[Federal Register Volume 59, Number 245 (Thursday, December 22, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-31344]


[[Page Unknown]]

[Federal Register: December 22, 1994]


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POSTAL RATE COMMISSION

39 CFR Part 3001

[Docket No. RM95-1; Order No. 1038]

 

Express Mail Market Response Rate Requests: Rules of Practice and 
Procedure

AGENCY: Postal Rate Commission.

ACTION: Notice of Proposed Rulemaking.

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SUMMARY: In response to a petition filed by the Postal Service, the 
Postal Rate Commission proposes to re-enact its rules of practice 
allowing expedited consideration of Express Mail market response rate 
requests. These rules expired recently pursuant to a sunset provision. 
Re-enactment will insure the continued existence of a flexible 
ratemaking mechanism for consideration of changes in Express Mail rates 
between omnibus rate cases when required by market conditions.

DATES: Comments should be filed by January 23, 1995.

ADDRESSES: Comments should be sent to Charles L. Clapp, Secretary of 
the Commission, 1333 H Street NW, 20268-0001. Comments will be 
available for inspection and photocopying at the Commission's Docket 
Room.

FOR FURTHER INFORMATION CONTACT: Stephen Sharfman, Legal Advisor (202) 
789-6820.

SUPPLEMENTARY INFORMATION: On August 15, 1994, the Postal Service filed 
a petition for institution of a rulemaking to re-enact Commission rules 
of practice and procedure on Postal Service requests for changes in 
Express Mail rates in response to market conditions. These rules were 
the outcome of Docket No. RM88-2, Express Mail Rulemaking. That 
rulemaking, like this one, was instituted at the Service's request. The 
rules that were finally issued differed from those initially proposed 
by the Service. They are codified at 39 CFR 3001.57-3001.57c. They took 
effect August 16, 1989. At that time, they were identified as 
experimental rules and issued subject to a five-year sunset provision. 
That period has expired.
    As the Service notes in its recent petition, the original impetus 
for adoption of these rules was a period of intense price competition 
in the expedited (overnight) delivery market. Postal Service Petition 
at 2. Prior to their adoption, rates for Express Mail service could be 
set only by filing a formal request under rule 54. Rule 54 requires 
detailed information on costs, revenues, elasticities of demand and 
entails numerous procedural stages. See 39 CFR 3001.54. Fulfillment of 
these requirements generally means that decisions on rate change 
requests require the full ten months allowed by the statute. This 
effectively forecloses prompt responses to frequent price changes. See 
generally 54 FR 33681 (August 16, 1989). As rapid price changes were 
the hallmark of expedited delivery competition in the early-to-mid 
1980s, it was believed that a flexible ratemaking mechanism would allow 
the Postal Service to respond more effectively to market conditions.
    In support of its petition for re-enactment, the Postal Service 
acknowledges that it has never invoked the market response rules. 
However, it asserts several reasons for their retention. One is that 
the overnight delivery market remains competitive, primarily on price. 
Another is Express Mail's emergence as a low-cost alternative for 
household users and small- and medium-volume businesses not eligible 
for discounts from other carriers' published rates. A third is 
preservation of Express Mail's contribution to institutional costs.
    The Commission's initial review of the Service's petition leads it 
to agree that the Express Mail market response rules should be 
retained. Interested parties are invited to comment on the 
appropriateness of this action. The Commission directs W. Gail 
Willette, Acting Director of the Office of the Consumer Advocate, to 
participate to the extent necessary to fulfill her responsibilities 
under 39 CFR 3002.7 and part 3002, Appendix A.

II. Regulatory Flexibility Act

    Pursuant to section 605(b) of the Regulatory Flexibility Act, the 
PRC hereby certifies that this notice of proposed rulemaking is not 
expected to have a significant economic impact on a substantial number 
of small entities. Accordingly, a regulatory flexibility analysis is 
not required.

III. List of Subjects in 39 CFR Part 3001

    Administrative practice and procedure, Postal Service.
    1. The authority citation for 39 CFR part 3001 continues to read as 
follows:

    Authority: 39 U.S.C. Sec. 404(b), 3603, 3622-3624, 3661, 3662.

    2. Sections 3001.57 through 3001.57c are added to Subpart B to read 
as follows:


Sec. 3001.57  Market response rate requests for Express Mail service--
purpose and duration of rules.

