[Federal Register Volume 72, Number 23 (Monday, February 5, 2007)]
[Proposed Rules]
[Pages 5230-5232]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-1787]


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POSTAL REGULATORY COMMISSION

39 CFR 3001

[Docket No. RM2007-1; Order No. 2]


Administrative Practice and Procedure, Postal Service

AGENCY: Postal Regulatory Commission.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: Recent legislation alters the postal ratemaking process, and 
tasks the Postal Regulatory Commission to develop regulations to 
implement this process. This notice invites public comment, in advance 
of formulating substantive rule proposals, to guide this process.

DATES: Initial comments due April 6, 2007; reply comments due May 7, 
2007.

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, 
202-789-6820 and [email protected].

SUPPLEMENTARY INFORMATION: The Postal Accountability and Enhancement 
Act, Public Law 109-435 (PAEA), directs that the Postal Regulatory 
Commission (Commission) shall by regulation establish a modern system 
for regulating rates and classes for market dominant postal products. 
The PAEA further directs that the Commission shall promulgate 
regulations to bound Postal Service discretion in setting rates for 
competitive postal products. Both of these tasks are to be completed by 
June 19, 2008.
    Interested persons are invited to provide written comments and 
suggestions as to how the Commission can best fulfill these 
responsibilities to achieve the purposes of the PAEA. Comments are due 
within 60 days of the date of publication of this notice in the Federal 
Register. All comments and suggestions received will be available for 
review on the Commission's Web site, http://www.prc.gov. Interested 
persons are further invited to review these submissions and provide 
follow-up comments and suggestions within 30 additional days, that is, 
within 90 days of the publication of this notice in the Federal 
Register.
    Commenters are requested to specifically explain how suggestions 
will comport with the specific applicable statutory directions as set 
out below.

I. Modern Rate Regulation of Market Dominant Products

    The PAEA reforms the postal laws of the United States. Among other 
things, it alters the method by which the rates and fees for postal 
products may be changed. Separate rules are to apply for market 
dominant, as opposed to competitive, postal services. The Commission is 
given 18 months to develop and implement this system. In fulfilling 
this responsibility, the Commission is to effectuate the following 
specific policies set forth in the PAEA.

A. Requirements

    The system for regulating rates and classes for market dominant 
products shall:
    1. Establish a schedule whereby rates, when necessary and 
appropriate, would change at regular intervals by predictable amounts;
    2. Include an annual limitation on the percentage changes in rates, 
to be set by the Commission, that will be equal to the change in the 
Consumer Price Index for All Urban Consumers unadjusted for seasonal 
variation over the most recent available 12-month period preceding the 
date the Postal Service files notice of its intention to increase 
rates;
    3. Establish procedures whereby the Postal Service may adjust rates 
not in excess of the annual limitation;
    4. Provide that not later than 45 days before the implementation of 
any adjustment in rates subject to this limitation, including special 
rates pursuant to factor (10), below:
    (a) Require the Postal Service to provide public notice of the 
adjustment;
    (b) Provide an opportunity for review by the Commission;
    (c) Provide for the Commission to notify the Postal Service of any 
noncompliance of the adjustment with this annual limitation;
    (d) Require the Postal Service to respond to the notice provided 
under the previous clause and describe the actions to be taken to 
comply with this annual limitation; and
    5. Establish procedures to allow rate adjustments in excess of the 
annual limitation on an expedited basis due to either extraordinary or 
exceptional circumstances, provided:
    (a) There is not sufficient unused rate authority as defined in 39 
U.S.C. 3622(d)(2)(C); and
    (b) The Commission determines, after notice and opportunity for a 
public hearing and comment, and within 90 days after any request by the 
Postal Service, that such adjustment is reasonable and equitable and 
necessary to enable the Postal Service, under best practices of honest, 
efficient, and economical management, to maintain and continue the 
development of postal services of the kind and quality adapted to the 
needs of the United States.

B. Objectives

    The system for regulating rates and classes for market dominant 
products shall be designed to achieve the following objectives, each of 
which shall be applied in conjunction with the others:

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    1. To maximize incentives to reduce costs and increase efficiency;
    2. To create predictability and stability in rates;
    3. To maintain high quality service standards established under 39 
U.S.C. 3691;
    4. To allow the Postal Service pricing flexibility;
    5. To assure adequate revenues, including retained earnings, to 
maintain financial stability;
    6. To reduce the administrative burden and increase the 
transparency of the ratemaking process;
    7. To enhance mail security and deter terrorism;
    8. To establish and maintain a just and reasonable schedule for 
rates and classifications, however the objective under this paragraph 
shall not be construed to prohibit the Postal Service from making 
changes of unequal magnitude within, between, or among classes of mail; 
and
    9. To allocate the total institutional costs of the Postal Service 
appropriately between market dominant and competitive products.

