[Federal Register Volume 84, Number 238 (Wednesday, December 11, 2019)]
[Proposed Rules]
[Pages 67685-67702]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-26573]
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POSTAL REGULATORY COMMISSION
39 CFR Parts 3010, 3020, 3050, and 3055
[Docket No. RM2017-3; Order No. 5337]
System for Regulating Market Dominant Rates and Classifications
AGENCY: Postal Regulatory Commission.
ACTION: Proposed rule.
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SUMMARY: The Commission proposes revised rules modifying the system for
regulating rates and classes for market dominant products. The revised
rules incorporate feedback from comments received from the Commission's
prior proposed rulemaking. The rule revisions replace some rules in
their entirety, move others, and change existing rules as necessary.
DATES: Comments are due: February 3, 2020; Reply Comments are due:
March 4, 2020.
ADDRESSES: For additional information, Order No. 5337 can be accessed
electronically through the Commission's website at https://www.prc.gov.
Submit comments electronically via the Commission's Filing Online
system at http://www.prc.gov. Those who cannot submit comments
electronically should contact the person identified in the FOR FURTHER
INFORMATION CONTACT section by telephone for advice on filing
alternatives.
FOR FURTHER INFORMATION CONTACT: David A. Trissell, General Counsel, at
202-789-6820.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Relevant Statutory Requirements
II. Background
III. Basis and Purpose of Revised Proposed Rules
IV. Revised Proposed Rules
I. Relevant Statutory Requirements
Section 3622 of title 39 of the United States Code established a
system to regulate the rates and classes of Market Dominant Postal
products. The Commission is required to conduct a review of the Market
Dominant ratemaking system 10 years after the enactment of the Postal
Accountability and Enhancement Act (PAEA), Public Law 109-435, 120
Stat. 3198 (2006). 39 U.S.C. 3622(d)(3). The Commission's purpose in
the review is to determine whether the system is achieving the
objectives appearing in subsection (b) of section 3622, taking into
account the factors appearing in subsection (c) of 3622. If, upon
completion of the mandatory 10-year review, including an opportunity
for notice and public comment, the Commission determines that the
system is not achieving the objectives (taking into account the
factors), the Commission may ``by regulation, make such modification or
adopt such alternative system for regulating rates and classes for
market-dominant products as necessary to achieve the objectives.'' 39
U.S.C. 3622(d)(3).
II. Background
Pursuant to the directives in section 3622 of the PAEA, the
Commission initiated Docket No. RM2017-3 to conduct a comprehensive
analysis of whether the PAEA system achieved the nine objectives,
taking into account the factors, in the decade following the PAEA's
enactment. The Commission issued Order No. 4257 setting forth the
findings from its review.\1\ In Order No. 4257, the Commission
determined that the overall PAEA system ``has not achieved the
objectives taking into account the factors of the PAEA.'' Order No.
4257 at 4, 275.
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\1\ Order on the Findings and Determination of the 39 U.S.C.
3622 Review, December 1, 2017 (Order No. 4257).
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In response to its conclusions in Order No. 4257 and as
contemplated by section 3622(d)(3), the Commission issued a Notice of
Proposed Rulemaking (NPR) \2\ preceded by an Advance Notice of Proposed
Rulemaking.\3\ In the NPR, the Commission proposed to amend several
parts of title 39 of the Code of Federal Regulations to achieve the
objectives of 39 U.S.C. 3622(b). Order No. 4258 at 3. The NPR sought
public comment on the Commission's proposed amendments. In response to
the wide range of comments received and additional considerations, the
Commission proposes new changes to the regulations and modifies and
clarifies previous proposals.
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\2\ Notice of Proposed Rulemaking for the System for Regulating
Rates and Classes for Market Dominant Products, December 1, 2017
(Order No. 4258).
\3\ Advance Notice of Proposed Rulemaking on the Statutory
Review of the System for Regulating Rates and Classes for Market
Dominant Products, December 20, 2016 (Order No. 3673).
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III. Basis and Purpose of Revised Proposed Rules
In Order No. 4257, the Commission concluded that ``while some
aspects of the system of regulating rates and classes for market
dominant products have worked as planned, overall, the system has not
achieved the objectives of the PAEA.'' Order No. 4257 at 5. The
Commission analyzed the system by reviewing three topical areas that
encompassed the nine objectives of the PAEA: (1) The structure of the
ratemaking system; (2) the financial health of the Postal Service; and
(3) service. Id. at 22. In its review of the structure of the
ratemaking system, the Commission found that with respect to pricing,
the system did not result in increased pricing efficiency. Id. at 48.
It concluded that the system did not result in pricing efficiency
because ``workshare discounts were not set as close as practicable to
their avoided costs despite the Postal Service's ability to do so under
the price cap'' in conjunction with the fact that ``seven products did
not cover their attributable costs during the PAEA era.'' Id. at 145.
In its analysis of the financial health of the Postal Service, the
Commission determined that ``financial stability, including retained
earnings, has not been maintained for the Postal Service in the medium
and long-term time frames and that cost reductions and operational
efficiency gains have not been maximized.'' Id. at 148. The Commission
further noted that the aggressive Retiree Health Benefits Fund
prefunding and reductions in volume and revenue added to the Postal
Service's net losses, as did the impact of the Great Recession combined
with emergent technological trends resulting in even greater declining
volumes for First-Class Single-Piece Mail. Id. at 38-40. Finally, in
its review of service, the Commission determined that the system did
not effectively encourage the maintenance of high quality service
standards. Id. at 4-5, 250.
Subsequently, the Commission issued the NPR setting forth proposed
rules to address the shortcomings of the system of ratemaking based on
the conclusions in Order No. 4257. With respect to the finding that the
system did not achieve pricing efficiency, the Commission proposed
rules to modify the requirements related to workshare discounts. The
proposed rules phased out two practices that harm pricing efficiency:
``workshare discounts set substantially below avoided costs and
workshare discounts set substantially above avoided costs.'' Order No.
4258 at 93.
To address the findings related to the system's failure to provide
for the financial health of the Postal Service, the Commission made
three proposals intended to address the failure to attain
[[Page 67686]]
medium-term and long-term financial stability. Id. at 26. First, the
Commission proposed a mechanism to provide the Postal Service with an
additional 2 percentage points of rate authority per calendar year for
5 years following the effective date of the regulations. Id. This
amount was aimed at putting the Postal Service ``on the path to medium-
term financial stability by providing [it] the opportunity to generate
additional revenue to cover its obligations.'' Id. at 38. Second, the
Commission proposed a performance-based rate authority mechanism to
provide up to an additional 1 percentage point of rate authority per
calendar year to address the failure to maintain financial stability in
the long term. Id. at 39. This proposal was dependent on the Postal
Service achieving specific performance-based requirements for
operational efficiency and service standard quality and was aimed at
putting the ``Postal Service on the path to long-term financial
stability by providing the Postal Service the opportunity to generate
retained earnings.'' Id. at 38-39. The proposed amount of performance-
based rate authority was based on ``several reference points related to
capital investment, capital assets, and borrowing authority.'' Id. at
39. In addition to placing the Postal Service on the path to long-term
financial stability, the proposal was aimed at remedying the
deficiencies of the system with respect to the failure to maximize
incentives to reduce costs and increase efficiency and maintain high
quality service standards. Id. at 46. Third, the Commission proposed a
mechanism to improve the cost coverage of non-compensatory classes and
products by including rate design requirements for non-compensatory
products and authorizing an additional 2 percentage points of rate
authority per calendar year for non-compensatory classes of mail. Id.
at 77. The proposal was based on the Commission's finding that non-
compensatory classes and products threatened the financial integrity of
the Postal Service because the revenues from these products and classes
do not cover their attributable costs. Id. at 73; Order No. 4257 at
233-235. The proposal was aimed at placing the ``Postal Service on the
path to having fully compensatory products and classes.'' Order No.
4258 at 73-74.
Finally, the NPR proposed additional procedural improvements
intended to ``improve the ratemaking process relating to planned rate
adjustments of general applicability.'' Id. at 98. These proposals were
``within the scope of the Commission's general authority to revise its
regulations'' and were in line with the Commission's review in Order
No. 4257 and comments received. Id. The proposed changes related to the
schedule for regular and predictable rate adjustments and the timing
for the notice period and related filings for rate adjustments. Id. at
98-99.
After further consideration, including consideration of the
comments received in response to the NPR, the Commission provides
revisions to its proposed rules in its Revised NPR.\4\
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\4\ Revised Notice of Proposed Rulemaking, December 5, 2019
(Order No. 5337).
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First, the Commission modifies the proposed supplemental rate
authority mechanism to address specific drivers of the Postal Service's
inability to achieve net income during the PAEA era. Order No. 5337 at
12. Instead of a singular, fixed amount of supplemental rate authority,
the revised supplemental authority proposal includes two separate
mechanisms intended to provide rate authority to address costs largely
outside the Postal Service's control. Id. The first mechanism provides
additional rate authority based on loss of density, and the second
mechanism provides additional rate authority based on amortization of
retirement benefit obligations until such time as the Postal Service
has sufficient revenue incorporated in the rate base to cover these
payments. Id. at 12-13.
Second, the Commission adjusts the performance-based authority to
retain the 1 percentage point of rate authority benchmark but modifies
how the specific performance-based requirements for operational
efficiency and service will be measured. Id. at 13-14. Additionally,
the Postal Service must now meet both efficiency and service benchmarks
to claim the performance-based rate authority. These revisions to the
performance-based authority are intended to allow the Postal Service to
improve its financial health and provide a mechanism for the Postal
Service to achieve long-term financial stability and increase
operational efficiency while maintaining high quality service
standards. Id. at 14.
Next, the Commission makes minor revisions to the rules for non-
compensatory products and classes, proposing that the use of an
additional 2 percentage points of rate authority for non-compensatory
classes be optional and removing the requirement that determinations of
a class's compensatory status be made only in the Annual Compliance
Determination proceeding. Id. These modifications are geared towards
placing the Postal Service on the path to having fully compensatory
products and classes as well as improving the financial integrity of
the system while allowing for the continued achievement of objectives
relating to pricing flexibility, pricing efficiency, and establishing
and maintaining reasonable rates. Id.
The Commission further proposes revised rules for worksharing
discounts that dispense with the use of the 3-year grace period. Id.
The proposed rules prohibit the Postal Service from: (1) Changing those
workshare discounts currently set equal to avoided cost; (2) reducing
workshare discounts set below avoided cost; and (3) increasing
workshare discounts set above avoided cost. Id. The modifications also
add a new requirement that the Postal Service provide information and
analysis specific to certain workshare costs set excessively above or
below avoided cost. Id. The proposed workshare rules are intended to
incentivize workshare discounts to adhere as closely as possible to
Efficient Component Pricing principles in order to help the ratemaking
system maximize incentives to increase efficiency. Id. at 14-15.
The Commission also proposes new reporting requirements for costs
and cost-reduction initiatives in response to commenter concerns and in
light of the revised proposals for additional rate authority. Id. at
15. The proposals set forth reporting requirements for changes in unit
costs, specific cost-reduction initiatives, and Decision Analysis
Reports. Id. The new cost reporting requirements are intended to
provide transparency into the Postal Service's efforts to reduce costs
and increase efficiency. Id.
Finally, the Commission proposes additional procedural rules
related to planning rate adjustments of general applicability. Id.
These revisions are intended to improve the ratemaking process. Id.
IV. Revised Proposed Rules
Proposed 39 CFR part 3010, subpart A describes the applicability of
the rules, provides an index, sets forth relevant definitions, and
modifies the schedule for regular and predictable rate adjustments.
Proposed 39 CFR part 3010, subpart B modifies procedures applicable
to periodic rate adjustments (including extending notice and filing
periods from 45 to 90 days), setting forth specific requirements for
contents of a rate adjustment filing (including mandating that the
Postal Service certify that it has used the most recently accepted
analytical principles in its rate adjustment filing), specifying
content to
[[Page 67687]]
be included in supporting technical documentation, and describing the
sequence of a proceeding applicable to a request to review a notice of
rate adjustment. This section also specifies the calculation of the
maximum rate adjustment authority and imposes limitations on certain
rate decreases, providing an exception for certain de minimis rate
increases.
Proposed 39 CFR part 3010, subpart C relates to the timing of rate
adjustment authority dependent on CPI-U.
Proposed 39 CFR part 3010, subpart D creates additional rate
authority to address the effects of decreases in mail density and sets
forth the data sources and calculation of the density rate authority.
