not the Company. Id. The Company summarized its witness' testimony regarding customer benefits from the Plan, including mitigating future rate increases; paying off the deferred depreciation balance with no increase to rates; ensuring that customers pay only what they owe on the deferred depreciation balance, no more and no less; and eliminating long-term intergenerational inequities. Id. at 6. The Company expressed that it has no intention of filing a general rate case in 2018, but that it would be filing a new depreciation study. Id. It anticipates filing its next rate case when the impacts of the new depreciation study can be included. Id. The Company explained [a]bsent the Rate Stability Plan, the Company anticipates the rate impact from the 2013 and 2018 rate changes plus amortization of the deferred depreciation balance will have a significant impact on the next general rate case. While the Company believes the proposed Rate Stability Plan is in the best interest of all Idaho customers, it acknowledges the viewpoint of the parties who participated in this proceeding, and respects their decision not to pursue the plan at this time. Id. In conclusion, the Company asked the Commission to approve the base NPC of $91,646,156 or $26.90 per MWh and the tariff revisions filed November 14, 2016, as an update to Attachment A to the Application, to be effective January 1, 2017. Id. at 6-7. Commission Findings: The Commission finds that the Company's request to decrease its base rates and update NPC effective January 1, 2017, is fair, just and reasonable. Idaho Code § 61-622. The Company filed this Application to update its NPC in base rates in accordance with Commission Order No. 33440. The reduction to base rates is a result of the Company's compliance with that Order, reflects updated NPC information, and will allow the ORDER NO. 33668 5 Company to pass on its reduced costs to customers. Without the reduction, we find that the Company would over-collect NPC relative to actual costs. Further, the decrease in base rates is spread across customer classes on an equal per MW basis. Under these circumstances, we find the rates to be just, reasonable and in the public interest. (2) The proposed updates to the PTC and REC rates in the ECAM. Commission Staff: Staff explained that the Company is proposing to update the PTC and REC rates for purposes of the ECAM using the updated Idaho load at the meter from the 2015 Results of Operations report. Staff Comments at 4-5. This change would update the denominator of the PTC and REC rates in the ECAM. Id. However, the Company proposed to make this change without changing the PTC and REC revenue recovery embedded in base rates. Id. In Staff's opinion, accepting the proposal would "overstate PTC and REC revenues in the ECAM resulting in an inaccurate adjustment and over-recovery by the company." Id. at 4-5. Staff explained that in Case No. PAC-E-15-09 base rates were adjusted by both reductions in PTC and REC revenue (in the numerator of the rate calculation) and by changes to the per MWh Idaho load at the meter ( denominator of the rate calculation). Id. at 5. According to Staff, because both the numerator and the denominator changed, these rates could be used in the ECAM because they matched the PTC and REC revenue recovery embedded in base rates. Id. Here, the Company's proposal to only change the Idaho load at the meter (the denominator) without changing the revenue requirement (the numerator) would result in a mismatch between the PTC and REC rates used in the ECAM and the amounts embedded in base rates. Id. Staff disagreed with the Company's proposal and recommended that the current PTC and REC rates authorized in Case No. PAC-E-15-09 and embedded in base rates should continue to be used for calculating base rate recovery in the ECAM. Id. The current PTC rate is a credit of $1.99 per MWh and the current REC rate is a credit of $0.09 per MWh. Id.; Wilding Direct at 4. Company Reply: The Company stated it does not object to Staff's recommendation to retain the current PTC and REC rates. Company Reply at 2. Commission Findings: The Commission finds that it is fair, just, and reasonable to retain the current PTC and REC rates. Retaining the current rates will ensure consistency between the PTC and REC components in base rates and the PTC and REC rates in the ECAM. It will also ensure consistency in the vintage of the PTC and REC revenue figures in the ORDER NO. 33668 6 numerator, and the load figures in the denominator, of the rate calculations. Under these circumstances, we find the rates to be just, reasonable and