[Federal Register Volume 71, Number 91 (Thursday, May 11, 2006)]
[Proposed Rules]
[Pages 27436-27440]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-7218]


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POSTAL RATE COMMISSION

39 CFR Part 3001

[Order No. 1464; Docket No. R2006-1]


Postal Rate and Fee Changes

AGENCY: Postal Rate Commission.

ACTION: Notice and order in omnibus rate filing.

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SUMMARY: This document informs the public that the United States Postal 
Service has filed a request for a decision on proposed changes in 
essentially all domestic postage rate and fee changes, along with 
proposed classification changes. It identifies several procedural steps 
the Commission has taken in response to the filing. The request 
reflects a system-wide average increase of 8.5 percent; however, there 
are limited (and in some instances, significant) exceptions.

DATES: 1. May 31, 2006: deadline for interventions, answers to motion 
for waiver and for protective conditions. 2. June 5, 2006: Deadline for 
answer to motion for waiver of rules regarding certain library 
references, and answer to motion concerning Forever Stamp. 3. June 7, 
2006: Deadline for statements identifying topics for prehearing 
conference. 4. June 16, 2006: Prehearing conference.

ADDRESSES: File notices of intervention and other documents 
electronically via the Commission's Filing Online system at http://www.prc.gov.

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

SUPPLEMENTARY INFORMATION:

I. Introduction

    Public notice. This order provides notice to the public that on May 
3, 2006, the United States Postal Service (Postal Service or Service) 
filed a formal Request with the Postal Rate Commission (Commission) for 
a recommended decision on proposed changes in domestic postage rates, 
fees and classifications.\1\ The Request was accompanied by several 
contemporaneous notices and motions.
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    \1\ Request of the United States Postal Service for a 
Recommended Decision on Changes in Rates of Postage and Fees for 
Postal Services, May 3, 2006 (Request).
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    The Service filed the Request pursuant to chapter 36 of title 39, 
United States Code, based on its determination that such changes would 
be in the public interest and in accordance with policies of that 
title. The filing of the Request triggers a statutory process mandated 
by 39 U.S.C. 3624. This process involves an opportunity for public 
hearings on the Service's proposals. It also requires issuance of the 
Commission's recommended decision within 10 months of the date of the 
Service's filing.

II. Establishment of Formal Docket

    Establishment of formal docket. The Commission hereby institutes a 
proceeding under 39 U.S.C. 3622 and 3623, designated as Docket No. 
R2006-1, Postal Rate and Fee Changes, to consider the instant Request. 
In the course of consideration, participants may propose alternatives 
to the Service's proposals, the Commission may propose certain 
classification changes, and the Service may revise, supplement, or 
amend its filing. The Commission's review of the Request, including any 
revisions or alternatives (including full or partial settlement 
proposals), may result in recommendations that differ from proposed 
rates, fees and classification changes.
    This notice apprises the public of the Service's Request, of the 
overall magnitude and scope of the Request, and of the institution of a 
formal proceeding. It does not address or review all aspects of the 
filing, which is comprehensive and complex; therefore, interested 
persons are urged to carefully review the filing to determine its 
impact on aspects of postal rates, fees and classifications that may be 
of interest to them.
    Availability; Web site posting. The Commission has posted the 
Service's Request and most related or supporting material on its Web 
site at http://www.prc.gov. Additional Postal Service filings in this 
case and participants' submissions also will be posted on the Web site, 
if provided in electronic format or amenable to conversion, and not 
subject to a valid protective order. Information on how to use the 
Commission's Web site is available online or by contacting the 
Commission's Webmaster via telephone at 202-789-6873 or via electronic 
mail at  [email protected].
    The Service's Request and related documents are also available for 
public inspection in the Commission's docket

[[Page 27437]]

section. Docket section hours are 8 a.m. to 4:30 p.m., Monday through 
Friday, except on federal government holidays. Docket section personnel 
may be contacted via electronic mail at [email protected] or via 
telephone at 202-789-6846.
    Paper copies. Intervenors' options for obtaining paper copies of 
the Docket No. 2006-1 filing from the Postal Service are described in 
the Notice of the United States Postal Service Regarding Availability 
and Distribution of Paper Copies of the Postal Service's Direct Case, 
May 3, 2006.

