[Federal Register Volume 66, Number 54 (Tuesday, March 20, 2001)]
[Notices]
[Pages 15775-15777]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-6890]



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POSTAL RATE COMMISSION

[Docket No. MC2001-1; Order No. 1306]


Notice and Order Concerning Request for Establishment of 
Experimental Presorted Priority Mail Rate Categories

AGENCY: Postal Rate Commission.

ACTION: Notice and order on experimental docket no. MC2001-1.

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SUMMARY: This document informs the public that the Postal Service has 
proposed experimental discounts for presorted Priority Mail. It 
establishes deadlines for intervention and comments. It sets a date for 
a prehearing conference. It also addresses other procedural aspects of 
the filing.

DATES: Notices of intervention are due by April 3, 2001. A prehearing 
conference is scheduled for April 6, 2001. See Supplementary 
Information section for other dates.

ADDRESSES: Send comments to the attention of Steven W. Williams, acting 
secretary, 1333 H Street NW., suite 300, Washington, DC 20268-0001.

FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, General Counsel, 
202-789-6820.

SUPPLEMENTARY INFORMATION:

A. Authority to Consider the Service's Request

    39 U.S.C. 3623.

B. Background

    On March 7, 2001, the United States Postal Service filed a request 
with the Postal Rate Commission for a recommended decision on a 
proposed three-year experimental classification change, and related 
discounts, for certain categories of Priority Mail. Request of the 
United States Postal Service for a recommended decision on experimental 
presorted Priority Mail rate categories (``request''). The Service's 
request was filed pursuant to section 3623 of the Postal Reorganization 
Act, 39 U.S.C. 101 et seq. It was accompanied by a contemporaneous 
motion seeking waiver of certain provisions of rules of 54 and 64 and 
by two notices. In addition, in a subsequent errata notice, the Service 
revised two of the three discounts identified in the initial filing. 
Notice of the United States Postal Service of errata in its request, 
March 8, 2001 (``errata notice'').

Brief Description of Request

    The Service proposes to offer on an experimental basis the 
following three categories of Priority Mail discounts, distinguished by 
depth of sort: area distribution center (ADC), with a 12-cent discount; 
3-digit, with a 16 cent discount; and 5-digit, with a 25-cent discount.


    Note: As indicated in the errata notice, the 3-digit discount 
was identified as 15 cents in the initial filing. The 5-digit 
discount was originally identified as 24 cents.

    Errata notice at 1. Eligibility would extend to all Priority Mail 
prepared in a mailing of at least 300 pieces or at least 500 pounds 
that is presorted, marked, and presented as specified by the Postal 
Service, and which meets machinability, addressing, and other 
preparation requirements specified by the Postal Service. Request at 3. 
Participating mailers would also be required to pay an annual presort 
fee of $125. USPS-T-1 at 13. The Service intends to limit participation 
in the experiment, at the outset, to about 10 mailers. Id. at 3.
    Under the terms of the Service's Request, the proposed discounted 
rate categories would be additional options offered to qualifying 
mailers; therefore, existing Priority Mail classifications and rates 
would remain unchanged. Request at 3.

Rationale for Filing the Request

    The Service says the proposed discounts are designed to recognize 
apparent cost differentials associated with three different levels of 
presortation of Priority Mail and to encourage mailers to engage in 
worksharing behavior, when such behavior would be mutually advantageous 
to the customer and the Postal Service. Id. at 2.

Contents of the Filing

    The request's attachments A and B, respectively, contain proposed 
changes in the domestic mail classification schedule (DMCS) and 
proposed changes in the rate schedules. Attachment C is the required 
certification regarding the accuracy of cost statements and supporting 
data. Attachment D contains the audited financial statements for fiscal 
years 1999 and 2000. It also includes a statement noting that the cost 
and revenue analysis reports for fiscal years 1998 and 1999 were filed 
with the Commission in docket No. R2000-1 (USPS-LR-I-275).
    Attachment E contains the testimony and exhibits of witnesses 
Scherer (USPS-T-1), Levine (USPS-T-2), and Kalenka (USPS-T-3). Witness 
Scherer, a Postal Service employee, addresses the Service's rationale 
for proposing this presort discount, for the experimental designation, 
and for limiting initial participation to approximately 10 mailers. He 
also addresses a Priority Mail presort discount that was eliminated in 
docket no. R97-1; discusses the proposed discounts in terms of cost 
avoidance estimates; describes estimated volume and financial impacts; 
and addresses the proposal's conformance with statutory criteria for 
experimental rules, classification changes and rate and fee changes.
    Witness Levine, a consultant, addresses estimated mail processing 
cost changes and the proposed data collection plan. With respect to the 
cost savings estimates, Levine notes that the estimates are based on 
data presented in docket no. R2000-1. USPS-T-2 at 2. However, he 
asserts that it is important to note that there has been a significant 
change in Priority Mail processing operations since that case was 
filed. He attributes this change to the termination of an underlying 
contract with Emery Worldwide Airlines for processing and 
transportation of some Priority Mail volume, and the Service's ensuing 
assumption of direct management of the Priority Mail processing 
centers. Levine says that to the extent possible, he has incorporated 
this change in his mail flow models. Id.
    Witness Kalenka is an industry witness employed by ADP Financial 
Information Services, Inc. He discusses how ADP views the limitations 
of the Service's current service offerings for Priority Mail, and how 
the proposed discounts would enhance the Service's offering in the 
competitive expedited delivery market. USPS-T-3 at 3.
    Attachment F is the compliance statement the Service has provided 
in response to Commission rules 54, 64 and 67 (39 CFR 3001.54, 3001.64 
and 3001.67).

