[Federal Register Volume 69, Number 219 (Monday, November 15, 2004)]
[Proposed Rules]
[Pages 65563-65565]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-25298]


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POSTAL RATE COMMISSION

39 CFR Part 3001

[Docket No. RM2005-1; Order No. 1423]


Periodic Reporting Rule

AGENCY: Postal Rate Commission.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: This document addresses a dispute that has arisen over the 
Postal Service's compliance with certain periodic reporting rules. 
These rules are intended to facilitate participation in Commission 
proceedings by providing the public with data and information on cost 
methodologies and other matters. This notice describes the dispute and 
invites comments on this development, including suggestions on possible 
rule changes.

DATES: Initial Comments: December 6, 2004; Reply Comments: January 6, 
2005.

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

SUPPLEMENTARY INFORMATION:

Regulatory History

    68 FR 2272, January 16, 2003.
    68 FR 65348, November 19, 2003.

Summary

    The Postal Rate Commission amended its Rules Applicable to the 
Filing of Reports by the U.S. Postal Service in its Order No. 1386, 
issued November 3, 2003. That order updated the rules to reflect new 
data systems and methodologies, and increased the amount of information 
the Postal Service was to submit to assist the Commission and foster 
effective public participation in Administrative Procedure Act (APA) 
hearings pursuant to 39 U.S.C. 3624.
    The Postal Service opposed expansion of its obligations under 39 
CFR

[[Page 65564]]

3001.102, Filing of Reports, in the rulemaking docket leading to the 
adoption of Order No. 1386. Although it initially complied with some of 
its new obligations, the Postal Service has now informed the Commission 
that after consideration at the ``highest level'' of postal management, 
it has determined that it will not comply with Commission rules that 
require the reporting of new methodologies and data used in the 
preparation of its annual Cost and Revenue Analysis (CRA) report.
    In support of its action, the Postal Service reiterated several 
legal contentions fully considered and rejected by the Commission in 
its rulemaking. However, the primary motivating factor leading to the 
Postal Service announcement that it would not comply with the rules 
seems to be the Commission practice of making materials filed in 
compliance with its rules available to the public.
    The Commission requests that interested persons provide comments on 
this controversy, including suggestions for adjustments to Commission 
rules designed to reconcile the conflicting interests outlined in this 
Notice. Comments should be provided by December 6, 2004. Reply comments 
may be submitted by January 6, 2005.

Background

    Over the years, postal ratemaking has become increasingly complex. 
The ability to computerize information and apply econometrics to large 
data bases has led to more sophisticated analyses of postal costs, 
volumes, and revenues. The Commission, and to an even greater extent 
mailers and other interested participants in Postal Rate Commission 
proceedings, have had growing difficulty in reviewing multiple new 
complex analyses in the context of proceedings that must, by statute, 
be completed in 10 months. 39 U.S.C. 3624(c)(1).
    The Postal Service supports its requests for rate increases with 
testimony from 40+ witnesses, a number of whom sponsor technical 
analyses that have been in preparation for many months. Participants 
must review this material, develop their criticisms, and present any 
suggested alternative analyses approximately half way through a case to 
allow other participants and the Commission to evaluate their views. 
The Commission is charged with reviewing every analysis presented, 
getting clarifications as needed, and preparing a technically sound, 
comprehensive decision.
    Commission conclusions must be confined to materials in the 
evidentiary record. Participants have complained that the process 
becomes ineffective and one-sided if only the Postal Service has time 
sufficient to analyze data and prepare persuasive evidence.
    Following the most recent rate case, the Postal Service and Postal 
Rate Commission jointly sponsored a Ratemaking Summit to obtain public 
input on ways to make the ratemaking process more streamlined and less 
burdensome for all involved. The Summit took place in May and June, 
2002, and involved written comments followed by two, separate full day 
discussion sessions.
    Attention was given both to how the Postal Service planned and 
implemented rate changes, and how to improve the current rate case 
process. The majority of comments addressing the rate case process 
focused on the difficulty of responding adequately to multiple new 
complex technical presentations within the 10-month timeframe. 
Participants emphasized they do not have the resources to address 
several major technical studies simultaneously.
    The most widely supported solution was to find a way to provide 
participants with more timely access to annual cost and volume data, as 
well as any changes in the methodologies the Postal Service uses to 
aggregate and distribute that data in preparing its annual reports. It 
has been the Postal Service's consistent practice to withhold from the 
public both the basic cost and volume data underlying its aggregate 
results, and any changes to its analytic methodologies, until it 
submits an omnibus rate request.