Proposed 39 CFR part 3010, subpart E creates additional rate
authority to provide the Postal Service with revenue for remittance
towards the statutorily mandated Retirement Health Benefits Fund, Civil
Service Retirement System, and Federal Employees Retirement System
unfunded liabilities. This section provides definitions, procedures
applicable to claiming the additional rate authority, and the data
sources, calculation, and requirement that the Postal Service remit the
amount of revenue collected under this authority towards the
supplemental and unfunded liabilities.
Proposed 39 CFR part 3010, subpart F creates an additional 1
percentage point of rate authority per class of mail based upon the
Postal Service meeting or exceeding an operational efficiency-based
requirement and adhering to a service standard-based requirement. This
section sets forth the timing for the Postal Service to claim the
additional rate authority and describes the criteria for claiming both
the operational efficiency-based requirement and the service standard-
based requirement.
Proposed 39 CFR part 3010, subpart G describes new rate-setting
criteria applicable to non-compensatory classes and products.
Proposed 39 CFR part 3010, subpart H relates to the manner by which
the Postal Service is required to calculate unused rate adjustment
authority and, if applicable, revise the schedule of banked rate
adjustment authority whenever it plans to adjust rates.
Proposed 39 CFR 3010, subpart I incorporates the requirements
concerning exigent rate increases. These updates are not intended to
change the meaning or operation of the current rules, but the current
rules have been reorganized.
Proposed 39 CFR 3010, subpart J establishes rate design criteria
for workshare discounts, including setting forth new limited instances
in which the Postal Service may set workshare discounts below avoided
costs.
To create global consistency between 39 CFR parts 3010 and 3020,
conforming changes are proposed to Sec. Sec. 3020.32, 3020.52,
3020.72, 3020.81, 3020.82, 3020.90, 3020.91, and 39 CFR 3020, subpart
G.
Additional conforming changes are proposed in 39 CFR part 3050 for
Sec. Sec. 3050.20, 3050.21, 3050.55, and 3050.60. Conforming changes
are also proposed in 39 CFR part 3055 for Sec. 3055.2.
List of Subjects
39 CFR Part 3010
Administrative practice and procedure, Postal Service.
39 CFR Part 3020
Administrative practice and procedure.
39 CFR Part 3050
Administrative practice and procedure, Postal Service, Reporting
and recordkeeping requirements.
39 CFR Part 3055
Administrative practice and procedure, Reporting and recordkeeping
requirements.
For the reasons discussed in the preamble, the Commission proposes
to amend Chapter III of title 39 of the Code of Federal Regulations as
follows:
0
1. Revise part 3010 to read as follows:
PART 3010--REGULATION OF RATES FOR MARKET DOMINANT PRODUCTS
Subpart A--General Provisions
Sec.
3010.100 Applicability.
3010.101 Definitions.
3010.102 Schedule for regular and predictable rate adjustments.
Subpart B--Rate Adjustments
3010.120 General.
3010.121 Postal Service rate adjustment filing.
3010.122 Contents of a rate adjustment filing.
3010.123 Supporting technical documentation.
3010.124 Docket and notice.
3010.125 Opportunity for comments.
3010.126 Proceedings.
3010.127 Maximum rate adjustment authority.
3010.128 Calculation of percentage change in rates.
3010.129 Exceptions for de minimis rate increases.
Subpart C--Consumer Price Index Rate Authority
3010.140 Applicability.
3010.141 CPI-U data source.
3010.142 CPI-U rate authority when rate adjustment filings are 12 or
more months apart.
3010.143 CPI-U rate authority when rate adjustment filings are less
than 12 months apart.
Subpart D--Density Rate Authority
3010.160 Applicability.
3010.161 Density calculation data sources.
3010.162 Calculation of density rate authority.
Subpart E--Retirement Obligation Rate Authority
3010.180 Definitions.
3010.181 Applicability.
3010.182 Retirement obligation data sources.
3010.183 Calculation of retirement obligation rate authority.
3010.184 Required minimum remittances.
3010.185 Forfeiture.
Subpart F--Performance-Based Rate Authority
3010.200 Applicability.
3010.201 Operational efficiency-based requirement.
3010.202 Service quality-based requirement.
Subpart G--Non-Compensatory Classes or Products
3010.220 Applicability.
3010.221 Individual product requirement.
3010.222 Class requirement and additional class rate authority.
Subpart H--Accumulation of Unused and Disbursement of Banked Rate
Adjustment Authority
3010.240 General.
3010.241 Schedule of banked rate adjustment authority.
3010.242 Calculation of unused rate adjustment authority for rate
adjustments that involve a rate increase which are filed 12 months
apart or less.
3010.243 Calculation of unused rate adjustment authority for rate
adjustments that involve a rate increase which are filed more than
12 months apart.
3010.244 Calculation of unused rate adjustment authority for rate
adjustments that only include rate decreases.
3010.245 Application of banked rate authority.
Subpart I--Rate Adjustments Due to Extraordinary and Exceptional
Circumstances
3010.260 General.
3010.261 Contents of a rate adjustment filing.
3010.262 Supplemental information.
3010.263 Docket and notice.
3010.264 Public hearing.
3010.265 Opportunity for comments.
3010.266 Deadline for Commission decision.
3010.267 Treatment of banked rate adjustment authority.
Subpart J--Workshare Discounts
3010.280 Applicability.
[[Page 67688]]
3010.281 Calculation of passthroughs for workshare discounts.
3010.282 Increased pricing efficiency.
3010.283 Limitations on excessive discounts.
3010.284 Limitations on discounts below avoided cost.
3010.285 Proposal to adjust a rate associated with a workshare
discount.
3010.286 Application for waiver.
Authority: 39 U.S.C. 503; 3622.
Subpart A--General Provisions.
Sec. 3010.100 Applicability.
(a) The rules in this part implement provisions in 39 U.S.C.
chapter 36, subchapter I, establishing the modern system of ratemaking
for regulating rates and classes for market dominant products. These
rules are applicable whenever the Postal Service proposes to adjust a
rate of general applicability for any market dominant product, which
includes the addition of a new rate, the removal of an existing rate,
or a change to an existing rate. Current rates may be found in the Mail
Classification Schedule appearing on the Commission's website at
www.prc.gov.
(b) Rates may be adjusted either subject to the rules appearing in
subpart B of this part, which includes a limitation on rate increases,
or subject to the rules appearing in subpart I of this part, which does
not include a limitation on rate increases but requires either
extraordinary or exceptional circumstances. The rules applicable to the
calculation of the limitations on rate increases appear in subparts C
through H of this part. The rules for workshare discounts, which are
applicable whenever market dominant rates are adjusted, appear in
subpart J of this part.
Sec. 3010.101 Definitions.
(a) The definitions in paragraphs (b) through (m) of this section
apply to this part.
(b) ``Annual limitation'' means the annual limitation on the
percentage change in rates equal to the change in the Consumer Price
Index for all Urban Consumers (CPI-U) unadjusted for seasonal variation
over the most recently available 12-month period preceding the date the
Postal Service files a request to review its notice of rate adjustment,
as determined by the Commission.
(c) ``Banked rate authority'' means unused rate adjustment
authority accumulated for future use pursuant to these rules.
(d) A ``class'' of mail means the First-Class Mail, USPS Marketing
Mail, Periodicals, Package Services, or Special Services groupings of
market dominant Postal Service products or services. Generally, the
regulations in this part are applicable to individual classes of mail.
(e) ``Density rate authority'' means rate authority that is
available to all classes to address the effects of decreases in density
of mail.
(f) ``Maximum rate adjustment authority'' means the maximum
percentage change in rates available to a class for any planned
increase in rates. It is the sum of: The consumer price index rate
authority, and any available density rate authority, retirement
obligation rate authority, banked rate authority, performance-based
rate authority, and rate authority applicable to non-compensatory
classes.
(g) ``Performance-based rate authority'' means rate authority that
is available to all classes where the Postal Service meets or exceeds
operational efficiency-based requirement and adheres to service
standard-based requirement as determined by the Commission.
(h) ``Rate authority applicable to non-compensatory classes'' means
rate authority available to classes where revenue for each product
within the class was insufficient to cover that product's attributable
costs as determined by the Commission.
(i) ``Rate cell'' means each and every separate rate identified as
a rate of general applicability.
(j) ``Rate incentive'' means a discount that is not a workshare
discount and that is designed to increase or retain volume, improve the
value of mail for mailers, or improve the operations of the Postal
Service.
(k) ``Rate of general applicability'' means a rate applicable to
all mail meeting standards established by the Mail Classification
Schedule, the Domestic Mail Manual, and the International Mail Manual.
A rate is not a rate of general applicability if eligibility for the
rate is dependent on factors other than the characteristics of the mail
to which the rate applies. A rate is not a rate of general
applicability if it benefits a single mailer. A rate that is only
available upon the written agreement of both the Postal Service and a
mailer, a group of mailers, or a foreign postal operator is not a rate
of general applicability.
(l) ``Retirement obligation rate authority'' means rate authority
that is available to all classes to provide revenue for remittance
towards the statutorily mandated amortization payments for unfunded
liabilities.
(m) A ``seasonal or temporary rate'' is a rate that is in effect
for a limited and defined period of time.
Sec. 3010.102 Schedule for regular and predictable rate adjustments.
(a) The Postal Service shall develop a Schedule for Regular and
Predictable Rate Adjustments applicable to rate adjustments subject to
this part. The Schedule for Regular and Predictable Rate Adjustments
shall:
(1) Schedule rate adjustments at specific regular intervals of
time;
(2) Provide estimated filing and implementation dates (month and
year) for future rate adjustments for each class of mail expected over
a minimum of the next 3 years; and
(3) Provide an explanation that will allow mailers to predict with
reasonable accuracy, by class, the amounts of future scheduled rate
adjustments.
(b) The Postal Service shall file a current Schedule for Regular
and Predictable Rate Adjustments annually with the Commission at the
time of filing the Postal Service's section 3652 report. The Commission
shall post the current schedule on the Commission's website at
www.prc.gov.
(c) Whenever the Postal Service deems it appropriate to change the
Schedule for Regular and Predictable Rate Adjustments, it shall file a
revised schedule.
(d) The Postal Service may vary the magnitude of rate adjustments
from those estimated by the Schedule for Regular and Predictable Rate
Adjustments. In such case, the Postal Service shall provide an
explanation for such variation with its rate adjustment filing.
Subpart B--Rate Adjustments
Sec. 3010.120 General
This subpart describes the process for the periodic adjustment of
rates subject to the percentage limitations specified in Sec. 3010.127
that are applicable to each class of mail.
Sec. 3010.121 Postal Service rate adjustment filing.
(a) In every instance in which the Postal Service determines to
exercise its statutory authority to adjust rates for a class of mail,
the Postal Service shall comply with the requirements specified in
paragraphs (b) through (d) of this section.
(b) The Postal Service shall take into consideration how the
planned rate adjustments are in accordance with the provisions of 39
U.S.C. chapter 36.
(c) The Postal Service shall provide public notice of its planned
rate adjustments in a manner reasonably designed to inform the mailing
community and the general public that it intends to adjust rates no
later than 90
[[Page 67689]]
days prior to the planned implementation date of the rate adjustments.
(d) The Postal Service shall file a request to review its notice of
rate adjustment with the Commission no later than 90 days prior to the
planned implementation date of the rate adjustment.
Sec. 3010.122 Contents of a rate adjustment filing.
(a) A rate adjustment filing under Sec. 3010.121 shall include the
items specified in paragraphs (b) through (j) of this section.
(b) A representation or evidence that public notice of the planned
changes has been issued or will be issued at least 90 days before the
effective date(s) for the planned rate adjustments.
(c) The intended effective date(s) of the planned rate adjustments.
(d) A schedule of the planned rate adjustments, including a
schedule identifying every change to the Mail Classification Schedule
that will be necessary to implement the planned rate adjustments.
(e) The identity of a responsible Postal Service official who will
be available to provide prompt responses to requests for clarification
from the Commission.
(f) The supporting technical documentation as described in Sec.
3010.123.
(g) A demonstration that the planned rate adjustments are
consistent with 39 U.S.C. 3626, 3627, and 3629.
(h) A certification that all cost, avoided cost, volume, and
revenue figures submitted with the rate adjustment filing are developed
from the most recent applicable Commission accepted analytical
principles.