in the public interest. (3) The proposed update to the LCAR in the ECAM. Commission Staff: Staff stated that, similar to the proposal for PTC and REC rates used in the ECAM, the Company proposed to update the LCAR2 in the ECAM without changing the LCAR-related costs embedded in base rates. Staff Comments at 5. Staff explained that the last case that adjusted the LCAR-related expense in base rates was Case No. PAC-E-10-07. Id. at 6. In that case, the LCAR rate of $5.47 per MWh was determined using then-current LCAR expenses as the numerator and a billing determinant of the Idaho load at generation as the denominator. Id.; n.3. (The equivalent LCAR using Idaho load at the customer meter was $6.07 per MWh.) Id. In Case No. PAC-E-15-09, the LCAR-related expenses were not updated, but the billing determinant (denominator) for calculating the LCAR and the load change adjustment in the ECAM was changed using updated Idaho load at the customer meter for that time period. Id. at 6; n.3. In that case, the authorized LCAR using the then-current Idaho load at the customer meter was $5.68 per MWh. Id. at 6. In the present case, the Company proposed to leave the LCAR-related expenses unchanged and to again update the Idaho load at the customer meter (the denominator), based on the 2015 Results of Operations report, resulting in an LCAR of $5.80 per MWh. Id. According to Staff, the Company's proposal would result in a mismatch between the LCAR in the ECAM and the LCAR-related expenses in base rates and would produce a smaller credit to customers or surcharge to the Company than each party would otherwise be entitled to receive through the ECAM. Id. Staff recommended that the more appropriate approach, given that the LCAR-related expenses have not changed since Case No. PAC-E-10-07, would be to calculate the LCAR using a billing determinant of the Idaho loads at the customer meter from Case No. PAC-E-10-07. See id. at 6; n.3. Staff stated that this methodology would result in an LCAR of $6.07 and would "represent LCAR-related expenses currently embedded in base rates." Id. at 6. Staff explained that $6.07 is the rate that would have been calculated in Case No. PAC­ E-I 0-07 if the billing determinant used in that case had been the Idaho load at the customer 2 Staff explained that "[i]n PacifiCorp's ECAM methodology, the LCAR is the embedded dollar per MWh rate for non-NPC energy-classified production cost. It is used to determine the amount of these costs recovered through base rates so that any over-or under-recovery can be credited to or surcharged from customers through the ECAM." Staff Comments at 5. ORDER NO. 33668 7 meter, instead of Idaho load at generation. See id. at 6; n.3. Staff's position is that this is the LCAR that should be used in the ECAM for the period of January 1, 2017 through December 31, 2017, and for subsequent ECAMs until the LCAR is changed in the next general rate case. Id. at 6. Company Reply: The Company contends that Staff's recommendation on the LCAR is inconsistent with the stipulation agreed to by parties and approved by the Commission in Case No. PAC-E-15-09 (Order No. 33440) and should be denied. Company Reply at 2. In Case No. PAC-E-15-09, the Company had originally proposed eliminating the LCAR entirely, and it quotes its witness' testimony describing its rationale: Capital costs and other operation and maintenance costs included in the LCAR calculation do not have a similar profile to NPC; they are not highly volatile or largely outside the Company's control and therefore should not be included in the ECAM. Furthermore, the LCAR is asymmetrical in the fact that it only considers changes in loads (or sales going forward) but ignores changes in the actual underlying energy component of production costs [ECPC]. ... The inherent flaw in the LCAR adjustment is that it assumes the actual ECPC equals the base. These costs were set at $20.2 million as part of the 2011 GRC. In the recently-filed Annual Results of Operations, current ECPC are $23.3 million, or $3.1 million (approximately 17 percent) greater than the base set in the 2011 GRC. However, since the increase in the ECPC is not accounted for in the LCAR adjustment, the Company has refunded customers approximately $3.1 million through the LCAR adjustment in ECAMs filed since 2012. Id. at 2-3 (quoting Wilding Direct at 21-22 (Case No. PAC-E-15-09)). The Company indicated that its position on the LCAR has not changed. Id. at 3. "The ECAM compares base load and NPC on a dollar per MWh basis to actual load and NPC on a dollar per MWh basis aligning both sides of the equation." Id. In