[Federal Register Volume 67, Number 250 (Monday, December 30, 2002)]
[Proposed Rules]
[Pages 79538-79543]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-32707]


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POSTAL RATE COMMISSION

39 CFR Part 3001

[Docket No. RM2003-1; Order No. 1355]


Additional Filing Requirements

AGENCY: Postal Rate Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This proposal requires the Postal Service to provide 
``overview'' testimony specifically discussing how other testimony in 
the case interrelates and identifying all material changes affecting 
cost attribution, volume projections and rate design. This additional 
explanation and detail will assist the Commission and case participants 
in more readily understanding complex filings without unduly burdening 
the Postal Service.

DATES: Initial comments are due February 12, 2003; reply comments are 
due February 26, 2003.

ADDRESSES: Submit comments electronically via the Commission's Filing 
Online system, which may be accessed at www.prc.gov.

FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, General Counsel, 
202-789-6818.

SUPPLEMENTARY INFORMATION: The ratemaking summit, jointly sponsored by 
the Postal Service and the Postal Rate Commission in May and June, 
encouraged the public to offer suggestions for modifying the ratemaking 
process. Among the issues discussed were phasing, negotiated service 
agreements, and procedural suggestions designed to ease the burdens 
associated with litigating omnibus rate cases. Based on a review of the 
transcripts of the summit and the parties' written comments, the 
Commission proposes to amend its rules of practice to require the 
Postal Service to file, as support for its rate and classification 
requests, testimony providing both a roadmap of how witnesses' 
testimony interrelate, and identification of all material changes 
affecting cost attribution methodology, volume projections, or rate 
design. Interested persons are invited to comment on the proposed rules 
by February 12, 2003.

Background

    In written comments as well as at the conferences, several parties 
suggested various mechanisms designed generally to address the burdens 
associated with litigating omnibus rate proceedings under the statutory 
10-month deadline. The proposals varied widely. Some parties proposed 
to limit issues that could be considered in omnibus rate proceedings, 
suggesting, for example, that costing issues be resolved in separately 
conducted rulemaking proceedings. In a similar vein, other parties 
proposed to prohibit consideration of classification changes.

[[Page 79539]]

Others followed a different tack, suggesting that discovery be sharply 
curtailed or even supplanted by depositions. Finally, some advocated an 
approach intended to enable participants to better and more quickly 
understand the Postal Service's filing by suggesting that the Postal 
Service submit testimony providing a roadmap of how its evidence 
supports its request, including highlighting any methodological 
changes.
    The Postal Service did not support any of these suggestions citing 
a variety of concerns. See generally Tr. 2 at 245-56. Briefly, it 
opposed considering costing methodology apart from the ratemaking 
process arguing, among other things, that the rate consequences would 
be too uncertain and further that separate proceedings would be 
unlikely to save any time or expense. Id. at 249-50. Recognizing the 
complexity of rate proceedings, the Postal Service suggested an 
alternative intended to speed up the litigation process. Specifically, 
it signaled its willingness to hold a technical conference following 
submission of its request to afford parties an opportunity to gain a 
better understanding of the Postal Service's case. Id. at 253. 
Likewise, the Postal Service dismissed suggestions that discovery be 
revamped either by greater reliance on depositions or otherwise 
limiting written discovery as representing no improvement over the 
current system. It did, however, indicate its willingness to engage in 
informal consultations to attempt to reduce the burdens associated with 
discovery. Id. at 253-54. Lastly, although it agreed that a rate case 
devoid of any classification proposals would reduce the complexity of 
the case, the Postal Service argued that benefits of such proposals 
outweigh any extra burden that may accompany them. Id. at 255-56.
    For its part, the Office of the Consumer Advocate (OCA) expressed 
disappointment with the Postal Service's universal rejection of the 
various proposals. It did, however, endorse the Postal Service's 
suggestion to hold a global technical conference, adding that it should 
also submit testimony providing an overview (or roadmap) of its case, 
highlighting the impact of the various methodological changes it 
proposes. Id. at 262-63.\1\ Citing its workload and time constraints 
associated with preparing and filing an omnibus rate request, the 
Postal Service dismissed this suggestion as impractical and largely 
unnecessary. Id. at 264-67. In response, OCA suggested that the Postal 
Service provide the write-up shortly after filing its request. Id. at 
267-68.
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    \1\ Other parties proposed, in written comments, that the Postal 
Service be required to identify any change in costing methodology, 
including quantifying its impact.
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Discussion