(i) For a rate adjustment that only includes a decrease in rates, a
statement of whether the Postal Service elects to generate unused rate
adjustment authority.
(j) Such other information as the Postal Service believes will
assist the Commission in issuing a timely determination of whether the
planned rate adjustments are consistent with applicable statutory
policies.
Sec. 3010.123 Supporting technical documentation.
(a) Supporting technical documentation shall include the items
specified in paragraphs (b) through (k) of this section, as applicable
to the specific rate adjustment filing. This information must be
supported by workpapers in which all calculations are shown and all
relevant values (e.g., rates, CPI-U values, billing determinants) are
identified with citations to original sources. The information must be
submitted in machine-readable, electronic format. Spreadsheet cells
must be linked to underlying data sources or calculations (not hard-
coded), as appropriate.
(b) The maximum rate adjustment authority, by class, as summarized
by Sec. 3010.127 and calculated separately for each of subparts C
through H of this part, as appropriate.
(c) A schedule showing the banked rate adjustment authority
available, by class, and the available amount for each of the preceding
5 years calculated as required by subpart H of this part.
(d) The calculation of the percentage change in rates, by class,
calculated as required by Sec. 3010.128.
(e) The planned usage of rate adjustment authority, by class, and
calculated separately for each of subparts C through H of this part, as
appropriate.
(f) The amount of new unused rate adjustment authority, by class,
if any, that will be generated by the rate adjustment calculated as
required by subpart H of this part, as applicable.
(g) A schedule of the workshare discounts included with the planned
rate adjustments, and a companion schedule listing the avoided costs
that underlie each such discount.
(h) Whenever the Postal Service establishes a new workshare
discount rate, it must include with its filing:
(1) A statement explaining its reasons for establishing the
workshare discount;
(2) All data, economic analyses, and other information relied on to
justify the workshare discount; and
(3) A certification based on comprehensive, competent analyses that
the discount will not adversely affect either the rates or the service
levels of users of postal services who do not take advantage of the
workshare discount.
(i) Whenever the Postal Service establishes a new discount or
surcharge rate it does not view as creating a workshare discount, it
must include with its filing:
(1) An explanation of the basis for its view that the discount or
surcharge rate is not a workshare discount; and
(2) A certification that the Postal Service applied accepted
analytical principles to the discount or surcharge rate.
(j) Whenever the Postal Service includes a rate incentive with its
planned rate adjustment, it must include with its filing:
(1) If the rate incentive is a rate of general applicability,
sufficient information to demonstrate that the rate incentive is a rate
of general applicability; and
(2) A statement of whether the Postal Service has excluded the rate
incentive from the calculation of the percentage change in rates under
Sec. 3010.128.
(k) For each class or product where the attributable cost for that
class or product exceeded the revenue from that class or product as
determined by the Commission, a demonstration that the planned rate
adjustments comply with the requirements in subpart G of this part.
Sec. 3010.124 Docket and notice.
(a) The Commission will establish a docket for each rate adjustment
filed by the Postal Service under Sec. 3010.121, promptly publish
notice of the filing in the Federal Register, and post the filing on
its website. The notice shall include the items specified in paragraphs
(b) through (g) of this section.
(b) The general nature of the proceeding.
(c) A reference to legal authority under which the proceeding is to
be conducted.
(d) A concise description of the planned changes in rates, fees,
and the Mail Classification Schedule.
(e) The identification of an officer of the Commission to represent
the interests of the general public in the docket.
(f) A period of 30 days from the date of the filing for public
comment.
(g) Such other information as the Commission deems appropriate.
Sec. 3010.125 Opportunity for comments.
Public comments should focus on whether planned rate adjustments
comport with applicable statutory and regulatory requirements.
Sec. 3010.126 Proceedings.
(a) If the Commission determines that the rate adjustment filing
does not substantially comply with the requirements of Sec. Sec.
3010.122 and 3010.123, the Commission may:
(1) Inform the Postal Service of the deficiencies and provide an
opportunity for the Postal Service to take corrective action;
(2) Toll or otherwise modify the procedural schedule until such
time the Postal Service takes corrective action;
(3) Dismiss the rate adjustment filing without prejudice; or
(4) Take other action as deemed appropriate by the Commission.
(b) Within 21 days of the conclusion of the public comment period
the Commission will determine whether the planned rate adjustments are
consistent with applicable law and issue an order announcing its
findings. Applicable law means only the applicable requirements
[[Page 67690]]
of this part, Commission directives and orders, and 39 U.S.C. 3626,
3627, and 3629.
(c) If the planned rate adjustments are found consistent with
applicable law, they may take effect.
(d) If the planned rate adjustments are found inconsistent with
applicable law, the Commission will notify and require the Postal
Service to respond to any issues of noncompliance.
(e) Following the Commission's notice of noncompliance, the Postal
Service may submit an amended rate adjustment filing that describes the
modifications to its planned rate adjustments that will bring its rate
adjustments into compliance. An amended rate adjustment filing shall be
accompanied by sufficient explanatory information to show that all
deficiencies identified by the Commission have been corrected.
(f) The Commission will allow a period of 10 days from the date of
the amended rate adjustment filing for public comment.
(g) The Commission will review the amended rate adjustment filing
together with any comments filed for compliance and issue an order
announcing its findings within 21 days after the comment period ends.
(h) If the planned rate adjustments as amended are found to be
consistent with applicable law, they may take effect. However, no
amended rate shall take effect until 45 days after the Postal Service
transmits its rate adjustment filing specifying that rate.
(i) If the planned rate adjustments in an amended rate adjustment
filing are found to be inconsistent with applicable law, the Commission
shall explain the basis for its determination and suggest an
appropriate remedy. Noncompliant rates may not go into effect.
(j) A Commission finding that a planned rate adjustment is in
compliance with the applicable requirements of this part, Commission
directives and orders, and 39 U.S.C. 3626, 3627, and 3629 is decided on
the merits. A Commission finding that a planned rate adjustment does
not contravene other policies of 39 U.S.C. chapter 36, subchapter I is
provisional and subject to subsequent review.
Sec. 3010.127 Maximum rate adjustment authority.
(a) The maximum rate adjustment authority available to the Postal
Service for each class of market dominant mail is limited to the sum of
the percentage points developed in:
(1) Subpart C--Consumer Price Index Rate Authority;
(2) Subpart D--Density Rate Authority;
(3) Subpart E--Retirement Obligation Rate Authority;
(4) Subpart F--Performance-based Rate Authority;
(4) Subpart G--Non-compensatory Classes or Products; and
(5) Subpart H--Accumulation of Unused and Disbursement of Banked
Rate Adjustment Authority.
(b) For any product where the attributable cost for that product
exceeded the revenue from that product as determined by the Commission,
rates may not be reduced.
Sec. 3010.128 Calculation of percentage change in rates.
(a) For the purpose of calculating the percentage change in rates,
the current rate is the rate in effect at the time of the rate
adjustment filing under Sec. 3010.121 with the following exceptions.
(1) A seasonal or temporary rate shall be identified and treated as
a rate cell separate and distinct from the corresponding non-seasonal
or permanent rate. When used with respect to a seasonal or temporary
rate, the current rate is the most recent rate in effect for the rate
cell, regardless of whether the seasonal or temporary rate is available
at the time of the rate adjustment filing.
(2) When used with respect to a rate cell that corresponds to a
rate incentive that was previously excluded from the calculation of the
percentage change in rates, the current rate is the full undiscounted
rate in effect for the rate cell at the time of the rate adjustment
filing, not the discounted rate in effect for the rate cell at such
time.
(b) For the purpose of calculating the percentage change in rates,
the volume for each rate cell shall be obtained from the most recently
available 12 months of Postal Service billing determinants with the
following permissible adjustments.
(1) The Postal Service shall make reasonable adjustments to the
billing determinants to account for the effects of classification
changes such as the introduction, deletion, or redefinition of rate
cells. The Postal Service shall identify and explain all adjustments.
All information and calculations relied upon to develop the adjustments
shall be provided together with an explanation of why the adjustments
are appropriate.
(2) Whenever possible, adjustments shall be based on known mail
characteristics or historical volume data, as opposed to forecasts of
mailer behavior.
(3) For an adjustment accounting for the effects of the deletion of
a rate cell when an alternate rate cell is not available, the Postal
Service should adjust the billing determinants associated with the rate
cell to 0. If the Postal Service does not adjust the billing
determinants for the rate cell to 0, the Postal Service shall include a
rationale for its treatment of the rate cell with the information
required under paragraph (b)(1) of this section.
(c) For a rate adjustment that involves a rate increase, for each
class of mail and product within the class, the percentage change in
rates is calculated in three steps. First, the volume of each rate cell
in the class is multiplied by the planned rate for the respective cell
and the resulting products are summed. Second, the same set of rate
cell volumes is multiplied by the corresponding current rate for each
cell and the resulting products are summed. Third, the percentage
change in rates is calculated by dividing the results of the first step
by the results of the second step and subtracting 1 from the quotient.
The result is expressed as a percentage.
(d) For rate adjustments that only involve a rate decrease, for
each class of mail and product within the class, the percentage change
in rates is calculated by amending the workpapers attached to the
Commission's order relating to the most recent rate adjustment filing
that involved a rate increase to replace the planned rates under the
most recent rate adjustment filing that involves a rate increase with
the corresponding planned rates applicable to the class from the rate
adjustment filing involving only a rate decrease.
(e) The formula for calculating the percentage change in rates for
a class, described in paragraphs (c) and (d) of this section, is as
follows:
Percentage change in rates =
[GRAPHIC] [TIFF OMITTED] TP11DE19.002
[[Page 67691]]
Where,
N = number of rate cells in the class
i = denotes a rate cell (i = 1, 2, . . . , N)
Ri,n = planned rate of rate cell i
Ri,c = current rate of rate cell i (for rate adjustment involving a
rate increase) or rate from most recent rate adjustment involving a
rate increase for rate cell i (for a rate adjustment only involving
a rate decrease)
Vi = volume of rate cell i
(f) Treatment of rate incentives.
(1) Rate incentives may be excluded from a percentage change in
rates calculation. If the Postal Service elects to exclude a rate
incentive from a percentage change in rates calculation, the rate
incentive shall be treated in the same manner as a rate under a
negotiated service agreement (as described in Sec. 3010.128(g)).
(2) A rate incentive may be included in a percentage change in
rates calculation if it meets the following criteria:
(i) The rate incentive is in the form of a discount or can be
easily translated into a discount;
(ii) Sufficient billing determinants are available for the rate
incentive to be included in the percentage change in rate calculation
for the class, which may be adjusted based on known mail
characteristics or historical volume data (as opposed to forecasts of
mailer behavior); and
(iii) The rate incentive is a rate of general applicability.
(g) Treatment of volume associated with negotiated service
agreements and rate incentives that are not rates of general
applicability.
(1) Mail volumes sent at rates under a negotiated service agreement
or a rate incentive that is not a rate of general applicability are to
be included in the calculation of the percentage change in rates under
this section as though they paid the appropriate rates of general
applicability. Where it is impractical to identify the rates of general
applicability (e.g., because unique rate categories are created for a
mailer), the volumes associated with the mail sent under the terms of
the negotiated service agreement or the rate incentive that is not a
rate of general applicability shall be excluded from the calculation of
the percentage change in rates.
(2) The Postal Service shall identify and explain all assumptions
it makes with respect to the treatment of negotiated service agreements
and rate incentives that are not rates of general applicability in the
calculation of the percentage change in rates and provide the rationale
for its assumptions.
Sec. 3010.129 Exceptions for de minimis rate increases.
(a) The Postal Service may request that the Commission review a de
minimis rate increase without immediately calculating the maximum rate
adjustment authority or banking unused rate adjustment authority. For
this exception to apply, requests to review de minimis rate adjustments
must be filed separately from any other request to review a rate
adjustment filing.
(b) Rate adjustments resulting in rate increases are de minimis if:
(1) For each affected class, the rate increases do not result in
the percentage change in rates for the class equaling or exceeding
0.001 percent; and
(2) For each affected class, the sum of all rate increases included
in de minimis rate increases since the most recent rate adjustment
resulting in a rate increase, or the most recent rate adjustment due to
extraordinary and exceptional circumstances, that was not a de minimis
rate increase does not result in the percentage change in rates for the
class equaling or exceeding 0.001 percent.
(c) If the rate adjustments are de minimis, no unused rate
adjustment authority will be added to the schedule of banked rate
adjustment authority maintained under subpart G of this part as a
result of the de minimis rate increase.