    (a) This section and Secs. 3001.57a through 3001.57c only apply in 
cases in which the Postal Service requests an expedited recommended 
decision pursuant to section 3622 of the Postal Reorganization Act on 
changes in rates and fees for Express Mail service, where the proposed 
changes are intended to respond to a change in the market for expedited 
delivery services for the purpose of minimizing the loss of Express 
Mail contribution to institutional costs recommended in the most recent 
omnibus rate case. These rules set forth the requirements for filing 
data in support of such rate proposals and for providing notice of such 
requests, and establish an expedited procedural schedule for evaluating 
Market Response Rate Requests. These rules may not be used when the 
Postal Service is requesting changes in Express Mail rates as part of 
an omnibus rate case. Further explanation concerning these rules can be 
found at 54 FR 11394-413 (March 20, 1989), 54 FR 251342-42 (June 13, 
1989) and PRC Order No. 836.
    (b) This section and Secs. 3001.57a through 3001.57c are initially 
to be effective for the limited period of five years from the date of 
their adoption by the Commission. During that period the Commission 
will continue to analyze the need for these rules to enable the Postal 
Service to respond to changes in the market for expedited delivery 
services, and the impact of these procedures on Postal Service 
proposals. These rules will cease to be effective at the end of this 
period unless they have been reissued by the Commission following a 
Notice of Proposed Rulemaking published in the Federal Register which 
provides an appropriate opportunity for public comments.


Sec. 3001.57a  Market Response Rate Requests--data filing requirements.

    (a) Each formal request made under the provisions of Secs. 3001.57 
through 3001.57c shall be accompanied by such information and data as 
are necessary to inform the Commission and the parties of the nature 
and expected impact of the change in rates proposed. Except for good 
cause shown, the information specified in paragraphs (c) through (i) of 
this section shall also be provided with each request.
    (b) Except as otherwise expressly provided in this section, the 
information required by Sec. 3001.54 (b) through (r) must be filed only 
for those subclasses and services for which the Postal Service requests 
a change in rates or fees. Test period volume, cost, and revenue 
estimates presented in satisfaction of rule 57a shall be for four 
postal quarters beginning after the filing date of the request. The 
cost roll-forward may be developed by extending the cost forecasting 
model used in the last omnibus rate case (utilizing available actual 
data). Volume and revenue estimates required by these rules shall 
utilize, to the extent practicable, the factors identified in rule 54 
(j)(6), and must be fully explained, with all available supporting 
documentation supplied, but they need not be econometrically derived.
    (c) Every formal request made under the provisions of Secs. 3001.57 
through 3001.57c shall contain an explanation of why the change 
proposed by the Postal Service is a reasonable response to the change 
in the market for expedited delivery services to which it is intended 
to respond.
    (d) Every formal request made under the provisions of Secs. 3001.57 
through 3001.57c shall be accompanied by the then effective Domestic 
Mail Classification Schedule sections which would have to be altered in 
order to implement the changes proposed by the Postal Service, and, 
arranged in a legislative format, the text of the replacement Domestic 
Mail Classification Schedule sections the Postal Service proposes.
    (e) In addition to the required test period cost estimates, every 
formal request made under the provisions of Secs. 3001.57 through 
3001.57c shall be accompanied by a statement of the attributable costs 
by segment and component for Express Mail service determined in 
accordance with the attributable cost methodology adopted by the 
Commission in the most recent omnibus rate case, for the base year used 
in that case, and for each fiscal year thereafter for which cost data 
is available. If the Postal Service believes that an adjustment to that 
methodology is warranted it may also provide costs using alternative 
methodologies as long as a full rationale for the proposed changes is 
provided.
    (f) Each formal request made under the provisions of Secs. 3001.57 
through 3001.57c shall include a description of all operational 
changes, occurring since the most recent omnibus rate case, having an 
important impact on the attributable cost of Express Mail. Postal 
Service shall include an analysis and estimate of the cost impact of 
each such operational change.
    (g) Every formal request made under the provisions of Secs. 3001.57 
through 3001.57c shall be accompanied by a statement of the actual 
Express Mail revenues of the Postal Service from the then effective 
Express Mail rates and fees for the most recent four quarters for which 
information is available.
    (h) Each formal request made under the provisions of Secs. 3001.57 
through 3001.57c shall be accompanied by a complete description of the 
change in the market for expedited delivery services to which the 
Postal Service proposal is in response, a statement of when that change 
took place, the Postal Service's analysis of the anticipated impact of 
that change on the market, and a description of characteristics and 
needs of customers and market segments affected by this change which 
the proposed Express Mail rates are designed to satisfy.
    (i) Each formal request made under the provisions of Secs. 3001.57 
through 3001.57c shall include estimates, on a quarterly basis, of test 
period volumes, revenues, and attributable costs determined in 
accordance with the attributable cost methodology adopted by the 
Commission in the most recent omnibus rate case for each Express Mail 
service for which rate changes are proposed assuming:
    (1) Rates remain at their existing levels, and
    (2) Rates are changed after 90 days to the levels suggested in the 
request.
    (j)(1) Each formal request made under the provisions of 
Secs. 3001.57 through 3001.57c shall be accompanied by the following 
information, for each quarter following the base year in the most 
recent omnibus rate case:
    (i) Estimated volume by rate cell, for each Express Mail service;
    (ii) Total postage pounds of Express Mail rated at:
    (A) Up to \1/2\ pound,
    (B) \1/2\ pound up to 2 pounds,
    (C) 2 pounds up to 5 pounds; and
    (iii) Total pounds of Express Mail and of each other subclass of 
mail carried on hub contracts.
    (2) In each instance when rates change based on a proceeding under 
the provisions of Secs. 3001.57 through 3001.57c the Postal Service 
shall provide, one year after the conclusion of the test period, the 
data described in Sec. 3001.57a(j)(1)(i-iii), for each of the four 
quarters of the test period.
    (k) Each formal request made under the provisions of Secs. 3001.57 
through 3001.57c shall include analyses to demonstrate:
    (1) That the proposed rates are consistent with the factors listed 
in 39 U.S.C. 3622 (b),
    (2) That the proposed rate changes are in the public interest and 
in accordance with the policies and applicable criteria of the Act, and
    (3) That the proposed rates will preserve, or minimize erosion of, 
the Express Mail contribution to institutional costs recommended in the 
most recent omnibus rate case.
    (l) Each formal request made under the provisions of Secs. 3001.57 
through 3001.57c shall be accompanied by a certificate that service of 
the filing in accordance with Sec. 3001.57b (c) has been made.