    The summit was designed to serve as a forum to explore potential 
changes to the ratemaking process to make it more responsive to the 
needs of the various stakeholders, including the Postal Service, the 
Commission, and mailers. The discussion was wide-ranging and frank, 
providing a useful exchange of ideas. Many suggestions do not lend 
themselves to consideration in this rulemaking. In particular, until 
experience is gained regarding negotiated service agreements and phased 
rates, two of the principal topics at the summit, it is premature to 
consider possible amendments to the rules that may prove 
unnecessary.\2\
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    \2\ On September 19, 2002, the Postal Service filed a negotiated 
service agreement pursuant to rule 67 involving an experimental 
classification change. See Experimental Rate and Service Changes to 
Implement Negotiated Service Agreement with Capital One Services, 
Inc., docket no MC2002-2.
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    Other ideas, such as conducting costing proceedings apart from 
ratemaking, offer the potential for simplifying omnibus rate cases. As 
noted at the summit, however, countervailing considerations may more 
than offset any streamlining benefits implied by this suggestion. The 
limited examination of this complex proposal does not clearly indicate 
that any savings in time or expense would materialize or that the 
result would benefit the ratemaking process. Accordingly, the 
Commission declines to consider implementation of that suggestion as 
part of this rulemaking.
    This conclusion, however, should not be read as a determination on 
the merits. Rather, the record is simply not well developed on the 
point. More importantly, the possibility of separate costing 
proceedings raises myriad issues which, if fully considered, would 
enlarge this limited rulemaking more than is practical or desirable. 
The burdens associated with rate proceedings are such that potentially 
mitigating alternatives are worthy of close consideration. The 
Commission remains open to additional suggestions for new ways to 
improve the process.
    By statute, the Commission is required to transmit its recommended 
decision on Postal Service proposed rate and fee requests by no later 
than ten months after receiving the request. See 39 U.S.C. 
3624(c)(1).\3\ As is well known to anyone participating in previous 
omnibus proceedings, the procedural schedule necessitated by this 
timetable is exceedingly tight, imposing extraordinary demands on all 
active participants. The Commission appreciates the litigation burdens 
assumed by all participants in omnibus rate proceedings. Over time, 
those burdens appear to have grown dramatically.
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    \3\ The ten months may be extended upon a finding that the 
Postal Service unreasonably delayed consideration of its required. 
Id. Sec.  3624(c)(2).
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    By virtually any measure, Postal Service rate requests are complex 
and massive. Supporting documentation includes testimony, exhibits, 
workpapers, and library references. In docket no. R2000-1, for example, 
the Postal Service's direct case consisted of the testimony and 
exhibits of 41 witnesses (42 testimonies).\4\ Consistent with the 
Commission's rules, it simultaneously filed more than 170 library 
references, the vast majority of which supported its direct case.\5\ 
Intervenors, including OCA, also submit testimony most of which is 
based on information obtained from the Postal Service. In total, in 
docket no. R2000-1, 78 participants sponsored 178 testimonies (from 120 
witnesses) that were received into evidence during 40 days of hearing. 
Under these circumstances, suggestions that the process could be 
materially shortened through limiting discovery are neither practical 
nor realistic. Certainly, the summit produced no consensus that the 10-
month period was too long for the task at hand. Nonetheless, the 
process can be improved and made less onerous.
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    \4\ Likewise, the Postal Service's direct case in docket no. 
R2001-1 was supported by 40 witnesses covering 44 testimonies.
    \5\ To some degree, the increased complexity of the Postal 
Service's direct cases can be measured by the explosive growth in 
the number of witnesses it employs. Fifteen years ago, in docket no. 
R87-1, it relied on 21 witnesses. This grew modestly to 23 witnesses 
in docket no. R90-1. The proposed settlement in docket no. R94-1 
distinguishes that request for purposes of comparison. In that 
docket, only 11 witnesses supported the Postal Service's direct 
case. In docket no. R97-1, however, the number ballooned to 40 
witnesses (42 testimonies).
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    This overview is not meant as criticism, but is simply descriptive 
of the size and scope of Postal Service operations, e.g., a revenue 
requirement of nearly $75 billion and annual volumes approaching 213 
billion.\6\ To its credit, the Postal Service does yeoman's work 
throughout omnibus rate proceedings, particularly responding to 
discovery requests on a wide variety of subjects. Participants are also 
subject to