III. Overview of the Service's Filing

    Contents. The Service's Docket No. R2006-1 filing includes its 
formal Request (with seven attachments); 47 pieces of testimony (along 
with related exhibits) presented by 41 witnesses; and 133 library 
references.\2\ The Service notes that it anticipates supplementing its 
Request during the course of this proceeding with testimony on a 
proposal referred to as the ``Forever Stamp,'' which mainly affects 
senders of single-piece one-ounce First-Class Mail. See Motion of the 
United States Postal Service for Partial Waiver or Suspension of 
Commission Rules Specifying Materials to be Filed in Support of its 
Request for Changes in Postal Rates and Classifications, May 3, 2006 
(Motion Concerning Forever Stamp).
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    \2\ The Service has prepared, but withheld, one library 
reference (USPS-LR-L-35) pending resolution of a request for 
protective conditions. See Motion of United States Postal Service 
for Waiver and for Protective Conditions for Library Reference that 
Includes Costs and Other Data Associated with the FedEx 
Transportation Agreement, May 3, 2006 (FedEx Waiver Motion). See 
also USPS-LR-L-133 (Redacted Addendum to FedEx Transportation 
Contract.) Note: The Service's library reference count includes some 
library references that have been reserved by number, with contents 
expected to be filed later.
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    Test year; contingency; key projections. The Postal Service 
operates under a breakeven constraint pursuant to controlling law and, 
under Commission rules, generally relies on a future test year for 
ratemaking purposes. The Service proposes using fiscal year 2008 as the 
test year in its Request, and makes various projections based on that 
choice. In particular, it projects that it will incur a net revenue 
deficiency of $5.874 billion in the test year under existing rates. It 
projects that its proposed set of rates and fees would generate 
additional revenues of $3.983 billion, resulting in a test year revenue 
deficiency of $0.8 million. USPS-T-47 at 9. The filing assumes a 
contingency of 1 percent. USPS-T-6 at 62.
    System-wide average increase. The Service's Request reflects a 
system-wide average increase of 8.5%. Id. at 9. In certain instances, 
percentage increases for individual classes and subclasses of mail and 
Special Services vary considerably from that average. These departures 
from the system-wide average are often due to rate design changes, such 
as the proposed introduction of shape-based rates.
    First-Class stamp price. The price of the First-Class stamp for a 
single-piece one-ounce letter--traditionally the Postal Service's 
flagship offering and the product most familiar to the general public--
increases by 3 cents under the Service's proposal, thereby going from 
the current rate of 39 cents to 42 cents. The rate for each additional 
ounce of single-piece First-Class Mail (through 13 ounces) decreases by 
4 cents, going from the current rate of 24 cents to 20 cents.
    Defining features. The Service's Request is marked by two defining 
features. One is a return to the traditional approach to postal 
ratemaking, which entails a process which results in the percentage 
increase for any given class or service being arrived at as a result of 
application of the factors of 39 U.S.C. 3622, rather than through 
application of a generally uniform ``across the board'' percentage.\3\ 
The other feature is the incorporation of extensive proposed rate 
design and classification changes based on new (or substantially 
updated) cost studies; other new data and information; policy 
considerations; and important assumptions about the mailing 
environment, including the evolving postal network.
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    \3\ The ``across the board'' approach was used in the two most 
recent omnibus cases.
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    The Service's summary of percentage changes in proposed rates 
relative to current rates provides the following information:

------------------------------------------------------------------------
                                                                 Percent
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First-Class Mail:
  Letters and Sealed Parcels..................................       7.0
  Cards.......................................................      10.6
Priority Mail.................................................      13.8
Express Mail..................................................      12.5
Periodicals:
  Within-County...............................................      24.4
  Outside County..............................................      11.4
Standard Mail:
  Regular.....................................................       9.6
  Nonprofit...................................................       9.5
  Enhanced Carrier Route......................................       8.6
  Nonprofit Enhanced Carrier Route............................       9.1
Package Services:
  Parcel Post.................................................      13.7
  Bound Printed Matter........................................      11.9
  Media Mail..................................................      18.0
  Library Rate................................................      18.4
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    Total All Mail............................................       8.5
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USPS-T-31, Exh. USPS-31D.