(d) If the rate adjustments are de minimis, no rate decreases may
be taken into account when determining whether rate increases comply
with paragraphs (b)(1) and (2) of this section.
(e) In the next rate adjustment filing proposing to increase rates
for a class that is not a de minimis rate increase:
(1) The maximum rate adjustment authority shall be calculated as if
the de minimis rate increase had not been filed; and
(2) For purposes of calculating the percentage change in rates, the
current rate shall be the current rate from the de minimis rate
increase.
(f) The Postal Service shall file supporting workpapers with each
request to review a de minimis rate increase that demonstrate that the
sum of all rate increases included in de minimis rate increases since
the most recent rate adjustment resulting in a rate increase that was
not de minimis, or the most recent rate adjustment due to extraordinary
and exceptional circumstances, does not result in a percentage change
in rates for the class equaling or exceeding 0.001 percent.
(g) For any product where the attributable cost for that product
exceeded the revenue from that product as determined by the Commission,
rates may not be reduced.
Subpart C--Consumer Price Index Rate Authority
Sec. 3010.140 Applicability.
The Postal Service may adjust rates based upon changes in the
Consumer Price Index for all Urban Consumers (CPI-U) identified in
Sec. 3010.141. If rate adjustment filings involving rate increases are
filed 12 or more months apart, rate adjustments are subject to a full
year limitation calculated pursuant to Sec. 3010.142. If rate
adjustment filings involving rate increases are filed less than 12
months apart, rate adjustments are subject to a partial year limitation
calculated pursuant to Sec. 3010.143.
Sec. 3010.141 CPI-U data source.
The monthly CPI-U values needed for the calculation of rate
adjustment limitations under this section shall be obtained from the
Bureau of Labor Statistics (BLS) Consumer Price Index--All Urban
Consumers, U.S. All Items, Not Seasonally Adjusted, Base Period 1982-84
= 100. The current Series ID for the index is ``CUUR0000SA0.''
Sec. 3010.142 CPI-U rate authority when rate adjustment filings are
12 or more months apart.
(a) If a rate adjustment filing involving a rate increase is filed
12 or more months after the most recent rate adjustment filing
involving a rate increase, then the calculation of an annual limitation
for the class (full year limitation) involves three steps. First, a
simple average CPI-U index is calculated by summing the most recently
available 12 monthly CPI-U values from the date of the rate adjustment
filing and dividing the sum by 12 (Recent Average). Second, a second
simple average CPI-U index is similarly calculated by summing the 12
monthly CPI-U values immediately preceding the Recent Average and
dividing the sum by 12 (Base Average). Third, the full year limitation
is calculated by dividing the Recent Average by the Base Average and
subtracting 1 from the quotient. The result is expressed as a
percentage, rounded to three decimal places.
(b) The formula for calculating a full year limitation for a rate
adjustment filing filed 12 or more months after the last rate
adjustment filing is as follows: Full Year Limitation = (Recent
Average/Base Average)-1.
[[Page 67692]]
Sec. 3010.143 CPI-U rate authority when rate adjustment filings are
less than 12 months apart.
(a) If a rate adjustment filing involving a rate increase is filed
less than 12 months after the most recent rate adjustment filing
involving a rate increase, then the annual limitation for the class
(partial year limitation) will recognize the rate increases that have
occurred during the preceding 12 months. When the effects of those
increases are removed, the remaining partial year limitation is the
applicable restriction on rate increases.
(b) The applicable partial year limitation is calculated in two
steps. First, a simple average CPI-U index is calculated by summing the
12 most recently available monthly CPI-U values from the date of the
rate adjustment filing and dividing the sum by 12 (Recent Average).
Second, the partial year limitation is then calculated by dividing the
Recent Average by the Recent Average from the most recent previous rate
adjustment filing (Previous Recent Average) applicable to each affected
class of mail and subtracting 1 from the quotient. The result is
expressed as a percentage, rounded to three decimal places.
(c) The formula for calculating the partial year limitation for a
rate adjustment filing filed less than 12 months after the last rate
adjustment filing is as follows: Partial Year Limitation = (Recent
Average/Previous Recent Average)-1.
Subpart D--Density Rate Authority
Sec. 3010.160 Applicability.
(a) This subpart allocates rate authority to address the effects of
decreases in the density of mail as measured by the sources identified
in Sec. 3010.161. The calculation of the additional rate authority
corresponding to the change in density is described in Sec. 3010.162.
(b) The Postal Service shall file a notice with the Commission by
December 31 of each year that calculates the amount of density rate
authority that is eligible to be authorized under this subpart.
(c) The Commission shall review the Postal Service's notice and
determine how much, if any, rate authority will be authorized under
this subpart. Any rate authority allocated under this subpart:
(1) Shall be made available to the Postal Service as of the date of
the Commission's determination;
(2) Must be included in the calculation of the maximum rate
adjustment authority in the first generally applicable rate adjustment
filed after the Commission's determination;
(3) Shall lapse if unused, within 12 months of the Commission's
determination; and
(4) May not be used to generate unused rate authority, nor shall it
affect existing banked rate authority.
Sec. 3010.161 Density calculation data sources.
(a) The data needed for the calculation of the density rate
authority in Sec. 3010.162 shall be obtained from the values reported
by the Postal Service as specified in paragraphs (b) through (d) of
this section. When both originally filed and annually revised data are
available, the originally filed data shall be used. When the originally
filed data are corrected through a refiling or in the Commission's
Annual Compliance Determination report, the corrected version of the
originally filed data shall be used.
(b) Market dominant volume and total volume from the Revenue,
Pieces, and Weight report, filed by the Postal Service under Sec.
3050.25 of this chapter;
(c) Institutional costs and total costs from the Cost and Revenue
Analysis report, filed with the Postal Service's section 3652 report;
and
(d) The number of delivery points, from the input data used to
produce the Total Factor Productivity estimates, filed with the Postal
Service's section 3652 report.
Sec. 3010.162 Calculation of density rate authority.
(a) Formulas--(1) The formula for calculating the amount of density
rate authority, in conformance with paragraph (c)(1) of this section,
is as follows:
Density rate authority = the greater of 0 and
[GRAPHIC] [TIFF OMITTED] TP11DE19.003
Where,
T = most recently completed fiscal year
T-1 = fiscal year prior to fiscal year T
ICT = institutional cost in fiscal year T
TCT = total cost in fiscal year T
%[Delta]D[T-1,T] = Percentage change in density from
fiscal year T-1 to fiscal year T
(2) The formula for calculating the percentage change in density,
in conformance with paragraph (b)(2) of this section, is as follows:
Percentage change in density from prior fiscal year =
[GRAPHIC] [TIFF OMITTED] TP11DE19.004
Where,
T = most recently completed fiscal year
T-1 = fiscal year prior to fiscal year T
VT = volume in fiscal year T (either market dominant
volume or total volume as discussed in paragraph (b)(2) of this
section)
DPT = delivery points in fiscal year T
(b) Calculation--(1) The amount of density rate authority available
under this section shall be calculated in three steps. First, the
percentage change in density during the most recently completed fiscal
year shall be calculated using the formula in paragraph (a)(2) of this
section as described in paragraph (b)(2) of this section. Second, this
percentage change shall be multiplied by the institutional cost ratio,
which is calculated as institutional costs for the most recently
completed fiscal year divided by total costs for that fiscal year.
Finally, this product shall be multiplied by negative 1 so that
declines in density correspond to a positive increase in rates. If the
result of this calculation is less than 0, the amount of additional
rate authority shall be 0.
[[Page 67693]]
(2) The percentage change in density from the prior fiscal year
shall be calculated as the ratio of volume to delivery points for the
most recently completed fiscal year, divided by the same ratio for the
prior fiscal year, and subtracting 1 from the quotient. The result is
expressed as a percentage, rounded to three decimal places. To ensure
that decreases in competitive product volume will not result in the
Postal Service receiving greater additional rate adjustment authority
under this subpart, the percentage change in density shall be
calculated two ways: Using market dominant volume and using total
volume. The greater of the two results (not using absolute value) shall
be used as the percentage change in density from the prior fiscal year.
Subpart E--Retirement Obligation Rate Authority
Sec. 3010.180 Definitions.
(a) The definitions in paragraphs (b) through (e) of this section
apply to this subpart.
(b) ``Amortization payments'' mean the amounts that the Postal
Service is invoiced by the U.S. Office of Personnel Management to
provide for the liquidation of the specific and supplemental unfunded
liabilities by statutorily predetermined dates, as described in Sec.
3010.182(a).
(c) ``Phase-in period'' means the period of time spanning the
fiscal years of issuance of the first five determinations following the
effective date of this subpart, as specified by the timing provisions
in Sec. 3010.181.
(d) ``Required minimum remittance'' means the minimum amount the
Postal Service is required to remit during a particular fiscal year, as
calculated under Sec. 3010.184.
(e) ``Revenue collected under this subpart'' means the amount of
revenue collected during a fiscal year as a result of all previous rate
increases authorized under this subpart, as calculated under Sec.
3010.184.
Sec. 3010.181 Applicability.
(a) This subpart allocates additional rate authority to provide the
Postal Service with revenue for remittance towards the statutorily
mandated amortization payments for supplemental and unfunded
liabilities identified in Sec. 3010.182. As described in Sec.
3010.184, for retirement obligation rate authority to be made
available, the Postal Service must annually remit towards these
amortization payments all revenue collected under this subpart
previously. The full retirement obligation rate authority, calculated
as described in Sec. 3010.183, shall be phased in over 5 fiscal years,
taking into account changes in volume during the phase-in period. If
combined with an equal rate increase on Competitive products, the
compounded rate increase resulting from retirement obligation rate
authority is calculated to generate sufficient additional revenue at
the end of the phase-in period to permit the Postal Service to remit
the entire invoiced amount of its amortization payments.
(b) The Postal Service shall file a notice with the Commission by
December 31 of each year, until the conclusion of the phase-in period,
that calculates the amount of retirement obligation rate authority that
is eligible to be authorized under this subpart.
(c) The Commission shall review the Postal Service's notice and
determine how much, if any, rate authority will be authorized under
this subpart. Any rate authority allocated under this subpart:
(1) Shall be made available to the Postal Service as of the date of
the Commission's determination;
(2) Must be included in the calculation of the maximum rate
adjustment authority in the first generally applicable rate adjustment
filed after the Commission's determination;
(3) Shall lapse if not used in the first generally applicable rate
adjustment filed after the Commission's determination;
(4) Shall lapse if unused, within 12 months of the Commission's
determination; and
(5) May not be used to generate unused rate authority, nor shall it
affect existing banked rate authority.
Sec. 3010.182 Retirement obligation data sources.
(a) The amounts of the amortization payments needed for the
calculation of retirement obligation rate adjustment authority in Sec.
3010.183 shall be obtained from notifications to the Postal Service by
the Office of Personnel Management of annual determinations of the
funding amounts specific to payments at the end of each fiscal year for
Retiree Health Benefits as computed under 5 U.S.C. 8909a(d)(2)(B) and
(d)(3)(B)(ii); the Civil Service Retirement System as computed under 5
U.S.C. 8348(h)(2)(B); and the Federal Employees Retirement System as
computed under 5 U.S.C. 8423(b)(1)(B), (b)(2) and (b)(3)(B), filed with
the Postal Service's section 3652 report.
(b) The values for market dominant revenue, total revenue and
market dominant volumes needed for the calculation of retirement
obligation rate authority in Sec. 3010.183 shall be obtained from
values reported in the Revenue, Pieces, and Weight report, filed by the
Postal Service under Sec. 3050.25 of this chapter.
(c) The values for additional rate authority previously provided
under this subpart, if any, needed for the calculation of retirement
obligation rate authority in Sec. 3010.182 and the calculation of
required minimum remittances under Sec. 3010.183 shall be obtained
from the Commission's prior determinations.
Sec. 3010.183 Calculation of retirement obligation rate authority.