[[Page 79540]]

substantial demands. To understand the Postal Service's proposals, they 
must review its direct case, prepare discovery, and, if appropriate, 
cross examine witnesses and file testimony in response to the Postal 
Service, all within a few months of the docketing of the Postal 
Service's request. The Commission believes that this process would be 
facilitated if, at the outset of the proceeding, the Postal Service 
submits a single piece of summarizing testimony providing a roadmap of 
its filing and identifying all methodological changes.
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    \6\ PRC Op. R2001-1, Appendix C and Appendix G at 1, 
respectively.
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Scope of the Proposed Rules

    Preparing an omnibus rate request entails coordinating the 
testimony of various witnesses in support of the Postal Service's 
proposal. Even a summary description of the process highlights its 
complexity. The process requires the development of base year costs, 
predicated on a prior fiscal year Cost and Revenue Analysis (CRA) 
modified to reflect intervening changes in costing methodologies as 
well as any changes proposed in the request. Necessarily, base year 
testimony, which is routinely sponsored by a single witness, relies on 
the testimony of numerous costing witnesses, namely, those addressing 
issues of cost attribution and distribution in various cost segments 
and components, e.g., mail processing, carrier activities, purchased 
transportation, and equipment and facility costs.
    To develop test year estimates, base year costs must be rolled 
forward to the proposed test year. To accomplish this, the roll-forward 
witness must rely on, among others, witnesses sponsoring the revenue 
requirement, volume forecasts, and final adjustments. Once estimated 
test year costs by subclass and service are available, rates must be 
designed consistent with the statutory criteria, including the 
breakeven requirement, taking into account, inter alia, volume 
estimates, cost coverage constraints, and any cost testimony affecting 
rate levels, e.g., studies supporting proposed discounts. Finally, 
proposed test year after rates must be checked for compatibility with 
the proposed revenue requirement, including consistency with the 
underlying assumptions used to develop test year estimated costs, 
projected volumes, and roll-forward results. In recent cases, the 
Postal Service has supported its request with the testimony of more 
than 40 witnesses. No single witness addresses the proposal as a whole, 
describes how the various testimonies interrelate, or identifies 
changes (from the preceding recommended decision) affecting costs, 
volumes, or rate design. To be sure, certain witnesses reference the 
testimony of other witnesses. For example, typically the base year 
costs witness provides a brief description of the changes in the 
treatment of costs reflected in the Request and identifies the 
witnesses sponsoring the changes.\7\ While this testimony is helpful to 
the extent it alerts the reader to changes to base year costs, its 
utility is limited, for the most part, to identifying the sources of 
changes, not their implications. This observation should not be read as 
criticism of such testimony since it neither designed nor intended to 
serve as a roadmap of the Postal Service's filing. Based on the 
parties' oral and written comments, the Commission is of the opinion 
that it would be advantageous to require the Postal Service to submit, 
in support of its request, testimony by a single witness that provides 
both an overview of how the testimony of its other witnesses 
interrelates and highlights all material changes in cost attribution 
methodology, the development of volume estimates, and rate design. The 
changes would be measured against the methods employed by the 
Commission in its immediately preceding recommended decision in an 
omnibus rate proceeding.\8\ In addition, the proposed rules would 
relocate and clarify the Postal Service's current obligation to submit 