Recent Amendments to the Periodic Reporting Rules

    A short time after the Ratemaking Summit, the Commission issued a 
notice of proposed rulemaking, in which it sought comments on whether 
to update and expand its Rules Applicable to the Filing of Reports by 
the U.S. Postal Service. These rules had not been revised for over a 
decade and no longer fully reflected existing operating and data 
collection practices. The Commission is directed by 39 U.S.C. 3603 to 
implement such rules as it finds necessary and proper to enable it to 
carry out its statutory functions. That section specifically provides 
such rules ``shall not be subject to any change or supervision by the 
Postal Service.''
    All those who submitted either comments or reply comments, with the 
exception of the Postal Service, urged the Commission to amend its 
periodic reporting rules to facilitate analysis between rate cases. The 
Postal Service has opposed parts of these proposals, raising legal 
arguments (set forth below) and expressing concern that compliance 
would be burdensome, and that it might face time-consuming questions 
about new analytic methods underlying its published summary reports.
    The Commission followed APA processes, resolving every issue 
raised. It narrowed its initial proposal somewhat in light of the 
Postal Service's burden arguments, but it retained several proposed 
amendments to the periodic reporting rules providing access to new data 
collection systems and estimating methods. The Commission found that 
updating the periodic reporting rules would result in favor of key 
improvements:
    (1) Help the Commission and the public to evaluate the soundness of 
the cost, volume and revenue estimates on which existing rates were 
based;
    (2) Inform the Commission and the public about new data sets and 
estimation techniques incorporated by the Postal Service each year into 
the Cost and Revenue Analysis (CRA) report it currently provides;
    (3) Allow the public to participate more meaningfully in Commission 
cases; and
    (4) Enable the Commission to expedite the processing of rate, 
classification, and complaint cases.
    In November 2003 the Commission amended its periodic reporting 
rules. The Postal Service has complied with some parts of the new rule, 
but it now has refused to provide data and methodologies used to 
develop the majority of the cost attributions reported in its Cost and 
Revenue analysis. The Attachment to this Order lists the information 
the Postal Service has not provided.

The Postal Service Position

    The Postal Service explained its views in detailed filings in 
Docket RM2003-3. All of these filings may be accessed on the Commission 
Web site, http://www.prc.gov. The most recent Postal Service statement, 
in which it announced it would not provide required information, may 
also be found there on the ``Daily Listing'' for September 17, 2004.
    The Postal Service advances two main arguments in support of its 
position that the Commission is not authorized to require periodic 
reports of this nature. First, it contends that Commission authority is 
limited to acting in response to Postal Service requests for rate or 
classification decisions, and other strictly limited specific functions 
set forth in the Act. The Postal Service argues that the Commission 
does not

[[Page 65565]]

have broad investigative or oversight authority, and the Service has 
implied that the amended rules are an attempt by the Commission to 
expand its authority and oversee operations in a manner not 
contemplated by the statute.
    Second, the Postal Service contends that Congress does not want it 
to have to make information of this nature public ``indiscriminately.'' 
The Act includes a special test applicable to Freedom of Information 
Act (FOIA) requests. The Postal Service does not have to provide 
``information of a commercial nature'' which ``under good business 
practice would not be publicly disclosed'' in response to a FOIA 
request. 39 U.S.C. 410(c)(2). The Postal Service correctly observes 
that private businesses in the United States seldom disclose detailed 
information about their operating costs.
    The Postal Service argues that because it is standard Commission 
practice to post public documents on its Web site, including data 
received as periodic reports, the Service should not provide such 
detailed information to the Commission. The Postal Service seems to 
concede that the Commission might have use for these materials, and for 
explanations of changes since the most recent rate case, but it 
contends that allowing internet access to this information would be 
contrary to Congress' vision of the Postal Service following good 
business practices.