(a) Formulas--(1) The formula for calculating the amount of
retirement obligation rate authority available under this subpart,
described in paragraph (b)(1) of this section, is as follows:
Additional rate authority in fiscal year T+1 =
[GRAPHIC] [TIFF OMITTED] TP11DE19.005
Where,
T = most recently completed fiscal year
APT = total amortization payment for fiscal year T
TRT = total revenue in fiscal year T
PARAT = previously authorized retirement obligation rate
authority, compounded through fiscal year T, expressed as a
proportion of the market dominant rate base and calculated using the
formula in paragraph (a)(2) of this section as described in
paragraph (b)(2) of this section
N = number of previously issued determinations in which retirement
obligation rate authority was made available under this subpart
(2) The formula for calculating the amount of previously authorized
retirement obligation rate authority through fiscal year T, described
in paragraph (b)(2) of this section, is as follows:
Previously authorized retirement obligation rate authority through
fiscal year T =
[GRAPHIC] [TIFF OMITTED] TP11DE19.006
Where,
T = most recently completed fiscal year
rt = retirement obligation rate authority authorized in
fiscal year t
N = number of previously issued determinations in which retirement
obligation rate authority was made available under this subpart
(c) Calculations--(1) The amount of retirement obligation rate
authority available for a fiscal year shall be
[[Page 67694]]
calculated in four steps. First, the ratio of the total amortization
payment for the fiscal year under review to the total revenue in the
fiscal year under review shall be added to 1. This sum represents the
factor by which an equal increase in market dominant and competitive
rates in the fiscal year under review would generate sufficient
additional revenue to make the full amortization payment. It does not
account, however, for any previous rate authority authorized under this
subpart. The second step is therefore to subtract the proportion of the
market dominant rate base resulting from previously authorized
retirement obligation rate authority. That proportion is calculated
using the formula in Sec. 3010.184(a)(2) as described in Sec.
3010.183(b)(2) Third, to amortize the resulting amount of retirement
obligation rate authority over the remainder of the phase-in period,
the difference shall be raised to the power of the inverse of the
number of determinations remaining in the phase-in period, including
the current determination. Finally, 1 shall be subtracted from the
result to convert from a proportional change in rates to a percentage
of rate adjustment authority.
(2) The amount of previously authorized retirement obligation rate
authority shall be calculated in two steps. First, the sums of 1 and
the amount of retirement obligation rate authority authorized in each
of the previous fiscal years shall be multiplied together. This product
represents the compounded amount of such rate authority, expressed as a
net rate increase. To express this product as a proportion of the
market dominant rate base, the second step is to subtract the inverse
of this product from 1.
Sec. 3010.184 Required minimum remittances.
(a) Minimum remittances. During each fiscal year subsequent to the
year of the effective date of this subpart, the Postal Service shall
remit towards the liabilities identified in Sec. 3010.182 an amount
equal to or greater than the amount of revenue collected as a result of
all previous rate increases under this subpart during the previous
fiscal year, as calculated using the formulas in paragraph (b) of this
section, as described in paragraph (c) of this section.
(b) Formulas--(1) The formula for calculating the amount of revenue
collected under this subpart during a fiscal year, described in
paragraph (c)(1) of this section, is as follows:
Amount of revenue =
[GRAPHIC] [TIFF OMITTED] TP11DE19.007
Where,
T = most recently completed fiscal year
MDRT = market dominant revenue in fiscal year T
N = number of previously issued determinations in which retirement
obligation rate authority was made available under this subpart
rt = retirement obligation rate authority authorized in
fiscal year t
pt = prorated fraction of rt that was in
effect during fiscal year T, calculated using the formula in
paragraph (a)(2) of this section, as described in paragraph (b)(2)
of this section
(2) The formula for calculating the prorated fraction of retirement
obligation rate authority authorized in a particular fiscal year t that
was in effect during the most recently completed fiscal year, described
in paragraph (c)(2) of this section, is as follows:
Prorated fraction =
[GRAPHIC] [TIFF OMITTED] TP11DE19.008
Where,
T = most recently completed fiscal year
rt = retirement obligation rate authority authorized
under this subpart in fiscal year t
Q = the number of the quarter during the fiscal year of the
effective date of the price increase including retirement obligation
rate authority made available under this subpart
EQ = number of days in quarter Q subsequent to and
including the effective date of the price increase
DQ = total number of days in quarter Q
QMDVQ = market dominant volume in quarter Q
MDVT = market dominant volume in fiscal year T
(c) Calculations--(1) The amount of revenue collected under this
subpart during a fiscal year, as calculated by the formula in paragraph
(a)(1) of this section, shall be calculated in three steps. First, the
sums of 1 and the amount of retirement obligation rate authority made
available under this subpart during each previous fiscal year--prorated
to account for mid-year price increases as described in paragraph
(b)(2) of this section--shall by multiplied together. This product
represents the proportion by which prices were higher during the most
recently completed during the fiscal year as a result of retirement
obligation rate authority. Second, to express this net price increase
as a proportion of market dominant revenue, the inverse of this product
shall be subtracted from 1. Finally, the result shall be multiplied by
market dominant revenue for the fiscal year to change the proportion
into a dollar amount.
(2) The prorated fraction of retirement obligation rate authority
authorized in a particular fiscal year that was in effect during the
most recently completed fiscal year, as calculated by the formula in
paragraph (b)(2) of this section, shall be a piecewise function of
three parts. First, if the retirement obligation rate authority
authorized in a particular year was not in effect during the most
recently completed fiscal year, the prorated fraction shall be 0.
Second, if the retirement obligation rate authority
[[Page 67695]]
authorized in a particular year was in effect during the entirety of
the most recently completed fiscal year, the prorated fraction shall be
1. Finally, if the retirement obligation rate authority authorized in a
particular fiscal year was used to raise prices during the most
recently completed fiscal year, the prorated fraction shall be the
proportion of volume sent during the fiscal year after that rate
increase went into effect.
(c) This proportion shall be calculated in four steps. First, the
number of days of the fiscal quarter after and including the effective
date of the price adjustment including the retirement obligation rate
authority shall be divided by the total number of days in that fiscal
quarter. This quotient determines the proportion of days in that
quarter in which the higher rates were in effect. Second, that quotient
shall be multiplied by the market dominant volume from that fiscal
quarter to determine the amount of volume during the quarter receiving
the higher rates. Third, that product shall be added to the market
dominant volume from any subsequent quarters of the fiscal year because
the volume in those quarters was also sent under the higher rates.
Finally, this sum shall be divided by the total market dominant volume
from the fiscal year to determine the proportion of annual volume sent
after the rate increase went into effect.
Sec. 3010.185 Forfeiture.
(a) If any of the circumstances described in paragraphs (b) through
(d) of this section occur, the Postal Service shall not be eligible for
future retirement obligation rate authority under this subpart, and the
Commission may commence additional proceedings as appropriate.
(b) If, subsequent to 45 calendar days after the effective date of
this subpart and prior to the end of the phase-in period, the Postal
Service fails to timely file the notice required under Sec.
3010.181(b);
(c) In any fiscal year in which retirement obligation rate
authority was determined to be available under this subpart, the Postal
Service fails to timely file under Sec. 3010.122 for a rate increase
including the full amount of retirement obligation rate authority
authorized under this subpart during that fiscal year, to take effect
prior to the end of that fiscal year; or
(d) In any fiscal year including or subsequent to the first fiscal
year in which rate authority under this subpart was used to adjust
market dominant rates, the Postal Service's total payments towards the
supplemental and unfunded liabilities identified in Sec. 3010.182 are
not equal to or greater than the minimum remittance required for that
fiscal year under Sec. 3010.184(a).
Subpart F--Performance-Based Rate Authority
Sec. 3010.200 Applicability.
(a) This subpart allocates performance-based rate authority of 1
percentage point for each class of mail, which is available upon
meeting or exceeding both an operational efficiency-based requirement
and adhering to a service standard-based requirement. This rate
authority is allocated based on both meeting the operational
efficiency-based requirement appearing in Sec. 3010.201 and meeting
the service standard-based requirement appearing in Sec. 3010.202.
(b) The Postal Service shall file a notice with the Commission by
December 31 of each year that demonstrates whether or not performance-
based rate authority is eligible to be authorized under this subpart.
(c) The Commission shall review the Postal Service's notice and any
challenges filed pursuant to Sec. 3010.202(b) and announce how much,
if any, rate authority will be authorized under this subpart. Any rate
authority allocated under this subpart:
(1) Shall be made available to the Postal Service as of the date of
the Commission's announcement;
(2) Must be included in the calculation of the maximum rate
adjustment authority in the first generally applicable rate adjustment
filed after the Commission's announcement;
(3) Shall lapse if unused, 12 months after the Commission's
announcement; and
(4) May not be used to generate unused rate authority, nor shall it
affect existing banked rate authority.
Sec. 3010.201 Operational efficiency-based requirement.
The operational efficiency-based requirement is met if the Postal
Service's Total Factor Productivity for the measured fiscal year
exceeds the previous fiscal year as determined by the Commission.
Sec. 3010.202 Service standard-based requirement.
(a) The service standard-related criteria is met if all of the
Postal Service's service standards (including applicable business
rules) for that class during the applicable fiscal year meet or exceed
the service standards in place for the prior fiscal year on a
nationwide or substantially nationwide basis as determined by the
Commission.
(b) Any interested person may file a challenge to the notice
provided by the Postal Service under Sec. 3010.200(b) by March 15 of
each year. The scope of such a challenge shall be limited to whether or
not the Postal Service's service standards (including applicable
business rules) during the applicable fiscal year met or exceeded the
service standards in place for the prior fiscal year on a nationwide or
substantially nationwide basis. The Commission shall issue an order
which rules on any challenge as soon as practicable.
Subpart G--Non-Compensatory Classes or Products
Sec. 3010.220 Applicability.
This subpart is applicable to a class or product where the
attributable cost for that class or product exceeded the revenue from
that class or product as determined by the Commission. Section 3010.221
is applicable where the attributable cost for a product within a class
exceeded the revenue from that particular product. Section 3010.222 is
applicable where the attributable cost for an entire class exceeded the
revenue from that class.
Sec. 3010.221 Individual product requirement.
Whenever the Postal Service files a rate adjustment filing
affecting a class of mail which includes a product where the
attributable cost for that product exceeded the revenue from that
product, as determined by the Commission, the Postal Service shall
increase the rates for each non-compensatory product by a minimum of 2
percentage points above the percentage increase for that class. This
section does not create additional rate authority applicable to any
class of mail.
Sec. 3010.222 Class requirement and additional class rate authority.
(a) This section provides 2 percentage points of additional rate
authority for any class of mail where the attributable cost for that
class exceeded the revenue from that class as determined by the
Commission. This additional rate authority is optional and may be used
at the Postal Service's discretion.
(b) The Commission shall announce how much, if any, rate authority
will be authorized under this subpart. Any rate authority allocated
under this subpart:
(1) Shall be made available to the Postal Service as of the date of
the Commission's announcement;
(2) Must be included in the calculation of the maximum rate
adjustment authority change in rates in the first generally applicable
rate
[[Page 67696]]
adjustment filed after the Commission's announcement;
(3) Shall lapse if unused, within 12 months of the Commission's
announcement; and
(4) May not be used to generate unused rate authority, nor shall it
affect existing banked rate authority.
Subpart H--Accumulation of Unused and Disbursement of Banked Rate
Adjustment Authority
Sec. 3010.240 General.
Unless a specific exception applies, unused rate adjustment
authority, on a class-by-class basis, shall be calculated for each rate
adjustment filing. Unused rate adjustment authority shall be added to
the schedule of banked rate authority in each instance, and be
available for application to rate adjustments pursuant to the
requirements of this subpart.
Sec. 3010.241 Schedule of banked rate adjustment authority.
Upon the establishment of unused rate adjustment authority, the
Postal Service shall devise and maintain a schedule that tracks the
establishment and subsequent use of banked rate authority on a class-
by-class basis. At a minimum, the schedule must track the amount of
banked rate authority available immediately prior to the rate
adjustment filing and the amount of banked rate authority available
upon acceptance of the rates included in the rate adjustment filing. It
shall also track all changes to the schedule, including the docket
numbers of Commission decisions affecting the schedule, the dates and
amounts that any rate authority was generated or subsequently expended,
and the expiration dates of all rate adjustment authority. The schedule
shall be included with any rate adjustment filing purporting to modify
the amount of banked rate adjustment authority.
Sec. 3010.242 Calculation of unused rate adjustment authority for
rate adjustments that involve a rate increase which are filed 12 months
apart or less.
(a) When rate adjustment filings that involve a rate increase are
filed 12 months apart or less, unused rate adjustment authority for a
class is equal to the difference between the maximum rate adjustment
authority as summarized by Sec. 3010.127 and calculated pursuant to
subparts C through H of this part, as appropriate, and the percentage
change in rates for the class calculated pursuant to Sec. 3010.128,
subject to the limitations described in paragraphs (b) and (c) of this
section.
