[Federal Register Volume 70, Number 141 (Monday, July 25, 2005)]
[Notices]
[Pages 42602-42604]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-14594]


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POSTAL RATE COMMISSION

[Docket No. MC2005-3; Order No. 1441]


Negotiated Service Agreement

AGENCY: Postal Rate Commission.

ACTION: Notice and order on new baseline negotiated service agreement 
case.

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SUMMARY: This document establishes a docket for consideration of the 
Postal Service's request for approval of a baseline negotiated service 
agreement with Bookspan. It identifies key elements of the proposed 
agreement, which involves Standard Mail letter rates; its relationship 
to the Capital One Services, Inc. negotiated service agreement; and 
addresses preliminary procedural matters.

DATES: Key dates are:
    1. August 8, 2005: Deadline for filing notices of intervention.
    2. August 8-10, 2005: Authorized alternative dates for settlement 
conference.
    3. August 11, 2005: Prehearing conference (10 a.m.).

ADDRESSES: Submit comments electronically via the Commission's Filing 
Online system at http://www.prc.gov.

FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, general counsel, 
at 202-789-6818.

SUPPLEMENTARY INFORMATION:

Procedural History

    Capital One Services, Inc. Negotiated Service Agreement, 67 FR 
61355 (September 30, 2002).
    Negotiated Service Agreement Final Rule, 69 FR 7574 (February 18, 
2004).
    On July 14, 2005, the United States Postal Service filed a request 
seeking a recommended decision from the Postal Rate Commission 
approving a Negotiated Service Agreement (NSA) with Bookspan.\1\ The 
NSA is proffered as a new baseline agreement. This is the first new 
baseline agreement filed since the Capital One Negotiated Service 
Agreement, MC2002-2, and the first baseline agreement filed under the 
Commission's new rules for baseline NSAs. Rule 195 [39 CFR 3001.195]. 
The Request, which includes six attachments, was filed pursuant to 
Chapter 36 of the Postal Reorganization Act, 39 U.S.C. 3601 et seq.\2\ 
The Postal Service has identified Bookspan, along with itself, as 
parties to the NSA. This identification serves as notice of 
intervention by Bookspan. It also indicates that Bookspan shall be 
considered a co-proponent,

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procedurally and substantively, of the Postal Service's Request during 
the Commission's review of the NSA. Rule 191(b) [39 CFR 3001.191(b)]. 
An appropriate Notice of Appearance and Filing of Testimony as Co-
Proponent by Bookspan, July 14, 2005, also was filed.
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    \1\ Request of the United States Postal Service for a 
Recommended Decision on Classifications and Rates to Implement a 
Baseline Negotiated Service Agreement with Bookspan, July 15, 2005 
(Request).
    \2\ Attachments A and B to the Request contain proposed changes 
to the Domestic Mail Classification Schedule and the associated rate 
schedules; Attachment C is a certification required by Commission 
rule 193(i) specifying that the cost statements and supporting data 
submitted by the Postal Service, which purport to reflect the books 
of the Postal Service, accurately set forth the results shown by 
such books; Attachment D is an index of testimony and exhibits; 
Attachment E is a compliance statement addressing satisfaction of 
various filing requirements; and Attachment F is a copy of the 
Negotiated Service Agreement.
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    In support of the direct case, the Postal Service has filed Direct 
Testimony of Michael K. Plunkett on Behalf of the United States Postal 
Service, July 14, 2005 (USPS-T-1), and Direct Testimony of Michelle K. 
Yorgey on Behalf of the United States Postal Service, July 14, 2005 
(USPS-T-2). Bookspan has separately filed Direct Testimony of Robert J. 
Posch, Jr. on Behalf of Bookspan, July 14, 2005 (Bookspan-T-1), and 
Direct Testimony of Matthias Epp on Behalf of Bookspan, July 14, 2005 
(Bookspan-T-2). The Postal Service has reviewed the Bookspan testimony 
and, in accordance with rule 192(b) [39 CFR 3001.192(b)], states that 
such testimony may be relied upon in presentation of the Postal 
Service's direct case.\3\
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    \3\ Request at 6; USPS-T-2 at 1.
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    The Postal Service has submitted a contemporaneous filing which 
requests the establishment of settlement procedures.\4\ The Postal 
Service believes that this agreement should not be particularly 
contentious given that the agreement is straightforward and the 
substance of the agreement concerns the availability of declining 
blocks, which were an integral part of all previously approved NSAs. 
However, if the parties do have issues that they want to explore, 
settlement discussions might provide a convenient forum to resolve 
those issues or facilitate a limitation of the issues that need to be 
litigated.
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    \4\ Request of the United States Postal Service for 
Establishment of Settlement Procedures, July 14, 2005.
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    The Postal Service's Request, the accompanying testimonies of 
witnesses Plunkett (USPS-T-1), Yorgey (USPS-T-2), Posch (Bookspan-T-1), 
and Epp (Bookspan-T-2), and other related material are available for 
inspection at the Commission's docket section during regular business 
hours. They also can be accessed electronically, via the Internet, on 
the Commission's Web site (http://www.prc.gov).