    Special Services. Percentage changes vary widely for Special 
Services. A summary of proposed cost coverages for Special Services 
appears at USPS-T-31, Exh. USPS-31B. Detailed development of the 
proposed fee levels and discussion of other aspects of the filing 
affecting Special Services is provided in USPS-T-39; USPS-T-40; and 
USPS-T-41.

IV. ``Roadmap'' Testimony and Master List of Library References

    Witness Davis (USPS-T-47) presents ``roadmap'' testimony in 
compliance with Commission rule 53(b), that provides an overview of the 
Service's filing. It describes the subject matter of each witness's 
testimony; explains the inter-relationship between and among the 
testimonies; describes changes in cost methodology, volume estimation, 
and rate design relative to the Commission's approach in Docket No. 
R2005-1; and identifies each witness who addresses any material 
methodological change. Witness Davis's testimony also includes two 
attachments: Roadmap Testimony Quick Reference Guide (Attachment 1) and 
Postal Testimony Flowchart (Attachment 2). A master list of library 
references appears in Notice of the United States Postal Service of 
Filing of Master List of Library References, May 3, 2006.
    Witness O'Hara (USPS-T-31) addresses rate policy. His testimony 
presents proposed cost coverages (rate levels) for each subclass and 
addresses the consistency of these coverages with applicable Postal 
Reorganization Act criteria.

V. Attachments to the Request

    Attachment A, Requested Changes in Rates and Fees, and Attachment 
B, Proposed Changes to Domestic Mail Classification Schedule, identify 
changes that would be required if the Service's proposals are adopted. 
Attachment C, Specification of the Rules, Regulations, and Practices 
that Establish Standards of Service and Conditions of Mailability, 
addresses Commission rule 54(b)(2), by designating the contents of the 
Domestic Mail Manual (DMM) as the source of such rules, regulations and 
practices, and provides a copy of the table of contents of the DMM 
(updated as of April 13, 2006). The DMM in its entirety is available 
for review on the Postal

[[Page 27438]]

Service's Web site at http://www.USPS.gov.
    Attachment D is a certification, filed pursuant to Commission rule 
54(p), attesting to the accuracy of cost statements and other 
documentation submitted with the Request. Attachment E presents the 
Audited Financial Statements for Fiscal Year 2005, as filed with the 
Commission on February 15, 2006 as part of the United States Postal 
Service Annual Report. Attachment F is an index that identifies 
witnesses, the numerical designation of each piece of testimony, 
related exhibits and library references, and attorney contacts. 
Attachment G is a compliance statement addressing pertinent provisions 
of rules 53, 54 and 64.

VI. Nature and Impact of the Proposed Changes

    The following summary identifies some central elements of the 
Service's Request, focusing mainly on changes relative to existing rate 
design and classification. Interested persons are urged to review the 
filing in its entirety for other important aspects of the filing.