(b) Unused rate adjustment authority cannot be generated and is
assumed to be 0 percent for classes subject to Sec. 3010.222, Class
requirement and additional class rate authority.
(c) For rate adjustment filings that involve a rate increase,
unused rate adjustment authority cannot exceed the unused portion of
rate authority calculated pursuant to subpart C of this part.
Sec. 3010.243 Calculation of unused rate adjustment authority for
rate adjustments that involve a rate increase which are filed more than
12 months apart.
(a) When rate adjustment filings that involve a rate increase are
filed more than 12 months apart, any interim rate adjustment authority
must first be added to the schedule of banked rate authority before the
unused rate adjustment authority is calculated.
(b) Interim rate adjustment authority for a class is equal to the
Base Average applicable to the second rate adjustment filing (as
developed pursuant to Sec. 3010.142) divided by the Recent Average
utilized in the first rate adjustment filing (as developed pursuant to
Sec. 3010.142) and subtracting 1 from the quotient. The result is
expressed as a percentage and immediately added to the schedule of
banked rate authority as of the date the rate adjustment filing is
filed.
(c) Unused rate adjustment authority for a class is equal to the
difference between the maximum rate adjustment authority as summarized
by Sec. 3010.127 and calculated pursuant to subparts C through H of
this part, as appropriate, and the percentage change in rates for the
class calculated pursuant to Sec. 3010.128, subject to the limitations
described in paragraphs (d) and (e) of this section.
(d) Unused rate adjustment authority cannot be generated and is
assumed to be 0 percent for classes subject to Sec. 3010.222, Class
requirement and additional class rate authority.
(e) For rate adjustment filings that involve a rate increase,
unused rate adjustment authority cannot exceed the unused portion of
rate authority calculated pursuant to subpart C of this part.
Sec. 3010.244 Calculation of unused rate adjustment authority for
rate adjustments that only include rate decreases.
(a) For rate adjustment filings that only include rate decreases,
unused rate adjustment authority for a class is calculated in two
steps. First, the difference between the maximum rate adjustment
authority as summarized by Sec. 3010.127 and calculated pursuant to
subparts C through H of this part, as appropriate, for the most recent
rate adjustment that involves a rate increase and the percentage change
in rates for the class calculated pursuant to Sec. 3010.128(d) is
calculated. Second, the unused rate adjustment authority generated in
the most recent rate adjustment that involves a rate increase is
subtracted from that result.
(b) Unused rate adjustment authority generated under paragraph (a)
of this section for a class shall be added to the unused rate
adjustment authority generated in the most recent rate adjustment that
involves a rate increase on the schedule maintained under Sec.
3010.241. For purposes of Sec. 3010.244, the unused rate adjustment
authority generated under paragraph (a) of this section for a class
shall be deemed to have been added to the schedule maintained under
Sec. 3010.241 on the same date as the most recent rate adjustment
filing that involves a rate increase.
(c) For rate adjustment filings that only include rate decreases,
the sum of unused rate adjustment authority generated under paragraph
(a) of this section and the unused rate adjustment authority generated
in the most recent rate adjustment that involves a rate increase cannot
exceed the unused portion of rate adjustment authority calculated
pursuant to subpart C of this part in the most recent rate adjustment
that involves a rate increase.
(d) Unused rate adjustment authority generated under paragraph (a)
of this section shall be subject to the limitation under Sec.
3010.245, regardless of whether it is used alone or in combination with
other existing unused rate adjustment authority.
(e) For rate adjustment filings that only include rate decreases,
unused rate adjustment authority generated under this section lapses 5
years from the date of filing of the most recent rate adjustment filing
that involves a rate increase.
(f) A rate adjustment filing that only includes rate decreases that
is filed immediately after a rate adjustment due to extraordinary or
exceptional circumstances (i.e., without an intervening rate adjustment
involving a rate increase) may not generate unused rate adjustment
authority.
Sec. 3010.245 Application of banked rate authority.
(a) Banked rate authority may be applied to any planned rate
adjustment subject to the limitations appearing in paragraphs (b)
through (f) of this section.
(b) Banked rate authority may only be applied to a proposal to
adjust rates
[[Page 67697]]
after applying rate authority as described in subparts C through F of
this part and in Sec. 3010.222, Class requirement and additional class
rate authority.
(c) A maximum of 2 percentage points of banked rate authority may
be applied to a rate adjustment for any class in any 12-month period.
If banked rate authority is used, it shall be subtracted from the
schedule of banked rate adjustment authority as of the date of the
final order accepting the rates.
(d) Subject to paragraphs (b) and (c) of this section, interim rate
adjustment authority may be used to make a rate adjustment pursuant to
the rate adjustment filing that led to its calculation. If interim rate
adjustment authority is used to make such a rate adjustment, the
interim rate adjustment authority generated pursuant to the rate
adjustment filing shall first be added to the schedule of banked rate
adjustment authority pursuant to Sec. 3010.241 as the most recent
entry. Then, any interim rate adjustment authority used in accordance
with this paragraph shall be subtracted from the existing banked rate
adjustment authority using a first-in, first-out (FIFO) method,
beginning 5 years before the instant rate adjustment filing.
(e) Banked rate authority for a class must be applied, using a
first-in, first-out (FIFO) method, beginning 5 years before the instant
rate adjustment filing.
(f) Banked rate adjustment authority calculated under this section
shall lapse 5 years from the date of the rate adjustment filing leading
to its calculation.
Subpart I--Rate Adjustments Due to Extraordinary and Exceptional
Circumstances
Sec. 3010.260 General.
The Postal Service may request to adjust rates for market dominant
products due to extraordinary or exceptional circumstances pursuant to
39 U.S.C. 3622(d)(1)(E). The rate adjustments are not subject to rate
adjustment limitations or the restrictions on the use of unused rate
adjustment authority. The rate adjustment request may not include
material classification changes. The request is subject to public
participation and Commission review within 90 days.
Sec. 3010.261 Contents of a request.
(a) Each exigent request shall include the items specified in
paragraphs (b) through (i) of this section.
(b) A schedule of the planned rates.
(c) Calculations quantifying the increase for each affected product
and class.
(d) A full discussion of the extraordinary or exceptional
circumstances giving rise to the request, and a complete explanation of
how both the requested overall increase and the specific rate
adjustments requested relate to those circumstances.
(e) A full discussion of why the requested rate adjustments are
necessary to enable the Postal Service, under best practices of honest,
efficient, and economical management, to maintain and continue the
development of postal services of the kind and quality adapted to the
needs of the United States.
(f) A full discussion of why the requested rate adjustments are
reasonable and equitable as among types of users of market dominant
products.
(g) An explanation of when, or under what circumstances, the Postal
Service expects to be able to rescind the exigent rate adjustments in
whole or in part.
(h) An analysis of the circumstances giving rise to the exigent
request, which should, if applicable, include a discussion of whether
the circumstances were foreseeable or could have been avoided by
reasonable prior action.
(i) Such other information as the Postal Service believes will
assist the Commission in issuing a timely determination of whether the
requested rate adjustments are consistent with applicable statutory
policies.
Sec. 3010.262 Supplemental information.
The Commission may require the Postal Service to provide
clarification of its request or to provide additional information in
order to gain a better understanding of the circumstances leading to
the request or the justification for the specific rate adjustments
requested. The Postal Service shall include within its request the
identification of one or more knowledgeable Postal Service official(s)
who will be available to provide prompt responses to Commission
requests for clarification or additional information.
Sec. 3010.263 Docket and notice.
(a) The Commission will establish a docket for each request to
adjust rates due to extraordinary or exceptional circumstances, publish
notice of the request in the Federal Register, and post the filing on
its website. The notice shall include the items specified in paragraphs
(b) through (g) of this section.
(b) The general nature of the proceeding.
(c) A reference to legal authority under which the proceeding is to
be conducted.
(d) A concise description of the proposals for changes in rates,
fees, and the Mail Classification Schedule.
(e) The identification of an officer of the Commission to represent
the interests of the general public in the docket.
(f) A specified period for public comment.
(g) Such other information as the Commission deems appropriate.
Sec. 3010.264 Public hearing.
(a) The Commission will hold a public hearing on the Postal
Service's request. During the public hearing, responsible Postal
Service officials will appear and respond under oath to questions from
the Commissioners or their designees addressing previously identified
aspects of the Postal Service's request and supporting information.
(b) Interested persons will be given an opportunity to submit to
the Commission suggested relevant questions that might be posed during
the public hearing. Such questions, and any explanatory materials
submitted to clarify the purpose of the questions, should be filed in
accordance with Sec. 3001.9 of this chapter, and will become part of
the administrative record of the proceeding.
(c) The timing and length of the public hearing will depend on the
nature of the circumstances giving rise to the request and the clarity
and completeness of the supporting materials provided with the request.
(d) If the Postal Service is unable to provide adequate
explanations during the public hearing, supplementary written or oral
responses may be required.
Sec. 3010.265 Opportunity for comments.
(a) Following the conclusion of the public hearings and submission
of any supplementary materials, interested persons will be given the
opportunity to submit written comments on:
(1) The sufficiency of the justification for an exigent rate
adjustment;
(2) The adequacy of the justification for adjustments in the
amounts requested by the Postal Service; and
(3) Whether the specific rate adjustments requested are reasonable
and equitable.
(b) An opportunity to submit written reply comments will be given
to the Postal Service and other interested persons.
Sec. 3010.266 Deadline for Commission decision.
Requests under this subpart seek rate relief required by
extraordinary or exceptional circumstances and will be
[[Page 67698]]
treated with expedition at every stage. It is Commission policy to
provide appropriate relief as quickly as possible consistent with
statutory requirements and procedural fairness. The Commission will act
expeditiously on the Postal Service's request, taking into account all
written comments. In every instance, a Commission decision will be
issued within 90 days of the filing of an exigent request.
Sec. 3010.267 Treatment of banked rate adjustment authority.
(a) Each request will identify the banked rate adjustment authority
available as of the date of the request for each class of mail and the
available amount for each of the preceding 5 years.
(b) Rate adjustments may use existing banked rate adjustment
authority in amounts greater than the limitations described in Sec.
3010.245.
(c) Increases will exhaust all banked rate adjustment authority for
each class of mail before imposing additional rate adjustments in
excess of the maximum rate adjustment for any class of mail.
Subpart J--Workshare Discounts
Sec. 3010.280 Applicability.
This subpart is applicable whenever the Postal Service proposes to
adjust a rate associated with a workshare discount. For the purpose of
this subpart, the cost avoided by the Postal Service for not providing
the applicable service refers to the amount identified in the most
recently applicable Annual Compliance Determination, unless the
Commission otherwise provides.
Sec. 3010.281 Calculation of passthroughs for workshare discounts.
For the purpose of this subpart, the percentage passthrough for any
workshare discount shall be calculated by dividing the workshare
discount by the cost avoided by the Postal Service for not providing
the applicable service and expressing the result as a percentage.
Sec. 3010.282 Increased pricing efficiency.
(a) For a workshare discount that is equal to the cost avoided by
the Postal Service for not providing the applicable service, no
proposal to adjust a rate associated with that workshare discount may
change the size of the discount.
(b) For a workshare discount that exceeds the cost avoided by the
Postal Service for not providing the applicable service, no proposal to
adjust a rate associated with that workshare discount may increase the
size of the discount.
(c) For a workshare discount that is less than the cost avoided by
the Postal Service for not providing the applicable service, no
proposal to adjust a rate associated with that workshare discount may
decrease the size of the discount.
Sec. 3010.283 Limitations on excessive discounts.
(a) No proposal to adjust a rate may set a workshare discount that
would exceed the cost avoided by the Postal Service for not providing
the applicable service, unless at least one of the following reasons
provided in paragraphs (b) through (e) of this section applies.
(b) The proposed workshare discount is associated with a new postal
service, a change to an existing postal service, or a new workshare
initiative.
(c) The proposed workshare discount is a minimum of 20 percent less
than the existing workshare discount.
(d) The proposed workshare discount is set in accordance with a
Commission order issued pursuant to Sec. 3010.286.
(e) The proposed workshare discount is provided in connection with
a subclass of mail, consisting exclusively of mail matter of
educational, cultural, scientific, or informational value (39 U.S.C.