C. Factors

    In establishing the system for regulating rates and classes for 
market dominant products, the Commission shall take into account:
    1. The value of the mail service actually provided each class or 
type of mail service to both the sender and the recipient, including 
but not limited to the collection, mode of transportation, and priority 
of delivery;
    2. The requirement that each class of mail or type of mail service 
bear the direct and indirect postal costs attributable to each class or 
type of mail service through reliably identified causal relationships 
plus that portion of all other costs of the Postal Service reasonably 
assignable to such class or type;
    3. The effect of rate increases upon the general public, business 
mail users, and enterprises in the private sector of the economy 
engaged in the delivery of mail matter other than letters;
    4. The available alternative means of sending and receiving letters 
and other mail matter at reasonable costs;
    5. The degree of preparation of mail for delivery into the postal 
system performed by the mailer and its effect upon reducing costs to 
the Postal Service;
    6. Simplicity of structure for the entire schedule and simple, 
identifiable relationships between the rates or fees charged the 
various classes of mail for postal services;
    7. The importance of pricing flexibility to encourage increased 
mail volume and operational efficiency;
    8. The relative value to the people of the kinds of mail matter 
entered into the postal system and the desirability and justification 
for special classifications and services of mail;
    9. The importance of providing classifications with extremely high 
degrees of reliability and speed of delivery and of providing those 
that do not require high degrees of reliability and speed of delivery;
    10. The desirability of special classifications for both postal 
users and the Postal Service in accordance with the policies of Title 
39, including agreements between the Postal Service and postal users, 
when available on public and reasonable terms to similarly situated 
mailers, that
    (a) Either improve the net financial position of the Postal Service 
through reducing Postal Service costs or increasing the overall 
contribution to the institutional costs of the Postal Service; or 
enhance the performance of mail preparation, processing, 
transportation, or other functions; and
    (b) Do not cause unreasonable harm to the marketplace;
    11. The educational, cultural, scientific, and informational value 
to the recipient of mail matter;
    12. The need for the Postal Service to increase its efficiency and 
reduce its costs, including infrastructure costs, to help maintain high 
quality, affordable postal services;
    13. The value to the Postal Service and postal users of promoting 
intelligent mail and of secure, sender-identified mail; and
    14. The policies of this title as well as such other factors as the 
Commission determines appropriate.

D. Additional Consideration

    The system for regulating rates and classes for market dominant 
products must enable the Commission to ensure that workshare discounts, 
as defined in 39 U.S.C. 3622(e)(1), do not exceed the cost that the 
Postal Service avoids as a result of workshare activity unless:
    1. The discount is
    (a) Associated with a new postal service, a change to an existing 
postal service, or with a new workshare initiative related to an 
existing postal service; and
    (b) Necessary to induce mailer behavior that furthers the 
economically efficient operation of the Postal Service and the portion 
of the discount in excess of the cost that the Postal Service avoids as 
a result of the workshare activity will be phased out over a limited 
period of time; or
    2. The amount of the discount above costs avoided
    (a) Is necessary to mitigate rate shock; and
    (b) Will be phased out over time; or
    3. The discount is provided in connection with subclasses of mail 
consisting exclusively of mail matter of educational, cultural, 
scientific, or informational value; or
    4. Reduction or elimination of the discount would impede the 
efficient operation of the Postal Service.
    Application of these standards shall not require that a workshare 
discount be reduced or eliminated if the reduction or elimination of 
the discount would:
    1. Lead to a loss of volume in the affected category or subclass of 
mail and reduce the aggregate contribution to the institutional costs 
of the Postal Service from the category or subclass subject to the 
discount below what it otherwise would have been if the discount had 
not been reduced or eliminated; or
    2. Result in a further increase in the rates paid by mailers not 
able to take advantage of the discount.

II. Provisions Applicable to Rates for Competitive Products

    With regard to competitive products, regulations are to be 
established that:
    1. Prohibit the subsidization of competitive products by market 
dominant products;
    2. Ensure that each competitive product covers its costs 
attributable; and
    3. Ensure that all competitive products collectively cover what the 
Commission determines to be an appropriate share of the institutional 
costs of the Postal Service.

Ordering Paragraphs

    It is ordered:
    1. Docket No. RM2007-1 is established for the purpose of receiving 
comments in advance of developing regulations effectuating a modern 
system of ratemaking.
    2. Interested persons may submit comments no later than 60 days 
from the date of publication of this notice in the Federal Register.
    3. Reply comments also may be filed no later than 90 days from the 
date of publication of this notice in the Federal Register.
    4. Shelley S. Dreifuss, director of the Office of the Consumer 
Advocate, is designated to represent the interests of the general 
public in this docket.
    5. The Secretary shall arrange for publication of this Notice in 
the Federal Register.


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    By the Commission.
Steven W. Williams,
Secretary.
 [FR Doc. E7-1787 Filed 2-2-07; 8:45 am]
BILLING CODE 7710-FW-P