A. Mail Classes, Subclasses and Categories

    First-Class Mail. The Service proposes introducing the shape of a 
mailpiece (in terms of being presented as a letter, flat or parcel) as 
a factor in developing rates, along with elimination of the heavy piece 
discount and limitations on the application of the nonmachinable 
surcharge. A piece would have to weigh 3.5 ounces or less to be 
eligible for letter rates. USPS-T-32 at 19. The Service also proposes 
altering the approach to additional-ounce rates, which apply through 13 
ounces. Additional proposals affecting First-Class Mail, among others, 
include separating the workshared mail rate design from the single-
piece rate design; eliminating the Automation Carrier Route rate 
categories; and introducing a Forever Stamp. The Forever Stamp 
proposal, in brief, would allow a First-Class stamp to continue to be 
accepted as valid payment of postage for single-piece First-Class Mail 
weighing less than one ounce following a rate change, thereby avoiding 
the need to add a relatively small amount of incremental ``makeup'' 
postage.
    Priority Mail. The Service proposes, among other things, the 
introduction of a dimensional-weight price structure to recognize the 
role of cubic volume as a cost driver in Priority Mail; a permanent 
classification for the Priority Mail flat-rate box; and a fee for on-
call and scheduled Priority Mail, Express Mail, and Parcel Post pick-up 
service. See USPS-T-33 (witness Scherer) and references cited therein 
for additional details related to Priority Mail.
    Express Mail. The Service proposes a new one-pound Express Mail 
flat rate. See USPS-T-34 (witness Berkeley) and references cited 
therein for additional details.
    Periodicals. The Service proposes the introduction of a container 
charge of 85 cents for each sack and pallet used by senders of Outside 
County Periodicals mail (including Science of Agriculture 
publications). This charge would replace existing co-palletization 
discounts, including an experimental co-pallet discount. USPS-T-35 at 
4; id. at 16. The Service proposes raising 37 percent of revenue from 
pounds and 63 percent from pieces, reflecting a slight alteration in 
the existing 40/60 split. Id. at 6. It also proposes separate editorial 
pound dropship rates for destinating ADC, SCF and DDU mail. Id. at 7. 
These proposed rate design and classification changes do not apply to 
mail that qualifies for Within County subclass rates. The proposed 
Ride-Along rate is 15.5 cents.  at 14. See witness Tang's testimony 
(USPS-T-35) and references cited therein for additional details about 
the Service's Periodicals proposals.
    Standard Mail. The Service proposes several nomenclature changes; a 
new rate category for ``hybrid'' pieces that share characteristics of 
both flats and parcels; changes to better align rate design with mail 
processing categories; and certain shape-related changes. It proposes 
expanded dropshipping incentives, often linked to postal facilities 
where certain automated sorting equipment is available in Standard 
Mail; a separate charge (of 1.5 cents) for the use of detached address 
labels in connection with Saturation mailings; and a new rate category 
for parcels and pieces that are not commonly processed on the Service's 
flat sorting machines. See USPS-T-36.
    The Service also proposes de-averaging worksharing rates for non-
automation letters and for automation and non-automation non-letters. 
The Service proposes separate rate structures for parcels and 
``hybrid'' pieces. USPS-T-47 at 45. See USPS-T-36 (witness Kiefer) and 
references cited therein for additional details.
    Package Services. In the Parcel Post subclass, the Service proposes 
one rate design change, which it characterizes as minor. This entails 
requiring all Parcel Select DBMC machinable parcels to be barcoded. 
Cost savings from barcoding would be reflected in rates, instead of 
being separately stated. Pieces without appropriate barcodes would pay 
the applicable retail rate. USPS-T-37 at 7. The Service also proposes 
raising the weight for balloon parcels from 15 pounds to 20 pounds. 
Ibid. See USPS-T-37 (witness Kiefer) and references cited therein for 
additional details. The Service is not proposing any fundamental 
changes to the rate designs for Bound Printed Matter, Media Mail or 
Library Mail. USPS-T-38 at 15 and 16-17. See USPS-T-38 (witness Yeh) 
and references cited therein for additional details.