The Current Commission Position

    The Commission has not found either Postal Service argument 
persuasive, as explained fully in Order No. 1386. The Commission has 
concluded that its responsibility under section 3603 to establish rules 
to carry out its functions under the Act does provide the authority to 
assure that sufficient information is available in a timely fashion to 
facilitate meaningful public participation and to enable the Commission 
to provide informed recommendations in response to Postal Service rate 
and classification requests.
    The Commission also has concluded that information required by its 
rules is not equivalent to a citizen's FOIA request. While citizens can 
file a FOIA request seeking information on any topic without any 
showing of need, the Commission's rules focus on information needed to 
carry out its statutory functions. The Act requires public 
participation in all Commission proceedings, and thus contemplates 
public access to relevant data. In past rate cases, the Postal Service 
has made all of the contested information available without suggesting 
that there was any need to restrict public access to it.
    The Commission always has recognized that when the Postal Service 
or any other participant provides items for use in a Commission 
proceeding that it shows to be trade secrets or other sensitive 
business information, and that disclosure of this information could 
result in commercial harm, such items should be made subject to 
appropriate protective conditions. Similarly, the Commission has been 
willing to accommodate in its periodic reporting rules, Postal Service 
requests that specific information be protected as commercially 
sensitive, after balancing the asserted risk of harm against the needs 
of the public to remain informed. See Docket No. RM89-3, Order No. 839, 
at 7-8 (deferring filing dates for billing determinants of competitive 
products).

Comments

    The Postal Service has indicated its interest in further exploring 
the possibility of ways to refine procedures for controlling 
dissemination of information provided as periodic reports. This might 
be accomplished through additions to rule 102. Those responding to this 
notice are invited to advise on the most important policies and 
principles that should guide the Commission in evaluating potential 
action in regard to this situation. Commenters also may suggest 
procedures for obtaining a desired outcome or specific proposals for 
changes to Commission rules.

Ordering Paragraphs

    It is ordered:
    1. Interested persons are invited to submit comments on the 
Commission's Advance Notice of Proposed Rulemaking on or before 
December 6, 2004. Any reply comments should be submitted by January 6, 
2005.
    2. The Secretary shall cause this Advance Notice of Proposed 
Rulemaking to be published in the Federal Register.

Attachment

Materials Required by Rule 102 That the Postal Service Has Not Provided
    1. The In-Office Cost System (IOCS) data for FY 2003 used to 
distribute attributable mail processing and in-office carrier costs to 
classes of mail in the Cost and Revenue Analysis (CRA) report.
    2. The City Carrier Cost System (CCCS) data for FY 2003 used to 
distribute attributable city carrier costs to classes of mail in the 
CRA.
    3. The Rural Carrier Cost System (RCCS) data for 2003 used to 
distribute attributable rural carrier costs to classes of mail in the 
CRA.
    4. The National Mail Count data for 2003. These data are used to 
determine attributable rural carrier costs.
    5. MODS input data used to estimate mail processing cost 
variabilities by activity.
    6. SAS computer programs showing how FY 2003 attributable mail 
processing costs were estimated and distributed to mail classes in the 
CRA.
    7. Revenue, Pieces, and Weight reports by rate category for the 
first three quarters of FY 2004.

    By the Commission.

    Issued: November 8, 2004.
Steven W. Williams,
Secretary.
[FR Doc. 04-25298 Filed 11-12-04; 8:45 am]
BILLING CODE 7710-FW-P