testimony addressing material changes affecting costing, volume 
projections, or rate design.
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    \7\ See, e.g., docket no. R2001-1, Direct Testimony of Karen 
Meehan, USPS-T-11 at 2-9; docket no. R2000-1, Direct Testimony of 
Karen Meehan, USPS-T-11 at 2-9; and docket no. R97-1, Direct 
Testimony of Joe Alexandrovich, USPS-T-5 at 2-5.
    \8\ If a charge was adopted in an intervening classification 
proceeding, the testimony need only reference that fact.
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    The roadmap testimony has two primary purposes. First, it is 
designed to allow intervenors to quickly identify how the testimony of 
40 or more witnesses fits together. Intervenors' tasks should be 
simplified by having a roadmap of the Postal Service's filing, 
providing a brief description of each witness's testimony and its 
interrelationship with the testimony of other witnesses. For example, 
in docket no. R2001-1, witness Van-Ty-Smith distributed cost segment 3 
costs based on IOCS distributions within MODS cost pools. Her results 
were utilized by several witnesses, including Meehan (base year costs), 
Smith (cost by shape and deriving piggyback factors), and Patelunas 
(roll-forward costs).\9\ In cursory fashion, Van-Ty-Smith briefly notes 
that certain witnesses use her mail processing volume-variable costs. 
See docket no. R2001-1, USPS-T-13 at 1. The proposed rule would require 
something more from the roadmap witness. Specifically, the roadmap 
witness's overview of the Postal Service's filing would identify the 
subject matter of each witness's testimony, explain how the testimony 
of the various witnesses interrelates, and highlight changes in cost 
methodology, volume estimation, and rate design. See proposed Sec.  
3001.53(b). Thus, with reference to Van-Ty-Smith's testimony, the 
roadmap witness would, among other things, explain the linkage between 
her analysis and the testimony of those witnesses who rely on it.
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    \9\ In addition, witnesses Kay, Eggleston, Mayes, and Miller 
reply directly on Van-Ty-Smith's results.
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    The description of the interrelation between the testimonies should 
be sufficient to identify what each witness relied upon. This could be 
explained in narrative form or perhaps by diagram. The 
interrelationship between or among witnesses becomes particularly 
critical where a witness uses inputs from one or more witnesses to 
produce outputs used by one or more witnesses. Again with reference to 
docket no. R2001-1, witness Smith (USPS-T-15) used inputs from 
witnesses Bozzo and Van-Ty-Smith to develop the variabilities for mail 
processing equipment-related costs subsequently used by witnesses 
Meehan and Patelunas. Additionally, Smith developed a variety of 
piggyback and premium pay factors that were used by Miller, Eggleston, 
Mayes, Nieto and Abdirahman to calculate workshare cost avoidance 
estimates. Under the proposed rules, the roadmap witness would be 
required to explain how the testimony of the various witnesses 
interrelates thereby enabling parties to quickly understand the flow of 
the analytic work of a case and to identify all witnesses affecting the 
development of a particular rate.\10\
    Continuing the example, a rate design witness often must rely on 
testimony of other witnesses to determine avoided workshare costs and 
establish presort discounts. In docket no. R2001-1, witness Robinson's 
rates for First-Class Mail relied on, among others, the testimony of 
witnesses Miller, Schenk, and Smith. Under the proposed rules, the 
roadmap testimony should identify any linkage among the various pieces 
of testimony, briefly describing how it is employed.
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    \10\ In addition, each witness relying on the testimony of 
another must identify the specific source of the material relied 
upon, e.g., the portion of the testimony, exhibits, or workpapers.

