[Federal Register Volume 72, Number 63 (Tuesday, April 3, 2007)]
[Notices]
[Pages 15914-15916]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-6191]


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POSTAL REGULATORY COMMISSION

[Docket No. R2006-1; Order No. 8]


Reconsideration of Rate Recommendations

AGENCY: Postal Regulatory Commission.

ACTION: Notice and order.

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SUMMARY: This document addresses several procedural and legal matters 
related to the Postal Service Governors' request for reconsideration of 
three aspects of the Commission's recent rate recommendations in Docket 
No. R2006-1. The recommendations in issue involve the Priority Mail 
Flat Rate Box, the nonmachinable surcharge for First-Class Mail 
letters, and Standard Mail flats (including catalogs). The document 
discusses the procedures the Commission adopts to effectuate 
reconsideration and identifies several key deadlines. Issuance of this 
document provides rate case participants and the public with 
information on the Commission's intended course of action in terms of 
procedural steps and informs them of their rights and responsibilities.

DATES: 
    1. April 4, 2007: Deadline for filing motions to reopen the record.
    2. April 11, 2007: Deadline for replies to motions to reopen the 
record.
    3. April 12, 2007: Deadline for filing initial comments.
    4. April 19, 2007: Deadline for filing reply comments.

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: 

Regulatory History

71 FR 27436 (May 11, 2006)

    On March 19, 2007, the Governors of the United States Postal 
Service issued a decision approving the Commission's

[[Page 15915]]

February 26, 2007 Opinion and Recommended Decision in Docket No. R2006-
1 while requesting reconsideration of three matters.\1\ The three 
issues involve the Priority Mail Flat Rate Box, the nonmachinable 
surcharge for First-Class Mail letters, and Standard Mail flats. Id. at 
2.
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    \1\ Decision of the Governors of the United States Postal 
Service on the Opinion and Recommended Decision of the Postal 
Regulatory Commission on Changes in Postal Rates and Fees, Docket 
No. R2006-1, March 19, 2007 at 2 (Decision).
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    The Governors request the Commission ``to move as expeditiously as 
possible'' to enable mailers to plan effectively for future mailings. 
Id. Concomitant with the Decision, the Board of Governors set May 14, 
2007 as the effective date for changes in rates and fees with the 
exception of Periodicals, for which the implementation date has been 
deferred until July 15, 2007.\2\
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    \2\ Resolution of the Board of Governors of the United States 
Postal Service No. 07-3, March 19, 2007.
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    In a related pleading filed on March 28, 2007, the Postal Service 
offers procedural suggestions on the reconsideration process in 
general, and proposes specific resolutions of the three issues 
identified in the Governors' Decision.\3\
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    \3\ Initial Statement of the United States Postal Service on 
Reconsideration, March 28, 2007 (Initial Statement).
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    By this order, the Commission establishes procedures affording 
participants (and other interested parties) an opportunity to provide 
their views on each of the issues on which reconsideration is sought. 
Participants should address each issue separately since the substance 
of each issue differs. Initial comments are due April 12, 2007; reply 
comments may be filed not later than April 19, 2007.
    In its Initial Statement, the Postal Service anticipates that 
``reconsideration in this instance can be conducted without the need to 
reopen the record.'' Id. at 1. Any participant who believes that the 
record needs to be reopened and supplemented to address any matter on 
which reconsideration is sought must file a motion to that effect no 
later than April 4, 2007. Answers to any such motion are due no later 
than April 11, 2007. Each participant, if any, seeking to reopen the 
record must provide thorough justification for its request, including 
specific identification of the purported deficiencies in the current 
record for purposes of reconsideration and an explanation why that 
participant did not proffer the purportedly necessary materials during 
the hearing. Any such movant must also provide an estimate of the time 
needed to supplement the record.\4\
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    \4\ The Commission recognizes that reopening the record may 
preclude resolving one or more issues prior to May 14, 2007, the 
date for implementing most changes in rates and fees. Nonetheless, 
the Commission concludes that the process is best served if 
participants are provided an opportunity to demonstrate that the 
record should be reopened. Participants should recognize, however, 
that reopening the record may compromise mailers' ability to plan 
effectively for future mailings, as the Governors note in requesting 
expedited reconsideration.
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I. Flat Rate Box