contrast, the LCAR is inherently flawed because it "only accounts for half the equation ignoring actual increases or decreases to the [energy component of production costs]." Id. The Company argued that in Case No. PAC-E-15-09, as part of a collaborative effort to resolve the issues, the parties "negotiated a settlement that agreed to the continued inclusion of the LCAR in the ECAM with an update to the base loads used for calculating the LCAR for both the January 1, 2016 and January 1, 2017, update to base rates." Id. at 4. The Company then quoted from the stipulation in Case No. PAC-E-15-09: "t]he Parties agree that the load change adjustment rate ('LCAR') will be updated to reflect base ORDER NO. 33668 8 loads (at sales) corresponding to the period used to set base rates." Id. (emphasis added by the Company, quoting Stipulation, <J[ 14 (Case No. PAC-E-15-09)(filed with the Commission on Oct. 15, 2015)). The Company asserted that this section was to address the Company's concern that the base load in the LCAR relied on 2009 loads which only magnified the mismatch discussed above; comparing 2009 load with 2016 or 2017 actual usage while ignoring capital investment only penalizes the Company for actual investment made since 2009 in production plant. Id. The Company explained that the stipulation included a table summarizing the LCAR rate from Case No. PAC-E-10-07 and the update agreed to by the parties, which demonstrated that fixed costs stayed the same while system and Idaho energy measured at meter was updated. Id. The Company replicated the table in its comments and included an additional column illustrating the updated LCAR and base energy it has proposed in this case. Id. at 4-5. According to the Company, "[p ]ursuant to the Stipulation, 'the load change adjustment rate ("LCAR") will be updated to reflect base loads (at sales) corresponding to the period used to set base rates."' Id. (internal citations omitted). According to the Company, Staff's recommendation to set the LCAR at $6.07 per MWh, based on Case No. PAC-E-10-07, does not conform to the stipulation in Case No. PAC-E- 15-09 nor to Order No. 33440 and should be rejected. Id. The Company's position is that the LCAR should be updated to $5.75 per MWh as shown in the table on page 5 of its reply comments.3 Id. Commission Findings: The Commission finds that it is fair, just and reasonable to establish an LCAR rate for purpose of the ECAM of $6.07 and that doing so is not contrary to Order No. 33440. As was the case with the PTC and REC rates, we believe that an LCAR of $6.07 will ensure consistency between the LCAR component in base rates and the LCAR rate in the ECAM, and will ensure that the LCAR expenses (the numerator) and load (the denominator) are from the same time period. We believe that the $6.07 LCAR represents LCAR-related expenses currently in base rates because the rate of $6.07 is calculated using, as the numerator, the LCAR expenses currently in base rates (established in Case No. PAC-E-10-07) and, as the 3 The Company's reply comments proposed an LCAR of $5.75. Company Reply at 5. The Company's testimony supporting its Application proposed an LCAR of $5.80. Wilding Direct at 4. ORDER NO. 33668 9 denominator, load figures from the same time period.4 We find that the Company's proposed reduced LCAR would result in a mismatch between the LCAR used in the ECAM and the LCAR-related expenses in base rates, which would produce a smaller credit to customers or surcharge to the Company that each party is entitled to receive through the ECAM. Under these circumstances, we find an LCAR of $6.07 for the ECAM to be just, reasonable and in the public interest.5 We do not agree with the Company that an LCAR of $6.07 is contrary to Order No. 33440 in Case No. PAC-E-15-09 or the stipulation we approved in that Order. It is our interpretation that the October 2015 Stipulation's language regarding updating the LCAR, and Order No. 33440's approval of that language in December 2015, addressed and settled issues and established rates in that case. We do not agree that that language is dispositive for future cases such as this one.6 In any case, we believe the LCAR of $6.07 comports with the idea that the LCAR will be updated to reflect base loads (at sales) corresponding to the period used to set base rates. As described above, the LCAR of $6.07 is calculated using base load (at sales) numbers from the same time period as was used to establish the LCAR currently in base rates. (4) The Company's provision of notice to customers. Commission Staff: Staff explained that the Company did not file