B. Special Services

    For electronic Address Correction Service, the Service proposes a 
distinction between the fee for First-Class Mail and other classes, 
with First-Class Mail having a lower price. USPS-T-40 at 8. It also 
proposes a new automated option limited to letters, given that only 
letters are processed through the Postal Automation Redirection System. 
Ibid. For Confirm, the Service proposes classification changes, a new 
pricing structure based on the concept of purchasing units, and new 
fees. Id. at 14. The Service states that the use of a unit-based 
approach will provide, among other benefits, a mechanism to expand the 
types of data available without creating multiple subscriptions or 
accounts. Id. at 17. The Service proposes several fee, classification 
and operational changes for Insurance. These include, among others, 
elimination of the signature requirement for items insured for $50.01 
to $200; use of a barcode for all insured items, which will be scanned 
at delivery; lower fees for Express Mail insurance; and a cap of $15 on 
the Service's regular insurance liability for negotiable items, 
currency or bullion, which would match the Express Mail insurance 
limit. Id. at 24.
    The Service proposes classification changes affecting the account 
maintenance fee for special services, limited in many instances to 
changes in DMCS language and nomenclature. USPS-T-39 at 1. For post 
office boxes, the Service proposes changes that include new box fees 
and caller service fees that vary in relation to location space cost. 
The planned fee design is characterized as a continuation of the 
progress toward increased cost homogeneity in the post office fee 
groups. USPS-T-41 at 1. Interested persons are encouraged to review the 
testimony of witness Berkeley (USPS-T-39), witness Mitchum (USPS-T-40) 
and witness Kaneer (USPS-T-41) for further details about these changes 
and for information on proposed fees, rate design and classification 
for other Special Services.

[[Page 27439]]

VII. Motion Pertaining to FedEx Contract Material

    In a motion filed with its Request, the Postal Service states that 
it has prepared, but not yet filed, USPS-LR-L-35, Calculation of FedEx 
Day Turn Variability Factors, which it identifies as a category 2 
library reference sponsored by witness Kelley (USPS-T-15).\4\ FedEx 
Waiver Motion at 1. The Service's stated reason for withholding this 
document is its interest in application of protective conditions. The 
proposed conditions appear as Attachment A to the FedEx Waiver Motion. 
The Service also seeks waiver of relevant portions of Commission rules 
31(k) and 54 for this document.
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    \4\ Notice of the United States Postal Service of Filing of 
Master List of Library References (May 3, 2006).
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    In support of its interest in protective conditions, the Service 
states the FedEx agreement contains commercially sensitive information, 
given that it includes cost data for fuel charges, non-fuel charges, 
and handling charges (all on a daily basis), as well as applicable 
contract prices, along with volume information on a daily basis. Id. at 
1. Among other things, it asserts that the volume-related information 
is proprietary to both the Postal Service and FedEx. It also notes that 
similar conditions were granted by the Postal Rate Commission for FedEx 
data in two previous rate case (Docket Nos. R2001-1 and R2005-1), Id. 
at 2, citing Presiding Officer's Ruling No. R2001-1/5 (October 31, 
2001) and Presiding Officer's Ruling No. R2005-1/4 (May 4, 2005). 
Answers to the FedEx Waiver Motion are due no later than May 31, 2006.

VIII. Motion Pertaining to Forever Stamp Proposal

    Witness Taufique outlines the Service's interest in incorporating a 
Forever Stamp proposal in the instant Request. USPS-T-32 at 26-27. In a 
related motion, the Service seeks waiver or suspension of certain 
Commission rules to accommodate the anticipated filing of material 
supporting this proposal. Motion of the United States Postal Service 
for Partial Waiver or Suspension of Commission Rules Specifying 
Materials to be Filed in Support of its Request for Changes in Postal 
Rates and Classifications, May 3, 2006 (Motion Concerning Forever Stamp 
Proposal). Answers to the Motion Concerning Forever Stamp Proposal are 
due no later than June 5, 2006.