3622(e)(2)(C)) and is in compliance with Sec. 3010.285(c).
Sec. 3010.284 Limitations on discounts below avoided cost.
(a) No proposal to adjust a rate may set a workshare discount that
would be below the cost avoided by the Postal Service for not providing
the applicable service, unless at least one of the following reasons
provided in paragraphs (b) through (e) of this section applies.
(b) The proposed workshare discount is associated with a new postal
service, a change to an existing postal service, or a new workshare
initiative.
(c) The proposed workshare discount is a minimum of 20 percent more
than the existing workshare discount.
(d) The proposed workshare discount is set in accordance with a
Commission order issued pursuant to Sec. 3010.286.
(e) The percentage passthrough for the proposed workshare discount
is at least 85 percent.
Sec. 3010.285 Proposal to adjust a rate associated with a workshare
discount.
(a) Each proposal to adjust a rate associated with a workshare
discount shall be supported by substantial evidence and demonstrate
that each proposed workshare discount has been set in compliance with
39 U.S.C. 3622(e) and this subpart. Substantial evidence means such
relevant evidence as a reasonable mind might accept as adequate to
support a conclusion.
(b) For each proposed workshare discount that would exceed the cost
avoided by the Postal Service for not providing the applicable service,
the rate adjustment filing shall indicate the applicable paragraph of
Sec. 3010.283 under which the Postal Service is justifying the
excessive discount and include any relevant analysis supporting the
claim.
(c) For each proposed workshare discount that is provided in
connection with a subclass of mail, consisting exclusively of mail
matter of educational, cultural, scientific, or informational value (39
U.S.C. 3622(e)(2)(C)), would exceed the cost avoided by the Postal
Service for not providing the applicable service, and would not be set
in accordance with at least one specific provision appearing in Sec.
3010.283(b) through (d), the rate adjustment filing shall provide the
information specified in paragraphs (c)(1) through (3) of this section:
(1) The number of mail owners receiving the workshare discount
during the most recent full fiscal year and for the current fiscal year
to date;
(2) The number of mail owners for the applicable product or
products in the most recent full fiscal year and for the current fiscal
year to date; and
(3) An explanation of how the proposed workshare discount would
promote the public interest, even though the proposed workshare
discount would substantially exceed the cost avoided by the Postal
Service.
(d) For each proposed workshare discount that would be below the
cost avoided by the Postal Service for not providing the applicable
service, the rate adjustment filing shall indicate the applicable
paragraph of Sec. 3010.284 under which the Postal Service is
justifying the discount that is below the cost avoided and include any
relevant analysis supporting the claim.
Sec. 3010.286 Application for waiver.
(a) In every instance in which the Postal Service determines to
adjust a rate associated with a workshare discount in a manner that
does not comply with the limitations imposed by Sec. Sec. 3010.283
through 3010.284, the Postal Service shall file an application for
waiver. The Postal Service must file any application for waiver at
least 60 days prior to filing the proposal to adjust a rate associated
with the applicable workshare discount. In its application for waiver,
the Postal Service shall indicate the approximate filing date for its
next rate adjustment filing.
(b) The application for waiver shall be supported by a
preponderance of the
[[Page 67699]]
evidence and demonstrate that a waiver from the limitations imposed by
Sec. Sec. 3010.283 through 3010.284 should be granted. Preponderance
of the evidence means proof by information that, compared with that
opposing it, leads to the conclusion that the fact at issue is more
probably true than not.
(c) The application for waiver shall include a specific and
detailed statement signed by one or more knowledgeable Postal Service
official(s) who sponsors the application and attests to the accuracy of
the information contained within the statement. The statement shall set
forth the information specified in paragraphs (c)(1) through (8) of
this section, as applicable to the specific workshare discount for
which a waiver is sought:
(1) The reason(s) why a waiver is alleged to be necessary (with
justification thereof), including all relevant supporting analysis and
all assumptions relied upon.
(2) The length of time for which a waiver is alleged to be
necessary (with justification thereof).
(3) For each subsequent rate adjustment filing planned to occur
during the length of time for which a waiver is sought, a
representation of the proposed minimum amount of the change to the
workshare discount.
(4) For a claim that the amount of the workshare discount exceeding
the cost avoided by the Postal Service for not providing the applicable
service is necessary in order to mitigate rate shock (39 U.S.C.
3622(e)(2)(B)), the Postal Service shall provide an explanation
addressing all of the items specified in paragraphs (c)(4)(i) through
(iii) of this section:
(i) A description of the customers that the Postal Service claims
would be adversely affected.
(ii) Prices and volumes for the workshare discount at issue (the
benchmark and workshared mail category) for the last 10 years.
(iii) Quantitative analysis or, if not available, qualitative
analysis indicating the nature and extent of the likely harm to the
customers that would result from setting the workshare discount in
compliance with Sec. 3010.283(c).
(5) For a claim that setting an excessive or low workshare discount
closer or equal to the cost avoided by the Postal Service for not
providing the applicable service would impede the efficient operation
of the Postal Service, the Postal Service shall provide an explanation
addressing all of the items specified in paragraphs (c)(5)(i) through
(iii) of this section:
(i) A description of the operational strategy at issue.
(ii) Quantitative analysis or, if not available, qualitative
analysis indicating how the workshare discount at issue is related to
that operational strategy.
(iii) How setting the workshare discount in compliance with Sec.
3010.283(c) or Sec. 3010.284(c), whichever is applicable, would impede
that operational strategy.
(6) For a claim that reducing or eliminating the excessive
workshare discount would lead to a loss of volume in the affected
category of mail and reduce the aggregate contribution to the Postal
Service's institutional costs from the mail that is subject to the
discount (39 U.S.C. 3622(e)(3)(A)), the Postal Service shall provide an
explanation addressing all of the items specified in paragraphs
(c)(6)(i) through (iii) of this section:
(i) A description of the affected category of mail.
(ii) Quantitative analysis or, if not available, qualitative
analysis indicating the expected loss of volume and reduced
contribution that is claimed would result from reducing or eliminating
the excessive workshare discount.
(iii) How setting the excessive workshare discount in compliance
with Sec. 3010.283(c) would lead to the expected loss of volume and
reduced contribution.
(7) For a claim that reducing or eliminating the excessive
workshare discount would result in a further increase in the rates paid
by mailers not able to take advantage of the workshare discount (39
U.S.C. 3622(e)(3)(B)), the Postal Service shall provide an explanation
addressing all of the items specified in paragraphs (c)(7)(i) through
(iii) of this section:
(i) A description of the mailers not able to take advantage of the
discount.
(ii) Quantitative analysis or, if not available, qualitative
analysis indicating the expected size of the rate increase that is
claimed would result in the rates paid by mailers not able to take
advantage of the discount.
(iii) How setting the excessive workshare discount in compliance
with Sec. 3010.283(c) would result in a further increase in the rates
paid by mailers not able to take advantage of the discount.
(8) Any other relevant factors or reasons to support the
application for waiver.
(d) Unless the Commission otherwise provides, commenters will be
given at least 7 calendar days to respond to the application for waiver
after it has been filed by the Postal Service.
(e) To better evaluate the waiver application, the Commission may,
on its own behalf or by request of any interested person, order the
Postal Service to provide experts on the subject matter of the waiver
application to participate in technical conferences, prepare statements
clarifying or supplementing their views, or answer questions posed by
the Commission or its representatives.
(f) For a proposed workshare discount that would exceed the cost
avoided by the Postal Service for not providing the applicable service,
the application for waiver shall be granted only if at least one
provision appearing in 39 U.S.C. 3622(e)(2)(A) through (e)(2)(D) or 39
U.S.C. 3622(e)(3)(A) through (e)(3)(B) is determined to apply.
(g) For a proposed workshare discount that would be set below the
cost avoided by the Postal Service for not providing the applicable
service, the application for waiver shall be granted only if setting
the workshare discount closer or equal to the cost avoided by the
Postal Service for not providing the applicable service would impede
the efficient operation of the Postal Service.
(h) The Commission will issue an order announcing, at a minimum,
whether the requested waiver will be granted or denied no later than 21
days following the close of any comment period(s). An order granting
the application for waiver shall specify all conditions upon which the
waiver is granted, including the date upon which the waiver shall
expire.
PART 3020--PRODUCT LISTS
0
2. The authority citation for part 3020 continues to read as follows:
Authority: 39 U.S.C. 503; 3622; 3631; 3642; 3682.
0
3. Amend Sec. 3020.32 by revising paragraphs (a) and (b) to read as
follows:
Sec. 3020.32 Supporting justification.
* * * * *
(a) Explain the reason for initiating the docket and explain why
the change is not inconsistent with the applicable requirements of this
part and any applicable Commission directives and orders;
(b) Explain why, as to market dominant products, the change is not
inconsistent with the policies and the applicable criteria of chapter
36 of title 39 of the United States Code;
* * * * *
0
4. Amend Sec. 3020.52 by revising paragraphs (a) and (b) to read as
follows:
Sec. 3020.52 Supporting justification.
* * * * *
(a) Explain the reason for initiating the docket and explain why
the change is not inconsistent with the applicable
[[Page 67700]]
requirements of this part and any applicable Commission directives and
orders;
(b) Explain why, as to market dominant products, the change is not
inconsistent with the policies and the applicable criteria of chapter
36 of title 39 of the United States Code;
* * * * *
0
5. Amend Sec. 3020.72 by revising paragraphs (a) and (b) to read as
follows:
Sec. 3020.72 Supporting justification.
* * * * *
(a) Explain the reason for initiating the docket and explain why
the change is not inconsistent with the applicable requirements of this
part and any applicable Commission directives and orders;
(b) Explain why, as to market dominant products, the change is not
inconsistent with the policies and the applicable criteria of chapter
36 of title 39 of the United States Code;
* * * * *
0
6. Amend Sec. 3020.81 by revising paragraph (b)(1) to read as follows:
Sec. 3020.81 Supporting justification for material changes to
product descriptions.
* * * * *
(b)(1) As to market dominant products, explain why the changes are
not inconsistent with the policies and the applicable criteria of
chapter 36 of title 39 of the United States Code, the applicable
requirements of this part, and any applicable Commission directives and
orders; or
* * * * *
0
7. Amend Sec. 3020.82 by revising paragraph (e) to read as follows:
Sec. 3020.82 Docket and notice of material changes to product
descriptions.
* * * * *
(e) Provide interested persons with an opportunity to comment on
whether the proposed changes are consistent with the policies and the
applicable criteria of chapter 36 of title 39 of the United States
Code, the applicable requirements of this part, and any applicable
Commission directives and orders.
0
8. Amend Sec. 3020.90 by revising paragraph (c)(2) to read as follows:
Sec. 3020.90 Minor corrections to product descriptions.
* * * * *
(c) * * *
(2) Explain why the proposed corrections are consistent with the
policies and the applicable criteria of chapter 36 of title 39 of the
United States Code, the applicable requirements of this part, and any
applicable Commission directives and orders; and
* * * * *
0
9. Amend Sec. 3020.91 by revising paragraph (e) to read as follows:
Sec. 3020.91 Docket and notice of minor corrections to product
descriptions.
* * * * *
(e) Provide interested persons with an opportunity to comment on
whether the proposed corrections are consistent with the policies and
the applicable criteria of chapter 36 of title 39 of the United States
Code, the applicable requirements of this part, and any applicable
Commission directives and orders.
0
10. Add subpart G to read as follows:
Subpart G--Requests for Market Dominant Negotiated Service Agreements
Sec.
3020.120 General.
3020.121 Additional supporting justification for negotiated service
agreements.
3020.122 Data collection plan and report for negotiated service
agreements.
Sec. 3020.120 General.
This subpart imposes additional requirements whenever there is a
request to add a negotiated service agreement to the market dominant
product list. The additional supporting justification appearing in
Sec. 3020.121 also should be provided whenever the Postal Service
proposes to modify the terms of an existing market dominant negotiated
service agreement. Commission findings that the addition of a special
classification is not inconsistent with 39 U.S.C. 3622 are provisional
and subject to subsequent review. No rate(s) shall take effect until 45
days after the Postal Service files a request for review of a notice of
a new rate or rate(s) adjustment specifying the rate(s) and the
effective date.
Sec. 3020.121 Additional supporting justification for negotiated
service agreements.
(a) Each request shall also include the items specified in
paragraphs (b) through (j) of this section.
(b) A copy of the negotiated service agreement.
(c) The planned effective date(s) of the planned rates.