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[[Page 79541]]

    Second, the roadmap testimony also is intended as a means to 
quickly apprise participants of changes in costing, volume estimation, 
and rate design. As a general matter, the Postal Service notes changes 
in costing methodology in the testimony of its base year witness, 
principally by reference to the sponsoring witness's testimony. In 
docket no. R2000-1, for example, the Postal Service sponsored several 
new studies affecting base year volume variability. Witness Meehan 
identified these studies, briefly describing the topic addressed and 
referencing the sponsoring witness.\11\ Under the proposed rules, the 
roadmap witness would be charged with highlighting meaningful changes 
in cost methodology, as well as changes in volume forecasting and rate 
design that have a material effect on rates.
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    \11\ See docket no. R2000-1, USPS-T-11 at 6-7.
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    Pursuant to proposed rule 53(c), it would fall to the sponsoring 
witness to provide the details of the change, including estimating (or 
quantifying) its effects. For purposes of the latter, the intent of the 
proposed rules would be satisfied if the direction of the change were 
indicated, e.g., that the proposed change in mail processing 
variability increased (or decreased) segment 3 volume variability by 
approximately x percent; or the proposed change in cost distribution 
shifted approximately $x million from letters to flats. The Commission 
recognizes that quantification may, in certain circumstances, prove 
difficult. Therefore, the Commission invites interested persons to 
comment on the benefits of imposing this requirement, and if imposed, 
potential methods for evaluating the sufficiency of estimates measuring 
the effects of the proposed changes.
    The proposed rules are not intended to require the Postal Service 
to address each change regardless of its consequence. Rather the intent 
is to capture substantive changes, namely, those that meaningfully 
affect cost estimates and volume projections and changes in rate design 
that materially affect rates. Thus, for example, minor modifications in 
the in-office cost system, e.g., those not causing significant cost 
shifts, need not be highlighted, whereas changes affecting the 
development of cost pools would likely need to be highlighted. 
Similarly, minor changes in estimated demand elasticities need not be 
highlighted, whereas changes in volume estimates based on alternative 
specifications of demand equations should be addressed. Changes in rate 
design present a vexing problem. Rate levels may be affected by myriad 
factors that manifest themselves through changes in rate design, e.g., 
new modeled costs, different distribution keys, or revised benchmarks. 
Changes of this nature that materially affect rate levels fall within 
the scope of the proposed rules. The Commission will accept good faith 
estimates to comply with this aspect of the new requirements while 
experience is gained on reasonable levels of detail. In sum, the 
proposed rules are designed to be neither all encompassing so as to 
excessively burden the Postal Service nor so narrowly drawn as to 
defeat their purpose. The goal is to establish a reasonably achievable 
(and objective) standard to govern the roadmap and sponsoring 
witnesses' testimony while ultimately facilitating the ratemaking 
process. Interested persons are encouraged to comment on the scope of 
the proposed rules, including whether they are sufficiently objective 
to satisfy their intended purpose. The Commission also welcomes any 
other suggestions regarding possible improvements to its procedures, 
either as supplementary comments herein, or in separate transmissions 
to the Commission.

Relative Burdens

    Although the proposed rules will require some additional effort by 
the Postal Service, the benefits would appear to outweigh any 
inconvenience associated with them.
    First, the Postal Service is intimately familiar with the elements 
of its request, being compelled to make decisions as to its details as 
it develops. Thus, it is not as if the new testimony must be created 
out of whole cloth. Rather, the testimony describes the Postal 
Service's filing, providing an overview of its disparate pieces, and 
identifies and explains changes that may significantly affect rates. As 
described above, it is intended simply as a roadmap of the Postal 
Service's proposal.
    Second, the requirement is generally similar to, even if more 
expansive than, the current obligation under the rules mandating that 
the Postal Service describe any changes in cost attribution procedures 
in its request or, alternatively, in testimony. See rule 54(a).
    Third, time is of the essence in omnibus rate proceedings. The new 
explanatory testimony will enable participants to more quickly grasp 
the essential elements of the Postal Service's filing, highlighting the 
principal factors influencing proposed rate levels. This should enable 
participants to focus their discovery on substantive issues and more 
effectively use the limited time available to explore the merits of the 
Service's proposals.
    Finally, public participation in Commission proceedings is to be 
encouraged. Participation by mailers in Commission proceedings is 
important to the development of a complete record. Active participation 
in Commission proceedings can be costly. As it is, the advantages lie 
with the Postal Service. It is the proponent of proposed rate changes; 
it is the repository of virtually all of the relevant data; and it has 
resources not generally available to intervenors. The proposed 
amendments are designed to enable participants to gain a better 
understanding of the Postal Service's filing at the outset of the 
proceeding. As a consequence, the burdens of participating in 
Commission proceedings should be lessened. An example may illustrate 
the point.
    In docket no. R2001-1, the Postal Service changed its Parcel Post 
transportation cost model, compared to that used in docket no. R2000-1, 
causing estimated DBMC intermediate transportation costs per cubic foot 
to increase and estimated inter-BMC long distance zone-related 
transportation costs per cubic foot to decrease. The witness presenting 
the estimates provides only a general description of the methodology 
employed, sprinkled with references to the appropriate library 
reference. See USPS-T-25 at 11-13, and 18-19. While the resulting cost 
figures were presented in a library reference,\12\ there is no 
explanation for the changes. Only some six weeks later, in response to 
interrogatories, was the methodological change adequately 
explained.\13\
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    \12\ See USPS-LR-J-64, Attachment B at 12.
    \13\ Response of United States Postal Service Witness Jennifer 
L. Eggleston to Interrogatories of Parcel Shippers Association (PSA/
USPS-T25-1-3), November 8, 2001. See Tr. 11-A/3947-53. The 
methodological change involved the manner in which Inter-BMC highway 
transportation costs were distributed. In docket No. R2000-1, it was 
assumed that all Inter-BMC highway transportation costs were 
associated with transportation between BMCs. It was determined, 
however, that the inter-BMC highway account also reflects costs for 
stops at other than BMCs. The witness indicated that only 45 percent 
of the stop-days of Inter-BMC highway transportation are at BMCs. 
Accordingly, the witness adjusted the Parcel Post transportation 
model by distributing 45 percent of the inter-BMC highway 
transportation costs to the long distance zone-related cost 
category, with the balance distributed to the intermediate cost 
category. Id. at 3947-51.
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    The failure to adequately identify the change initially causes 
delay, unnecessarily encumbers participants' efforts to review and 
understand the Postal Service's request, and increases the 
participants' (and ultimately) the Postal Service's workload. Had the