IX. Motions for Waiver of Various Commission Rules on Category 1, 2, 3 
and 5 Library References

    The Service seeks waiver, to the extent deemed necessary, of the 
Commission's rules on library references for documents in the following 
categories: Category 1 (Data Reporting Systems); Category 2 (Witness 
Foundational Material); Category 3 (Reference Material); and Category 5 
(Disassociated Material).\5\ The motion clearly identifies the library 
references proposed to be covered by the waiver request and provides a 
detailed explanation of the Service's rationale for seeking waiver. See 
Motion of the United States Postal Service Requesting Waiver of the 
Commission Rules with Respect to Category 1, 2, 3 and 5 Library 
References, May 3, 2006 (Waiver Motion). Answers to the referenced 
Waiver Motion are due no later than June 5, 2006.
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    \5\ Library reference categories are identified in Commission 
rule 31(b)(2).
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X. Participation

    The Commission invites both formal participation in this case and 
informal expression of views. Interested persons may elect full, 
limited or commenter status (under rules 20, 20a, and 20b, 
respectively). Those electing full or limited status shall file notices 
of intervention conforming to Commission rules no later than May 31, 
2006. Notices of intervention and other documents generally should be 
submitted electronically via the Commission's Filing Online system at 
http://www.prc.gov. Persons seeking to intervene on a full or limited 
basis after May 31, 2006 must file a motion for intervention.
    Commenters are not required to file intervention notices or 
motions; instead, they may direct their comments to the attention of 
Steven W. Williams, Secretary of the Commission, 901 New York Avenue 
NW., Suite 200, Washington, DC 20268-0001. Commenters may also submit 
their views via electronic mail by addressing them to [email protected].
    Persons unsure of their intervention status under Commission rules 
or seeking more information on how to participate in this case should 
contact Shelley S. Dreifuss, director of the Commission's Office of the 
Consumer Advocate, by telephone at 202-789-6837 or via electronic mail 
at [email protected].

XI. Representation of the Interests of the General Public

    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 39 
U.S.C. 3624(a). Ms. Dreifuss shall direct the activities of Commission 
personnel assigned to assist her and, at an appropriate time, provide 
the names of these employees for the record. Neither Ms. Dreifuss nor 
the assigned personnel shall participate in or advise as to any 
Commission decision in this proceeding, other than in their designated 
capacity.

XII. Prehearing Conference

    The Commission will hold a prehearing conference on June 16, 2006, 
beginning at 10 a.m. in the Commission's hearing room, 901 New York 
Avenue NW., Suite 200, Washington, DC 20268-0001. The Presiding Officer 
will discuss initial scheduling matters at the conference. Participants 
may propose schedule dates or offer additional topics for discussion at 
the prehearing conference by filing a statement identifying such topics 
no later than June 7, 2006.

Ordering Paragraphs

    It is ordered:
    1. The Commission hereby institutes Docket No. R2006-1, Postal Rate 
and Fee Changes, for consideration of the Service's request for omnibus 
rate, fee and classification changes.
    2. The Commission will sit en banc in this proceeding.
    3. Notices of intervention shall be filed no later than May 31, 
2006.
    4. Shelley S. Dreifuss, director of the Commission's Office of the 
Consumer Advocate, is designated to represent the interests of the 
general public in this proceeding.
    5. A prehearing conference will be held on June 16, 2006, at 10 
a.m. in the Commission's hearing room.
    6. Statements identifying topics for discussion at the preheating 
conference shall be filed no later than June 7, 2006.
    7. Answers to the Motion of the United States Postal Service for 
Waiver and for Protective Conditions for Library Reference that 
Includes Costs and Other Data Associated with the FedEx Transportation 
Agreement, filed May 3, 2006, are due no later than May 31, 2006.
    8. Answers to the Motion of the United States Postal Service 
Requesting Waiver of the Commission Rules with Respect to Category 1, 
2, 3 and 5 Library References, filed May 3, 2006, are due no later than 
June 5, 2006.

[[Page 27440]]

    9. Answers to the Motion of the United States Postal Service for 
Partial Waiver or Suspension of Commission Rules Specifying Materials 
to be filed in Support of its Request for Changes in Postal Rates and 
Classifications, filed May 3, 2006, are due no later than June 5, 2006.
    10. The Secretary shall cause this Notice and Order to be published 
in the Federal Register.

Steven W. Williams,
Secretary.
 [FR Doc. E6-7218 Filed 5-10-06; 8:45 am]
BILLING CODE 7710-FW-P