Related Notices

    In notice of the United States Postal Service of filing of USPS 
library reference MC2001-1/1, filed March 7, 2001, the Service 
identifies the library reference it has filed in this case (entitled 
Documentation of Priority Mail Volumes) as a category 2 library 
reference. It also states that it considers this library reference 
sufficiently bulky, within the meaning of 39 CFR 3001.31(b)(2)(ii), as 
to make it unreasonable to require that it be served upon every person 
who is placed on the service list in this proceeding. It also says that 
it views the library reference as being of a technical nature, thereby 
making it reasonable, under the terms of 39 CFR 3001.31(b)(2)(ii)(A), 
to anticipate that its contents will be of limited interest. In notice 
of the United States Postal Service regarding arrangements for 
obtaining request and

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attorney/witness assignments, March 7, 2001, the Service addresses 
several administrative aspects of its request.

Significance of Experimental Designation

    The Service notes that its designation of the request as an 
experiment signals its intention that the Commission apply its 
expedited rules of practice and procedure for experimental changes in 
39 CFR 3001.67-3001.67d. Request at 1. In support of this treatment, 
the Service asserts that the filing is consistent with the logic of the 
experimental rules. Id. at 2. It also notes that a preliminary cost 
study has been prepared, and that more complete data will be gathered 
during the term of the experiment, with the potential for supporting a 
request to establish the change on a permanent basis. Id.

Motion for Waiver of Certain Commission Rules

    In an extensive motion, the Service seeks waiver of certain 
provisions of rule 64(h) and related rules that may be deemed 
applicable to the instant Request. Motion of the Unites States Postal 
Service for waiver of certain provisions of rules 54 and 64, March 7, 
2001 (``motion for waiver''). As noted therein, rule 64 (h) provides 
that when requesting a change in the classification schedule, the 
Postal Service must provide certain rule 54 information if the proposed 
classification change results in the following: A change in the rates 
or fees for any existing class or subclass; the establishment of a new 
class or subclass for which rates are to be established; a change in 
the relationship of costs to revenues for any class or subclass; or a 
change in the relationship of total Postal Service costs to total 
revenues. The Service submits that the proposed changes in the 
classification schedule in its request do not significantly change any 
of the referenced rates or cost-revenue relationships. Motion for 
waiver at 1. Therefore, it says that particular subsections of the rule 
need not apply to this proposal. Moreover, it asserts that the 
requirements of rule 64(h) should be interpreted in harmony with rule 
67 governing experiments, and that waiver of certain rule 64(h) 
requirements, and others related thereto, would further the intent of 
the experimental rules. Id. at 1-2.
    The Service also addresses reasons why certain criteria in rule 
64(h) do not apply to this request, and further contends that none of 
the rule 54 requirements should be found to apply. Id. at 2-3. It says 
all of the rule 54 requirements should therefore be waived, but that it 
will provide certain rule 54 information in an attempt to cooperate and 
assist with consideration of the request. Id. at 3. Interested parties 
are advised to review the Service's motion for waiver for additional 
information concerning the basis for this pleading.

Revenue and Cost Impact

    The Service notes that witness Scherer's testimony indicates that 
the estimated cost avoidance is anticipated to exceed the loss in 
revenue from the presort discount, but says the contribution to 
institutional cost from Priority Mail is projected to increase by only 
$2.7 million. The Service says this increase constitutes only 0.12 
percent of TYAR total contribution for Priority Mail. Id., citing USPS-
T-1 at 13. It further states that projected total cost coverage for 
Priority Mail will increase only slightly, from 161.9% to 162.0%. Id. 
The net revenue impact of the proposed presort discount is estimated at 
approximately -$2.0 million. USPS-T-1 at 13. The net total attributable 
cost impact is estimated at approximately -$4.7 million. Id. at 
14.Reliance on docket no. R2000-1 record. The Service contends that the 
proposed experiment is extremely limited in scope, and that its effect 
on total costs and revenues will be insignificant. Therefore, it says 
it believes it would be practical and appropriate to rely on the record 
of that case, as amended by the testimony and exhibits filed with the 
instant request, and would be in accordance with the Commission's 
recommended decision of November 13, 2000.

