[Federal Register Volume 73, Number 4 (Monday, January 7, 2008)]
[Notices]
[Pages 1234-1235]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-25656]


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POSTAL REGULATORY COMMISSION

[Docket No. ACR2007]


FY 2007 Annual Compliance Report; Comment Request

AGENCY: Postal Regulatory Commission.

ACTION: Notice.

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SUMMARY: As required by 39 U.S.C. 3652, the Postal Service has filed an 
Annual Compliance Report with the Postal Regulatory Commission on the 
costs, revenues, rates, and quality of service associated with its 
products in fiscal year 2007. Within 90 days, the Commission must 
evaluate that information and issue its determination as to whether 
rates were in compliance with title 39, chapter 36 and whether service 
standards in effect were met. To assist in this, the Commission seeks 
public comments on the Postal Service's FY 2007 Annual Compliance 
Report.

DATES: Comments due January 30, 2008; reply comments due February 13, 
2008.

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: Section 3652 of title 39 of the United 
States Code requires the Postal Service to file a report with the 
Postal Regulatory Commission on the costs, revenues, rates, and quality 
of service associated with its products within 90 days after the close 
of each fiscal year. That section requires that the Postal Service's 
annual report be sufficiently detailed to allow the Commission and the 
public to determine whether the rates charged and the service provided 
comply with all of the requirements of title 39 of the United States 
Code. See 39 U.S.C. 3652(a)(1) and (e)(1)(A). The Postal Service filed 
its annual compliance report for FY 2007 with the Commission on 
December 28, 2007. Appended to it are four major sets of data--the Cost 
and Revenue Analysis (CRA), the International Cost and Revenue Analysis 
(ICRA), the models of costs avoided by worksharing, and billing 
determinant information.\1\
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    \1\ United States Postal Service FY 2007 Annual Compliance 
Report, December 28, 2007 (FY 2007 Annual Compliance Report).
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    After receiving the FY 2007 Annual Compliance Report, the 
Commission is required under 39 U.S.C. 3653 to provide an opportunity 
for comment to the interested public and an officer of the Commission 
to represent the interests of the general public. The Commission hereby 
solicits public comment on the degree to which the Postal Service's 
operations and financial results comply with the policies of title 39. 
Comments by interested persons are due on or before January 30, 2008. 
Reply comments are due on February 13, 2008.\2\
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    \2\ The officer of the Commission in this matter will be 
appointed shortly.
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    The Commission is aware that these are shorter comment periods than 
those that the Commission has provided in other recent notice and 
comment proceedings. The statute affords the Commission 90 days to 
digest the report filed by the Postal Service and evaluate the Postal 
Service's compliance with the broad range of policies articulated in 
title 39. Expediting public comment is essential if the Commission is 
to have sufficient time to take the public's concerns into account in 
making its evaluation.\3\
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    \3\ Expedition may have an additional benefit. There is the 
possibility that the Postal Service may file notice of a general 
rate adjustment sometime in February under the provisions of 39 
U.S.C. 3622(d)(1)(C). This possibility has been discussed informally 
throughout the postal community. If public comments on the Postal 
Service's annual report identify potential problem areas several 
weeks in advance of the Postal Service's rate filing, this may 
inform or influence the Postal Service's pricing decisions.
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    The context in which the Postal Service has filed its annual report 
for FY 2007 is unique in several respects. It is the first compliance 
report that the Postal Service has filed after passage of the Postal 
Accountability and Enhancement Act of 2006 (PAEA). Fiscal Year 2007 was 
a transition period during which the rate-setting criteria of the 
former Postal Reorganization Act (PRA) remained in force. The Postal 
Service suggests that FY 2007 rates and service should be analyzed for 
compliance with the rate-setting criteria of the PRA rather than the 
PAEA. Id. at 1. In its report, the Postal Service applies the rate-
setting criteria of the PRA to the then-existing subclasses and 
concludes that FY 2007 rates and service fully complied with title 39. 
Id. at 6 and 22. Emphasizing the difficulty of developing a crosswalk 
between then-existing subclasses and the current list of products, the 
Postal Service does not