    The Governors contend that the Commission erred in setting the Flat 
Rate Box rate at $9.15, suggesting that inconsistent cost estimates may 
have been used to develop the recommended rate. Decision at 14. More 
specifically, the Governors opine that when calculating the savings 
that would accrue as a result of dim-weighting Priority Mail, the 
Commission incorrectly used the Postal Service's attributable cost 
estimates instead of its own, thereby causing the savings to be 
understated. The Governors conclude that if the Commission had used its 
own cost estimates consistently in the pricing model, the resulting 
recommended Flat Rate Box rate would have been closer to that proposed 
by the Postal Service, $8.80. Id.
    In its Initial Statement, the Postal Service reiterates the 
Governors' critique, and advances additional technical arguments 
against the soundness of the Commission's recommended rate of $9.15. 
According to the Service, adherence to the methodology and pricing 
model for the Flat Rate Box established on the record justifies a rate 
of $8.95. Initial Statement at 5-9.
    Participants are invited to comment on the merits of the Governors' 
and Postal Service's technical arguments, as well as the appropriate 
pricing objective for the Priority Mail Flat Rate Box.

II. Nonmachinable Surcharge

    The Governors advocate extending the nonmachinable surcharge to 
letter-shaped First-Class Mail pieces of two and three ounces. Id. at 
5. The Governors observe that the Postal Service proposed to charge 
nonmachinable one-ounce letters the rate proposed for one-ounce flats, 
$0.62. At the recommended one-ounce rate for flats, $0.80, the 
Commission found (and the Governors concur) that application of the 
one-ounce flats rate to nonmachinable one-ounce letters would be 
excessive. Thus, the Commission recommended retention of a separate 
nonmachinable surcharge for one-ounce letters, setting the rate at 
$0.17, equivalent to the recommended First-Class Mail additional ounce 
rate. The Governors endorse the $0.17 nonmachinable surcharge for one-
ounce letters. Id.
    The Governors note that the recommended rate for two- and three-
ounce letters, $0.58 and $0.75, respectively, is identical regardless 
of machinability. To rectify this situation, the Governors propose that 
section 221.26 of the Domestic Mail Classification Schedule be revised 
to eliminate application of the nonmachinable surcharge only to pieces 
weighing one ounce or less. Id. at 5-6.
    In its Initial Statement, the Postal Service repeats the criticism 
that the Commission's recommended rates fail to include a 
machinability-based price differential for First-Class letters weighing 
over one ounce, and argues that the Commission's rationale for a 
surcharge at the one-ounce level applies equally to the heavier tiers, 
particularly in view of the sizeable recommended reduction in the 
additional ounce rate. The Service submits that this gap in rate design 
and pricing could be filled by recommending the mail classification 
amendment suggested by the Governors, and calculates estimates of the 
consequent revenue impact, which it characterizes as de minimis. Id. at 
2-5.
    Participants commenting on this issue should, among other matters, 
specify any alternative proposed outcome, and identify record evidence 
supporting their position.

III. Standard Mail Flats

    The Governors express concern that the rates recommended for 
Standard Mail flats may be too high relative to those proposed by the 
Postal Service and may result in some dislocation, particularly within 
the catalog industry. Id. at 8-10.\5\ Thus, the Governors request that 
the Commission reconsider ``whether some rebalancing between Standard 
Mail letter and flat rates might be appropriate.'' Id. at 10.\6\
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    \5\ In addition, the Governors cite concern over mailers' 
ability to convert pieces to less costly shapes, and the potential 
for increased financial risks to the Postal Service at the 
recommended rate levels. Id. at 9-10.
    \6\ This request appears to apply to only Standard Regular and 
Standard Nonprofit Regular for two reasons. First, the quoted line 
appears under a caption titled ``Standard Regular and Nonprofit 
Regular Subclasses.'' Second, in the next section titled ``Standard 
ECR and Nonprofit ECR,'' the Governors do not request 
reconsideration for ECR/NECR flats.
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    In summarizing their position, the Governors are careful to note 
that both the Postal Service's proposed Standard Mail rates and the 
Commission's