Sec. 3001.57b  Market Response Rate Requests--expedition of public 
notice and procedural schedule.

    (a) The purpose of this section is to provide a schedule for 
expediting proceedings when a trial-type hearing is required in a 
proceeding in which the Postal Service proposes to adjust rates for 
Express Mail service in order to respond to a change in the market for 
expedited delivery services.
    (b) The Postal Service shall not propose for consideration under 
the provisions of Secs. 3001.57 through 3001.57c rates lower than:
    (1) The average per piece attributable cost for Express Mail 
service determined in the most recent omnibus rate case, or
    (2) The average per piece attributable cost for Express Mail 
service as determined by the Postal Service in accordance with 
Sec. 3001.57a (e) for the most recent fiscal year for which information 
is available, whichever is higher. Neither shall the Postal Service 
propose a rate for any rate cell which is lower than the estimated test 
period attributable cost of providing that rate cell with service.
    (c) (1) Persons who are interested in participating in Express Mail 
Market Response Rate Request cases may register at any time with the 
Secretary of the Postal Rate Commission, who shall maintain a publicly 
available list of the names and business addresses of all such Express 
Mail Market Response Registrants. Persons whose names appear on this 
list will automatically become parties to each Express Mail Market 
Response rate proceeding. Other interested persons may intervene 
pursuant to Sec. 3001.20 within 28 days of the filing of a formal 
request made under the provisions of Secs. 3001.57 through 3001.57c. 
Parties may withdraw from the register or a case by filing a notice 
with the Commission.
    (2) When the Postal Service files a request under the provisions of 
Secs. 3001.57 through 3001.57c it shall on that same day effect service 
by hand delivery of the complete filing to each Express Mail Market 
Response Registrant who maintains an address for service within the 
Washington metropolitan area and serve the complete filing by Express 
Mail service on all other Registrants. Each Registrant is responsible 
for insuring that his or her address remains current.
    (3) When the Postal Service files a request under the provisions of 
Secs. 3001.57 through 3001.57c, it shall on that same day send by 
Express Mail service to all participants in the most recent omnibus 
rate case a notice which briefly describes its proposal. Such notice 
shall indicate on its first page that it is a notice of an Express Mail 
Market Response Rate Request to be considered under Secs. 3001.57 
through 3001.57c, and identify the last day for filing a notice of 
intervention with the Commission.
    (d) In the absence of a compelling showing of good cause, the 
Postal Service and parties shall calculate Express Mail costs in 
accordance with the methodologies used by the Commission in the most 
recent omnibus rate case. In the analysis of customers' reactions to 
the change in the market for expedited delivery services which prompts 
the request, the Postal Service and parties may estimate the demand for 
segments of the expedited delivery market and for types of customers 
which were not separately considered when estimating volumes in the 
most recent omnibus rate case.
    (e) (1) In the event that a party wishes to dispute as an issue of 
fact whether the Postal Service properly has calculated Express Mail 
costs or volumes (either before or after its proposed changes), or 
wishes to dispute whether the change in the market for expedited 
delivery services cited by the Postal Service has actually occurred, or 
wishes to dispute whether the rates proposed by the Postal Service are 
a reasonable response to the change in the market for expedited 
delivery services or are consistent with the policies of the Postal 
Reorganization Act, that party shall file with the Commission a request 
for a hearing within 28 days of the date that the Postal Service files 
its request. The request for hearing shall state with specificity the 
fact or facts set forth in the Postal Service's filing that the party 