[[Page 1235]]

offer conclusions regarding the extent workshare discounts in effect in 
FY 2007 comply with the criteria of either the PRA or the PAEA. Id. at 
19-22.
    The Postal Service identifies some information as confidential and 
subject to protective conditions. It explains that in the absence of 
new rules regarding its confidential business information, it has 
largely followed past practice. Thus, financial data relating to 
international products is in a nonpublic annex while some financial 
information on competitive domestic products is presented publicly. The 
Postal Service recognizes that the appropriate identification of 
confidential data will be fully explored in a future Commission 
rulemaking. Id. at 30-33.
    The FY 2007 Annual Compliance Report is the Postal Service's first 
attempt to comply with the tight production schedule that section 3652 
imposes. Consequently, its report does not contain all of the 
information that normally would be provided in a section 3652 report. 
For example, 39 U.S.C. 3652(g) requires the Postal Service to submit 
its comprehensive statement together with its annual compliance report. 
The Postal Service explains that it expects to file its comprehensive 
statement in early to mid-January, 2008. Id. at 5.
    Another reason that the FY 2007 Annual Compliance Report does not 
contain all of the information that may be included in a standard 
section 3652 report is that it was prepared without the guidance of 
Commission rules governing the Postal Service's periodic reporting. The 
Commission will issue a notice of proposed rulemaking containing its 
proposed periodic reporting rules in the near future.
    Most of the analytical methods employed in producing the FY 2007 
Annual Compliance Report appear to be consistent with established 
precedent. However, some are new and have not been subjected to 
critical evaluation by the Commission or the public either in a formal 
evidentiary hearing or an informal rulemaking.\4\ Examples of new 
methods are in the revisions to the cost model that the Commission used 
in Docket No. R2006-1 to design rates for Periodicals. In adopting that 
model, the Commission described it as more comprehensive than the 
Postal Service's alternative, but still dependent on a number of 
assumptions whose accuracy could be improved if they were based on more 
direct and/or more recent observation. See PRC Op. R2006-1, paras. 
5730-44.
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    \4\ The Postal Service identifies methodology changes in FY 2007 
Annual Compliance Report, USPS-FY07-31, Section Two.
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    The Postal Service, too, views the Periodicals cost model as a work 
in progress. It has revised the model ``in order to resolve internal 
inconsistencies and permit transparent updates of the inputs.'' Its 
revisions include:

    (1) Inclusion of sweeping time in a productivity adjustment, (2) 
removing costs from bundle sorting for bundles that have already 
been broken into pieces, (3) including the costs of opening 
containers in the cost for container handling rather than container 
flow, and (4) elimination of bundle sortation costs when pallets 
flow directly to delivery units.

FY 2007 Annual Compliance Report, USPS-FY07-11, at 1. It suggests that 
additional refinements are warranted as well. Id. at 2-5.
    The methodological changes employed in the FY 2007 Annual 
Compliance Report should be subjected to independent critical 
evaluation to the maximum extent possible in the narrow window afforded 
by sections 3652 and 3653. To achieve that end, the Commission issued a 
notice on December 27, 2007, scheduling an informal technical 
conference to be held on January 11, 2008.\5\ At that conference, 
Postal Service analysts will describe the changes made to the 
Commission's Periodicals cost model, explain the reasons for making 
them, and answer related questions from the Commission's technical 
staff and the interested public. A follow-up technical conference to 
give interested parties an opportunity to discuss other possible 
refinements of the Periodicals cost model with Postal Service analysts 
will be held on January 23, 2008. Notice at 2. Other technical 
conferences may be scheduled as appear necessary.
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    \5\ Notice of Technical Conferences Supplementing Postal Service 
Annual Compliance Report, December 27, 2007 (Notice).
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It is ordered:
    1. Public comments on the United States Postal Service FY 2007 
Annual Compliance Report are due on or before January 30, 2008.
    2. Reply comments on the United States Postal Service FY 2007 
Annual Compliance Report are due on February 13, 2008.

(Authority: 39 U.S.C. 3653.)

Steven W. Williams,
Secretary.
 [FR Doc. E7-25656 Filed 1-4-08; 8:45 am]
BILLING CODE 7710-FW-P