[[Page 79542]]

change been prominently identified at the outset, confusion would have 
been avoided, and delay minimized. Given the tight timetables necessary 
in omnibus rate proceedings, participants are unduly disadvantaged when 
material changes are proposed but are not adequately identified in 
testimony accompanying the request.
    The proposed rulemaking is responsive to the summit process, 
specifically addressing the parties' concerns that the burdens of 
litigating omnibus rate cases would be reduced if the Postal Service 
were required to file a roadmap of its filing and to identify all 
methodological changes. Requiring the Postal Service to submit such 
testimony should not add to its burden appreciably. It will, however, 
enable participants to quickly gain a better understanding of the 
Postal Service's filing, including methodological issues that may have 
a substantial influence on rates. As a result, discovery should be more 
focused, and the Postal Service's workload may be reduced. In sum, the 
benefits of the proposed amendments appear to outweigh any burden that 
might be imposed on the Postal Service.
    Requests for proposed classification changes filed pursuant to 
subpart C of the Commission's rules do not suffer from the same time 
constraints. For simple or minor proposed classification changes the 
current rules suffice. For more complex classification proposals, 
however, there would appear to be no valid reason not to extend the 
proposed amendments which are intended to expedite and simplify the 
review process. Thus, when proposing classification changes affecting 
more than one subclass or special service, the Postal Service should 
include with its request testimony providing an overview of its filing, 
and describing all changes affecting costs, volumes, or rate design.

Comments; Representation of the General Public

    By this order, the Commission hereby gives notice that comments 
from interested persons concerning the proposed amendments to the 
Commission's rules are due on or before February 12, 2003. Reply 
comments may also be filed and are due February 26, 2003.
    In conformance with Sec.  3624(a) of title 39, the Commission 
designates Shelley S. Dreifuss, director of the Commission's Office of 
the Consumer Advocate, to represent the interests of the general public 
in this proceeding. Pursuant to this designation, Ms. Dreifuss will 
direct the activities of Commission personnel assigned to assist her 
and, upon request, will supply their names for the record. Neither Ms. 
Dreifuss nor any of the assigned personnel will participate in or 
provide advice on any Commission decision in this proceeding.

Ordering Paragraphs

    It is ordered:
    1. Interested persons may submit comments by no later than February 
12, 2003. Reply comments may also be filed and are due February 26, 
2003.
    2. Shelley S. Dreifuss, director of the Office of the Consumer 
Advocate, is designated to represent the interests of the general 
public in this docket.
    3. The Secretary shall arrange for publication of this notice of 
proposed rulemaking in the Federal Register.

    Issued December 13, 2002.

    By the Commission.
Steven W. Williams,
Secretary.