disputes, and when possible, what the party believes to be the true 
fact or facts and the evidence it intends to provide in support of its 
position.
    (2) The Commission will not hold hearings on a request made 
pursuant to Secs. 3001.57 through 3001.57c unless it determines that 
there is a genuine issue of material fact to be resolved, and that a 
hearing is needed to resolve this issue.
    (3) Whether or not a hearing is held, the Commission may request 
briefs and/or argument on an expedited schedule, but in any 
circumstance it will issue its recommended decision as promptly as is 
consistent with its statutory responsibilities.
    (4) In order to assist in the rapid development of an adequate 
evidentiary record, all participants may file appropriate discovery 
requests on other participants as soon as an Express Mail Market 
Response Rate Request is filed. Answers to such discovery requests will 
be due within 10 days. Objections to such discovery requests must be 
made within 10 days in the form of a Motion to Excuse from Answering, 
with service on the questioning participant made by hand, facsimile, or 
expedited delivery. Responses to Motions to Excuse from Answering must 
be submitted within seven days, and should such a motion be denied, the 
answers to the discovery in question are due within seven days of the 
denial thereof. It is the Commission's intention that parties resolve 
discovery disputes informally between themselves whenever possible. The 
Commission, therefore, encourages the party receiving discovery 
requests considered to be unclear or objectionable to contact counsel 
for the party filing the discovery requests whenever further 
explanation is needed, or a potential discovery dispute might be 
resolved by means of such communication.
    (5) If, either on its own motion, or after having received a 
request for a hearing, the Commission concludes that there exist one or 
more genuine issues of material fact and that a hearing is needed, the 
Commission shall expedite the conduct of such record evidentiary 
hearings to meet both the need to respond promptly to changed 
circumstances in the market and the standards of 5 U.S.C. Sec. 556 and 
557. The procedural schedule, subject to change as described in 
paragraph (e) (6) of this section, is as follows: Hearings on the 
Postal Service case will begin 35 days after the filing of an Express 
Mail Market Response Rate Request; parties may file evidence either in 
support of or in opposition to the Postal Service proposal 49 days 
after the filing; hearings on the parties' evidence will begin 56 days 
after the filing; briefs will be due 70 days after the filing; and 
reply briefs will be due 77 days after the filing.
    (6) The Presiding Officer may adjust any of the schedule dates 
prescribed in paragraph (e)(5) of this section in the interests of 
fairness, or to assist in the development of an adequate evidentiary 
record. Requests for the opportunity to present evidence to rebut a 
submission by a participant other than the Postal Service should be 
filed within three working days of the receipt of that material into 
the evidentiary record, and should include a description of the 
evidence to be offered and the amount of time needed to prepare and 
present it. Requests for additional time will be reviewed with 
consideration as to whether the requesting participant has exercised 
due diligence, and whether the requesting participant has been 
unreasonably delayed from fully understanding the proposal.


Sec. 3001.57c  Express Mail Market Response--``rule for decision.

    The Commission will issue a recommended decision in accordance with 
the policies of 39 U.S.C., and which it determines would be a 
reasonable response to the change in the market for expedited delivery 
services. The purpose of Secs. 3001.57 through 3001.57c is to allow for 
consideration of Express Mail Market Response Rate Requests within 90 
days, consistent with the procedural due process rights of interested 
persons.

    Issued by the Commission on December 14, 1994.
Charles L. Clapp,
Secretary
[FR Doc. 94-31344 Filed 12-21-94; 8:45 am]
BILLING CODE 7710-FW-P