I. The Bookspan NSA

    The Postal Service proposes to enter into a new baseline three-year 
NSA with Bookspan. Unlike the Capital One baseline NSA, the Bookspan 
NSA is based solely upon a declining block rate volume discount 
available to qualifying Standard Mail letter pieces.
    The declining block rate volume discount feature provides Bookspan 
with a per-piece discount for Standard Mail letter volumes that exceed 
specified volume thresholds. Discounts are payable only after certain 
specified minimum volume commitments have been reached. During the 
first year of the agreement, discounts may be earned for annual volumes 
above 87 million pieces once a volume commitment of 94 million has been 
reached. During the second year of the agreement, discounts may be 
earned for annual volumes above 85 million pieces once a volume 
commitment of 95 million has been reached. During the third year of the 
agreement, discounts may be earned for annual volumes above 94 million 
pieces once a volume commitment of 105 million has been reached. 
Discounts, under a declining block rage structure, range from 2 to 3 
cents in the first two years of the agreement, and from 1 to 3 cents in 
the third year of the agreement.
    The minimum commitment levels for the second and third years of the 
agreement are subject to adjustment based on the actual volumes mailed 
in the previous years. If at the end of the first or second years, the 
actual volume is 12% or more above the prior year's commitment, the 
following year's commitment will be revised to be the average of the 
prior year's actual volume and the following year's original 
commitment. If at the end of the first or second years, the actual 
volume is 5% or more below the prior year's commitment, the following 
year's commitment will be revised to be the average of the prior year's 
actual volume and the prior year's original commitment. In any event, 
the volume commitments will never be less than 90 million pieces.
    This agreement provides for several other risk mitigation features 
to protect the Service's financial interests. If Bookspan sends more 
than 150 million qualifying pieces in any one year, the agreement 
automatically terminates. Either party may also unconditionally cancel 
the agreement with 30 days' written notice. Additionally, the agreement 
contains a mechanism to adjust the volume blocks to the extent that 
Bookspan merges or acquires an entity with an annual Standard Mail 
letter volume exceeding 5 million pieces, or merges or acquires 
multiple entities with a combined annual Standard Mail letter volume 
exceeding 10 million pieces.
    The Postal Service estimates it will benefit by $7.4 million over 
the life of the NSA. This is based on estimates of $3.3 million in 
increased contribution due to additional volume for new Standard letter 
mail, $5.1 million in increased contribution due to a net contribution 
gain from converting Standard Mail solicitation flats to letters, and 
lost revenue from total incremental discounts of $0.96 million.

II. Commission Response

    Applicability of the Rules for Baseline NSAs. For administrative 
purposes, the Commission has docketed the instant filing as a request 
for a new baseline NSA pursuant to rule 195 (39 CFR 3001.195).
    Settlement. The Commission authorizes settlement negotiations in 
this proceeding. It appoints Postal Service counsel as settlement 
coordinator. In this capacity, counsel for the Service shall file 
periodic reports on the status of settlement discussions. The Postal 
Service requests that a settlement conference be held immediately 
following the deadline for intervention. The Commission authorizes the 
settlement coordinator to hold a settlement conference on either August 
8, 9, or 10, 2005, and at such times deemed necessary by the settlement 
coordinator. Authorization of settlement discussions does not 
constitute a finding on the proposal's procedural status or on the need 
for a hearing.
    Representation of the general public. In conformance with section 
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.
    Intervention. Those wishing to be heard in this matter are directed 
to file a notice of intervention on or before August 5, 2005. The 
notice of intervention shall be filed using the Internet (Filing 
Online) at the Commission's Web site (http://www.prc.gov), unless a 
waiver is obtained for hardcopy filing. Rules 9(a) and 10(a) (39 CFR 
3001.9(a) and 10(a)). Notices should indicate whether participation 
will be on a full or limited basis. See rules 20 and 20a (39 CFR 
3001.20 and 20a). No decision has been made at this point on whether a 
hearing will be held in this case.
    Prehearing conference. A prehearing conference will be held August 
11, 2005, at 10 a.m. in the Commission's hearing room. Participants 
shall be prepared to identify any issue(s) that would indicate the need 
to schedule a

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hearing, along with other matters referred to in this ruling.

Ordering Paragraphs

It Is Ordered:

    1. The Commission establishes Docket No. MC2005-3 to consider the 
Postal Service Request referred to in the body of this order.
    2. The Commission will sit en banc in this proceeding.
    3. Postal Service counsel is appointed to serve as settlement 
coordinator in this proceeding. The Commission will make its hearing 
room available for a settlement conference on either August 8, 9, or 
10, 2005, or at such times deemed necessary by the settlement 
coordinator.
    4. Shelley S. Dreifuss, director of the Commission's Office of the 
Consumer Advocate, is designated to represent the interests of the 
general public.
    5. The deadline for filing notices of intervention is August 5, 
2005.
    6. A prehearing conference will be held August 11, 2005, at 10 a.m. 
in the Commission's hearing room.
    7. The Secretary shall arrange for publication of this notice and 
order in the Federal Register.

    Issued: July 19, 2005.

    Dated: July 19, 2005.

    By the Commission.
Steven W. Williams,
Secretary.
[FR Doc. 05-14594 Filed 7-22-05; 8:45 am]
BILLING CODE 7710-FW-P