(d) The identity of a responsible Postal Service official who will
be available to provide prompt responses to requests for clarification
from the Commission.
(e) A statement identifying all parties to the agreement and a
description clearly explaining the operative components of the
agreement.
(f) Details regarding the expected improvements in the net
financial position or operations of the Postal Service (39 U.S.C.
3622(c)(10)(A)(i) and (ii)). The projection of the change in net
financial position as a result of the agreement shall be based on
accepted analytical principles. The projection of the change in net
financial position as a result of the agreement shall include for each
year of the agreement:
(1) The estimated mailer-specific costs, volumes, and revenues of
the Postal Service absent the implementation of the negotiated service
agreement;
(2) The estimated mailer-specific costs, volumes, and revenues of
the Postal Service which result from implementation of the negotiated
service agreement;
(3) An analysis of the effects of the negotiated service agreement
on the contribution to institutional costs from mailers not party to
the agreement;
(4) If mailer-specific costs are not available, the source and
derivation of the costs that are used shall be provided, together with
a discussion of the currency and reliability of those costs and their
suitability as a proxy for the mailer-specific costs; and
(5) If the Postal Service believes the Commission's accepted
analytical principles are not the most accurate and reliable
methodology available:
(i) An explanation of the basis for that belief; and
(ii) A projection of the change in net financial position resulting
from the agreement made using the Postal Service's alternative
methodology.
(g) An identification of each component of the agreement expected
to enhance the performance of mail preparation, processing,
transportation, or other functions in each year of the agreement, and a
discussion of the nature and expected impact of each such enhancement.
(h) Details regarding any and all actions (performed or to be
performed) to assure that the agreement will not result in unreasonable
harm to the marketplace (39 U.S.C. 3622(c)(10)(B)).
(i) A discussion in regard to how functionally similar negotiated
service agreements will be made available on public and reasonable
terms to similarly situated mailers.
(j) Such other information as the Postal Service believes will
assist the Commission in issuing a timely determination of whether the
requested changes are consistent with applicable statutory policies.
[[Page 67701]]
Sec. 3020.122 Data collection plan and report for negotiated service
agreements.
(a) The Postal Service shall include with any request concerning a
negotiated service agreement a detailed plan for providing data or
information on actual experience under the agreement sufficient to
allow evaluation of whether the negotiated service agreement operates
in compliance with 39 U.S.C. 3622(c)(10).
(b) A data report under the plan is due 60 days after each
anniversary date of implementation and shall include, at a minimum, the
following information for each 12-month period the agreement has been
in effect:
(1) The change in net financial position of the Postal Service as a
result of the agreement. This calculation shall include for each year
of the agreement:
(i) The actual mailer-specific costs, volumes, and revenues of the
Postal Service;
(ii) An analysis of the effects of the negotiated service agreement
on the net overall contribution to the institutional costs of the
Postal Service; and
(iii) If mailer-specific costs are not available, the source and
derivation of the costs that are used shall be provided, including a
discussion of the currency and reliability of those costs and their
suitability as a proxy for the mailer-specific costs.
(2) A discussion of the changes in operations of the Postal Service
that have resulted from the agreement. This shall include, for each
year of the agreement, identification of each component of the
agreement known to enhance the performance of mail preparation,
processing, transportation, or other functions in each year of the
agreement.
(3) An analysis of the impact of the negotiated service agreement
on the marketplace, including a discussion of any and all actions taken
to protect the marketplace from unreasonable harm.
PART 3050--PERIODIC REPORTING
0
11. The authority citation for part 3050 continues to read as follows:
Authority: 39 U.S.C. 503; 3651; 3652; 3653.
0
12. Amend Sec. 3050.20 by revising paragraph (c) to read as follows:
Sec. 3050.20 Compliance and other analyses in the Postal Service's
section 3652 report.
* * * * *
(c) It shall address such matters as non-compensatory rates and
failures to achieve stated goals for on-time delivery standards. A more
detailed analysis is required when the Commission observed and
commented upon the same matter in its Annual Compliance Determination
for the previous fiscal year.
0
13. Amend Sec. 3050.21 by:
0
a. Revising paragraphs (a), (e), and (m); and
0
b. Adding paragraphs (n) and (o).
The revisions and additions read as follows:
Sec. 3050.21 Content of the Postal Service's section 3652 report.
(a) No later than 90 days after the close of each fiscal year, the
Postal Service shall submit a report to the Commission analyzing its
cost, volume, revenue, rate, and service information in sufficient
detail to demonstrate that all products during such year comply with
all applicable provisions of title 39 of the United States Code. The
report shall provide the items in paragraphs (b) through (o) of this
section.
* * * * *
(e) For each market dominant workshare discount offered during the
reporting year:
(1) The per-item cost avoided by the Postal Service by virtue of
such discount;
(2) The percentage of such per-item cost avoided that the per-item
workshare discount represents;
(3) The per-item contribution made to institutional costs;
(4) The factual and analytical bases for any claim that one or more
of the exception provisions of 39 U.S.C. 3622(e)(2)(A) through
(e)(2)(D) or 39 U.S.C. 3622(e)(3)(A) through (e)(3)(B) apply; and
(5) For each workshare discount that is provided in connection with
a subclass of mail, consisting exclusively of mail matter of
educational, cultural, scientific, or informational value (39 U.S.C.
3622(e)(2)(C)), exceeded the cost avoided by the Postal Service for not
providing the applicable service, and was not set in accordance with at
least one specific provision appearing in Sec. 3010.262(b) through (d)
of this chapter, the information specified in paragraphs (5)(i) through
(iii) of this section:
(i) The number of mail owners receiving the workshare discount;
(ii) The number of mail owners for the applicable product or
products; and
(iii) An explanation of how the workshare discount promotes the
public interest, even though the workshare discount substantially
exceeds the cost avoided by the Postal Service.
* * * * *
(l) For the Inbound Letter Post product, provide revenue, volume,
attributable cost, and contribution data by Universal Postal Union
country group and by shape for the fiscal year subject to review and
each of the preceding 4 fiscal years;
(m) Input data and calculations used to produce the annual Total
Factor Productivity estimates;
(n) Copies of notifications to the Postal Service by the Office of
Personnel Management (OPM) of annual determinations of the funding
amounts specific to payments at the end of each fiscal year computed
under 5 U.S.C. 8909a(d)(2)(B) and 5 U.S.C. 8909a(d)(3)(B)(ii); 5 U.S.C.
8348(h)(2)(B) and 5 U.S.C. 8423(b)(3)(B); 5 U.S.C. 8423(b)(1)(B) and 5
U.S.C. 8423(b)(2); and
(o) Provide any other information that the Postal Service believes
will help the Commission evaluate the Postal Service's compliance with
the applicable provisions of title 39 of the United States Code.
0
14. Add Sec. 3050.55 to read as follows:
Sec. 3050.55 Information pertaining to cost reduction initiatives.
(a) The reports in paragraphs (b) through (f) of this section shall
be filed with the Commission at the times indicated.
(b) Within 95 days after the end of each fiscal year, the Postal
Service shall file a financial report that analyzes cost data from the
fiscal year. For purposes of this paragraph, the percentage change
shall compare the fiscal year under review to the previous fiscal year.
At a minimum, the report shall include:
(1) For all market dominant mail, the percentage change in total
unit attributable cost;
(2) For each market dominant mail product, the percentage change in
unit attributable cost;
(3) For the system as a whole, total average cost per piece, which
includes all Postal Service competitive and market dominant
attributable costs and institutional costs,
(4) The percentage change in total average cost per piece;
(5) Market dominant unit attributable cost by product;
(6) If the percentage change in unit attributable cost for a market
dominant mail product is more than 0.0 percent and exceeds the
percentage change in total market dominant mail unit attributable cost,
then the following information shall be provided:
(i) Unit attributable cost workpapers for the product disaggregated
into the following cost categories: Mail processing unit cost, delivery
unit cost, vehicle service driver unit cost, purchased transportation
unit cost, window service unit cost, and other unit cost;
[[Page 67702]]
(ii) A narrative that identifies cost categories that are driving
above average increases in unit attributable cost for the product and
explains the reason for the above-average increase; and
(iii) A specific plan to reduce unit attributable cost for the
product.
(7) An analysis of volume trends and mail mix changes for each
market dominant mail product from fiscal year 2017 through the end of
the fiscal year under review, which shall include at a minimum:
(i) A comparison of actual unit attributable costs and estimated
unit attributable costs for each market dominant mail product, using
the volume distribution from fiscal year 2017;
(ii) A narrative that identifies the drivers of change in volume
trends and the mail mix; and
(iii) A narrative that explains the methodology used to calculate
the estimated unit attributable costs as required by paragraph
(b)(7)(i) of this section.
(c) Within 95 days after the end of each fiscal year, the Postal
Service shall file a report with analysis of each planned cost
reduction initiative that is expected to require Postal Service total
expenditures of $5 million or more over the duration of the initiative.
At a minimum, the report shall include:
(1) A narrative that describes each cost reduction initiative
planned for future fiscal years, including the status, the expected
total expenditure, start date, end date, and any intermediate
deadlines;
(2) Identification of a metric to measure the impact of each
planned cost reduction initiative identified in paragraph (c)(1) of
this section, a narrative describing the selected metric, a narrative
explaining the reason for selecting that metric, and a schedule
approximating the months and fiscal years in which the cost reduction
impact is expected to be measureable;
(3) Estimates of the expected impact of each planned cost reduction
initiative, with supporting workpapers, using the metric identified in
paragraph (c)(2) of this section, total market dominant mail
attributable unit cost, and total unit cost as calculated pursuant to
paragraph (b)(3) of this section.
(d) Within 95 days after the end of each fiscal year, the Postal
Service shall file a report that describes each active cost reduction
initiative during the fiscal year which incurred or is expected to
incur Postal Service expenditures of $5 million or more over the
duration of the initiative. At a minimum, the report shall include:
(1) The information described in paragraphs (c)(1) through (c)(3)
of this section, based on actual data for the fiscal year, and a
specific statement as to whether the initiative actually achieved the
expected impact as measured by the selected metric;
(2) An explanation of the trends, changes, or other reasons that
caused any variance between the actual information provided under
paragraph (d)(1) of this section and the estimated information
previously provided under paragraphs (c)(1) through (c)(3) of this
section, if applicable;
(3) A description of any mid-implementation adjustments the Postal
Service has taken or will take to align the impacts with the schedule;
and
(4) Any revisions to the schedule of cost reduction impacts for
future fiscal years.
(e) Within 95 days after the end of each fiscal year, the Postal
Service shall file a report that summarizes all projects associated
with a Decision Analysis Report for the fiscal year. At a minimum, the
report shall include:
(1) A description of each project;
(2) The status of each project;
(3) An estimate of cost savings or additional revenues from each
project; and
(4) The return on investment expected from each project.
(f) Within 95 days after the end of each fiscal year, the Postal
Service shall file a report that summarizes all planned projects that
will require a Decision Analysis Report in the next fiscal year. At a
minimum, the report shall include:
(1) A description of each planned project;
(2) The status of each project;
(3) An estimate of the cost savings or additional revenues expected
from each project; and
(4) The return on investment expected from each project.
0
15. Amend Sec. 3050.60 by:
0
a. Revising paragraph (a);
0
b. Removing paragraph (e);
0
c. Redesignating paragraphs (f) and (g) as paragraphs (e); and (f).
The revision reads as follows:
Sec. 3050.60 Miscellaneous reports and documents.
(a) The reports in paragraphs (b) through (f) of this section shall
be provided at the times indicated.
* * * * *
PART 3055--SERVICE PERFORMANCE AND CUSTOMER SATISFACTION REPORTING
0
16. The authority citation for part 3055 continues to read as follows:
Authority: 39 U.S.C. 503; 3622(a); 3652(d) and (e); 3657(c).
0
17. Amend Sec. 3055.2 by revising paragraph (c) to read as follows:
Sec. 3055.2 Contents of the annual report of service performance
achievements.
* * * * *
(c) The applicable service standard(s) for each product. If there
has been a change to a service standard(s) since the previous report, a
description of and reason for the change shall be provided. If there
have been no changes to service standard(s) since the previous report,
a certification stating this fact shall be provided.
* * * * *
By the Commission.
Darcie S. Tokioka,
Acting Secretary.
[FR Doc. 2019-26573 Filed 12-10-19; 8:45 am]
BILLING CODE 7710-FW-P