Data Collection Plan

    The proposed data collection is described in attachment A to 
witness Levine's testimony. Phase I assesses preliminary problems with 
the proposed presort discounts and determines the feasibility of 
allowing more mailers to enter the experiment. USPS-T-2 at 8. Phase II 
gathers data for analysis of the cost and revenue impacts of the 
discount. Id. at 9. Levine's testimony indicates that a market research 
study will be conducted to determine the level of demand for each of 
the three proposed Priority Mail discounts. Id. at 9-10.

Intervention

    Those wishing to be heard in this matter are directed to file a 
written notice of intervention with Steven W. Williams, acting 
secretary of the Commission, 1333 H Street NW., suite 300, Washington, 
DC 20268-0001, on or before April 3, 2001. Notices should indicate 
whether participation will be on a full or limited basis. See 39 CFR 
3001.20 and 3001.20a.

Appropriateness of Proceeding Under the Experimental Rules

    The Service asks that the Commission handle this case under 
Commission rules 67-67d. In determining whether these procedures are 
appropriate, the Commission will consider the proposed change's 
novelty, magnitude, the ease or difficulty of collecting data, and 
duration.
    Participants are invited to comment on whether the Postal Service's 
request should be evaluated under rules 67-67d. Comments are due on or 
before April 3, 2001, and participants should be prepared to discuss 
relevant issues at the prehearing conference. Pending a determination 
on this issue, participants should recognize that the motion seeking 
application of the experimental rules may be granted. The Commission 
notes that its experimental rules provide that cases falling within 
this designation shall be treated as subject to the maximum expedition 
consistent with procedural fairness, and that participants will be 
expected to identify genuine issues of material fact at an early stage 
in this case. See rule 67a(b). The schedule ultimately adopted will be 
established to allow for issuance of a decision not more than 150 days 
following a determination regarding the appropriateness of applying the 
experimental rules or the filing of the Request, whichever occurs 
later. 39 CFR 3001.67d.

Limitation of Issues

    Rule 67a provides a procedure for limiting issues in experimental 
cases. To enable participants to evaluate whether genuine issues of 
fact exist, the Postal Service shall respond to discovery requests 
within 10 days. Written discovery pursuant to rules 25-28 may be 
undertaken upon intervention.

Need for Hearing

    A decision on whether there is a need for evidentiary hearings, and 
the scope of any such hearings, has not been made. Comments on this 
matter, and other procedural issues raised by the Service's Request, 
should be filed no later than April 3, 2001, and participants should be 
prepared to discuss these matters at the prehearing conference.

Representation of the General Public

    In conformance with section 3624(a) of title 39, the Commission 
designates Ted P. Gerarden, director of the Commission's office of the 
consumer

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advocate (OCA), to represent the interests of the general public in 
this proceeding. Pursuant to this designation, Mr. Gerarden will direct 
the activities of Commission personnel assigned to assist him and, upon 
request, will supply their names for the record. Neither Mr. Gerarden 
nor any of the assigned personnel will participate in or provide advice 
on any Commission decision in this proceeding. The OCA shall be 
separately served with three copies of all filings, in addition to and 
at the same time as, service on the Commission of the 24 copies 
required by Commission rule 10(d) [39 CFR 3001.10(d)].

Prehearing Conference

    A prehearing conference will be held Friday, April 6, 2001, at 10 
a.m. in the Commission's hearing room.

C. Ordering Paragraphs

    It is ordered:
    1. The Commission establishes docket no. MC2001-1, preliminarily 
designated as Experimental Presorted Priority Mail Rate Categories, to 
consider the request referred to in the body of this order.
    2. The Commission will sit en banc in this proceeding.
    3. The deadline for filing notices of intervention is Tuesday, 
April 3, 2001.
    4. Answers to the Service's motion for waiver of certain filing 
requirements are due no later than April 5, 2001.
    5. Written discovery pursuant to rules 26-28 may be undertaken upon 
intervention.
    6. The Service shall respond to discovery requests within 10 days.
    7. A prehearing conference will be held Friday, April 6, 2001, at 
10 a.m. in the Commission's hearing room.
    8. Ted P. Gerarden, director of the Commission's office of the 
consumer advocate, is designated to represent the interests of the 
general public.
    9. The acting secretary shall arrange for publication of this 
notice and order in the Federal Register.

    By the Commission.
Steven W. Williams,
Acting Secretary.
[FR Doc. 01-6890 Filed 3-19-01; 8:45 am]
BILLING CODE 7710-FW-P