List of Subjects in 39 CFR Part 3001

    Administrative practice and procedure, Postal Service.
    For the reasons discussed in the preamble, the Commission proposes 
to amend 39 CFR part 3001--Rules of Practice and Procedure Subparts B--
Rules Applicable to Requests for Changes in Rates or Fees and Subpart 
C--Rules Applicable to Requests for Establishing or Changing the Mail 
Classification Schedule as follows:

PART 3001--RULES OF PRACTICE AND PROCEDURE

    1. The authority citation for part 3001 continues to read as 
follows:

    Authority: 39 U.S.C. 404(b); 3603, 3622-24; 3661, 3662, 3663.

Subpart B--Rules Applicable to Requests for Changes in Rates or 
Fees

    2. Revise Sec.  3001.53 to read as follows:


Sec.  3001.53  Filing of prepared direct evidence.

    (a) General requirements. Simultaneously with the filing of the 
formal request for a recommended decision under this subpart, the 
Postal Service shall file all of the prepared direct evidence upon 
which it proposes to rely in the proceeding on the record before the 
Commission to establish that the proposed changes or adjustments in 
rates or fees are in the public interest and are in accordance with the 
policies and the applicable criteria of the Act. Such prepared direct 
evidence shall be in the form of prepared written testimony and 
documentary exhibits which shall be filed in accordance with Sec.  
3001.31.
    (b) Overview of filing. As part of its direct evidence, the Postal 
Service shall include a single piece of testimony that provides an 
overview of its filing, including identifying the subject matter of 
each witness's testimony, explaining how the testimony of its witnesses 
interrelates, and highlighting changes in cost methodology, volume 
estimation, or rate design, as compared to the manner in which they 
were calculated by the Commission to develop recommended rates and fees 
in the most recent general rate proceeding. This testimony should also 
identify, with reference to the appropriate testimony, each witness 
responsible for addressing any methodological change described in 
paragraph (c) of this section.
    (c) Proposed changes. As part of its direct evidence, the Postal 
Service shall submit testimony that identifies and explains each 
material change in cost methodology, volume estimation, or rate design, 
compared to the method employed by the Commission in the most recent 
general rate proceeding. This requirement shall not apply to any such 
change adopted by the Commission in an intervening proceeding. The 
testimony required in this paragraph (c) shall also include a 
discussion of the impact of each such change on the levels of 
attributable costs, projected volumes, and rate levels.
    3. Revise Sec.  3001.54(a) to read as follows:


Sec.  3001.54  Contents for formal requests.

    (a) General requirements. (1) Each formal request filed under this 
subpart shall include such information and data and such statements of 
reasons and bases as are necessary and appropriate fully to inform the 
Commission and the parties of the nature, scope, significance, and 
impact of the proposed changes or adjustments in rates or fees and to 
show that the changes or adjustments in rates or fees are in the public 
interest and in accordance with the policies of the Act and the 
applicable criteria of the Act. To the extent information is available 
or can be made available without undue burden, each formal request 
shall include the information specified in paragraphs (b) through (r) 
of this section. If a request proposes to change the cost attribution 
principles applied by the Commission in the most recent general rate 
proceeding in which its recommended rates were adopted, the Postal 
Service's request shall include an alternate cost presentation 
satisfying paragraph (h) of this section that shows what the effect on 
its request would be if it did not

[[Page 79543]]

propose changes in attribution principles.
* * * * *

Subpart C--Rules Applicable to Requests for Establishing or 
Changing the Mail Classification Schedule

    4. Revise Sec.  3001.63 to read as follows:


Sec.  3001.63  Filing of prepared direct evidence.

    (a) General requirements. Simultaneously with the filing of the 
formal request for a recommended decision under this subpart, the 
Postal Service shall file all of the prepared direct evidence upon 
which it proposes to rely in the proceeding on the record before the 
Commission to establish that the mail classification schedule or 
changes therein proposed by the Postal Service are in accordance with 
the policies and the applicable criteria of the Act. Such prepared 
direct evidence shall be in the form of prepared written testimony and 
documentary exhibits which shall be filed in accordance with Sec.  
3001.31.
    (b) Requests affecting more than one subclass. Each formal request 
filed under this subpart affecting more than one subclass or special 
service is subject to the requirements of Sec. Sec.  3001.53(b) and 
(c).

[FR Doc. 02-32707 Filed 12-27-02; 8:45 am]
BILLING CODE 7710-FW-P