a press release and customer notice with its Application and did not comply with Rule 125 of the Commission's Rules of Procedure, IDAPA 31.01.01.125, which requires that utilities notify customers and issue a press release when a change in rates is proposed. Staff Comments at 7. Staff explained that it contacted the Company about this and the Company agreed to provide notice to customers. Id. The Company filed a press release and customer notice on November 14, 2016, and the 4 The LCAR in current base rates was calculated using Idaho jurisdictional load at generation, rather than at the customer meter. See Order No. 33008 at 8. However, the "back-cast" adjustment to the LCAR in the ECAM approved in Order No. 33008 updates the load change adjustment revenue collected under base rates using a denominator of load at sales (that is, at the customer meter). See id. at 8, 14-15; see also Order 33440 at 6 (Load Change Adjustment Rate Calculation, demonstrating an LCAR based on load at the meter using data from Case No. PAC-E-10-07 of $6.07). Thus, using load (sales) figures from the same time period as the expenses embedded in base rates ensures that there is consistency between the LCAR in base rates and the LCAR in the ECAM. 5 We acknowledge the Company's concerns that the LCAR is "inherently flawed." However, in this case the Company and Staff each proposed updates to the LCAR-not elimination of it. We are evaluating the proposals and evidence before us in this case. 6 Other sections in the stipulation and Order required specific actions to be taken by specific future dates. See, e.g., Order No. 33440 at 5 (<J[ 3). In contrast, the LCAR language quoted by the Company does not contain such specificity with regard to future actions. See id. (<J[ 8). ORDER NO. 33668 10 notice will be included in customer bills beginning November 21, 2016, and ending December 12, 2016. Id. (see also November 14 Update) Staff noted that the Commission's deadline for comments was November 17, 2016, but recommended that the Commission accept late-filed comments from the public due to the notification delay. Id. Commission Findings: We acknowledge Staff's and the Company's efforts to issue a press release and customer notice when the lack of notice in this case came to light. We remind the Company that notice must be provided pursuant to the rules and in a way that provides customers reasonable opportunity to participate. ULTIMATE FINDINGS OF FACT AND CONCLUSIONS OF LAW Rocky Mountain Power is an electric utility. The Commission has jurisdiction and authority over Rocky Mountain Power and the issues raised in this case pursuant to Title 61 of the Idaho Code and the Commission's Rules of Procedure, IDAPA 31.01.01.000, et seq. Based on our review of the record, we find that Rocky Mountain Power's current base rates and NPC are unreasonable and would enable the Company to over-collect its net power costs. See Idaho Code §§ 61-501 and -502. We also find it fair, just and reasonable for the Company to change its rates and charges as described in this Order. Accordingly, we find that the Company's request to decrease its base rates by $0.319 per MWh and update NPC to $26.90 per MWh, effective January 1, 2017, is fair, just and reasonable. We find the Company's updated tariff sheets, filed November 14, 2016, to be fair, just and reasonable and authorize an effective date of January 1, 2017, for those tariff sheets. We find that the current PTC and REC rates in the Company's ECAM continue to be fair, just, and reasonable, and approve the Company's retention of those rates. Finally, we find that an LCAR of $6.07 for the ECAM is fair, just, and reasonable, and approve that rate. ORDER IT IS HEREBY ORDERED that the Company's proposed NPC of $26.90 per MWh and the corresponding reduction to base rates, as shown in the tariff sheets submitted on November 14, 2016, are approved, effective January 1, 2017. We also approve an LCAR, for purposes of the ECAM, of $6.07, as described more fully in the body of this Order, effective January 1, 2017. ORDER NO. 33668 11 THIS IS A FINAL ORDER. Any person interested in this Order may petition for reconsideration within twenty-one (21) days of the service date of this Order with regard to any matter decided in this Order. Within seven (7) days after any person has petitioned for reconsideration, any other person may cross-petition for reconsideration. See Idaho Code § 61- 626. DONE by Order of the Idaho Public Utilities Commission at Boise, Idaho this day of December 2016. KRISTINE RAPER, COMM SSIONER ISSIONER ATTEST: O:Pi\C-E-16-12_cc3 ORDER NO. 33668 12