[[Page 15916]]

recommended rates achieve the Postal Service's test year revenue 
target. However, the concerns noted above, particularly potential 
challenges to the vitality of the catalog industry, prompt the 
Governors to request reconsideration, focused on the appropriateness of 
rebalancing Standard Mail letter and flat rates. Unlike the other 
issues on which reconsideration is sought, the Governors do not suggest 
any specific ``rebalancing'' relief. Id.
    In its Initial Statement, the Postal Service explicitly recognizes 
that, ``in order to mitigate rates for flats, it would be necessary to 
make upward adjustments in other rates, namely, the rates for 
letters.'' Initial Statement at 9. Further, because the Governors do 
not challenge the cost or cost differential estimates on which the 
Commission's recommended Standard Mail rate design is based, the 
Service anticipates that, ``it would likewise be necessary to depart to 
some extent from the specific passthrough levels initially chosen by 
the Commission.'' Id. at 10.
    Without suggesting specific adjustments, the Postal Service submits 
that there are opportunities for providing rate relief to flats mailers 
while generating approximately the same net revenue by ``impos[ing] 
only a modest additional rate burden on letter mailers.'' Id. In doing 
so, the Service asks that the Commission's recommendations comply with 
two rate design criteria: (1) Ensuring that the revised Regular/
Nonprofit Regular 5-digit Automation Letters rate remain below the 
Basic ECR/NECR letters rates to continue efforts to support the letters 
automation program; and (2) retaining the initially-recommended 
dropship discounts for Regular and Nonprofit Regular letters and flats 
rates. Additionally, because any such flats/letters rate rebalancing 
would be based essentially on policy grounds, the Service submits that 
it is especially important to solicit the views of potentially affected 
Standard Mail users whose rates would be affected. In particular, the 
Service suggests that mailers may wish to address ``their perceptions 
of the relative trade-offs between possible benefits of further rate 
adjustments, and the potential costs of further disruptions associated 
with any additional rate changes (which, at this point, would be of 
uncertain magnitude and would be implemented at an unknown date).'' Id. 
at 11.
    In their Decision, the Governors note that reconsideration may 
enable ``individual mailers and their associations to address unique 
problems created by the Commission's [Standard Mail rate] 
recommendations.'' Decision at 12. Participants commenting in favor of 
any rebalancing of Standard Mail letter and flat rates should specify 
with particularity the relief requested. Such comments should include, 
at a minimum, citations to the record in support of the requested 
relief and, if possible, specific rates consistent with the proposed 
relief.\7\ Participants advocating retention of the recommended rates 
are advised to file initial comments to that effect, explaining the 
basis for their position.
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    \7\ In addition, such comments should include, if possible, 
annual volumes of flats and catalogs by rate cell. If these data are 
not available, commenters should so indicate.
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    While the procedures adopted herein provide an opportunity for 
comments, the Commission reminds potential commenters of the need to 
rely on record evidence.\8\ Anecdotal comments unconnected to the 
record, particularly from persons not parties to the proceeding, are 
problematic and cannot be relied on by the Commission in resolving 
issues raised on reconsideration.\9\
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    \8\ Alternatively, judicial notice may be appropriate in some 
circumstances. See 39 CFR 3001.31(i).
    \9\ Comments from persons not parties to the proceeding will be 
included in the public comments file by the Commission.
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IV. Ordering Paragraphs

    It is ordered:
    1. Initial comments on matters for which reconsideration has been 
requested are due no later April 12, 2007.
    2. Reply comments are due no later than April 19, 2007.
    3. Motions to reopen the record are due no later than April 4, 
2007. As required by the Commission's Rules of Practice and Procedure, 
answers are due no later than April 11, 2007.
    4. The Secretary shall arrange for publication of this notice and 
order in the Federal Register.

    By the Commission.
Steven W. Williams,
Secretary.
 [FR Doc. E7-6191 Filed 4-2-07; 8:45 am]
BILLING CODE 7710-FW-P