[Federal Register Volume 73, Number 187 (Thursday, September 25, 2008)]
[Proposed Rules]
[Pages 55464-55466]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-22639]


=======================================================================
-----------------------------------------------------------------------

POSTAL REGULATORY COMMISSION

39 CFR Part 3001

[Docket No. RM2008-6; Order No. 108]


Periodic Reporting Rules

AGENCY: Postal Regulatory Commission.

ACTION: Proposed rule; availability of rulemaking petition.

-----------------------------------------------------------------------

SUMMARY: Under a new law, the Postal Service must file an annual 
compliance report with the Postal Regulatory Commission on costs, 
revenues, rates, and quality of service associated with its products. 
It has filed documents with the Commission to change some of the 
methods it uses to compile the fiscal year 2008 report. In the 
Commission's view, these documents constitute a rulemaking petition. 
Therefore, this document provides an opportunity for the public to 
comment on potential changes in periodic reporting rules.

DATES: 1. Initial comments: September 26, 2008.
    2. Reply comments: October 3, 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: Regulatory History, 73 FR 51983 (September 
8, 2008).
    On September 12, 2008, the Postal Service filed a petition to 
initiate an informal rulemaking proceeding comparable to Docket No. 
RM2008-2 to consider two more proposed changes to the costing methods 
approved for periodic reporting.\1\ In Docket No. RM2008-2, nine 
numbered proposals are the subject of notice and comment rulemaking 
procedures. The Postal Service proposes that the two additional 
proposed changes be referred to as Proposal Ten and Proposal Eleven to 
avoid confusion with the nine proposals already under review. The 
Postal Service's petition describes its two additional proposals, 
explains their background, objectives, rationale, and, to the extent 
possible, their likely impact in FY 2008.
---------------------------------------------------------------------------

    \1\ Petition of the United States Postal Service Requesting 
Initiation of a Proceeding to Consider Further Proposed Methodology 
Changes for the FY 2008 ACR (Proposals Ten-Eleven), September 12, 
2008 (Petition).
---------------------------------------------------------------------------

I. Procedural Expedition

    The same factors that led the Commission to expedite review of the

[[Page 55465]]

nine proposals in Docket No. RM2008-2 apply here. There are fewer 
proposals and they appear to be simpler and potentially less 
controversial than there were in Docket No. RM2008-2. Accordingly, the 
Commission will set a shorter period for comments and reply comments 
for these two additional proposals, and will not schedule a technical 
conference ahead of time, as it did in Docket No. RM2008-2.

II. Substance of Postal Service Proposals

    The Postal Service proposals, see Petition at 3 et seq., are 
described below.
    Proposal Ten. Proposed Change in Costing of Parcel Post Products.
    Objective: Changes are proposed for the development of costs for 
products within the old Parcel Post subclass: market dominant product 
Parcel Post Single-Piece, and competitive products Parcel Select and 
Parcel Return Service (PRS).
    Background: In FY2007, costs from the data systems were only 
available for the Parcel Post subclass as a whole. In the Annual 
Compliance Report, ACR2007, costs for the market-dominant product 
Parcel Post Single-Piece and competitive products Parcel Select and 
Parcel Return Service (PRS) were developed using methodologies 
previously accepted for the purposes of estimating cost differences 
deemed to be relevant to worksharing.\2\ In other words, the estimates 
presented were primarily topdown. In the Annual Compliance 
Determination report, the Postal Regulatory Commission concluded that 
Parcel Return Service may have had an FY07 cost coverage of only 97.7 
percent, which would have been insufficient to meet the requirements of 
the PAEA. The Commission acknowledged that the PRS FY07 cost coverage 
might have been higher if there were cost savings, such as reduced 
carrier costs, but noted that dispositive data on that issue were not 
provided.\3\
---------------------------------------------------------------------------

    \2\ In Docket No. ACR2007, these estimates were presented in 
USPS-FT07-9 and USPS-FY07-15.
    \3\ Postal Regulatory Commission Annual Compliance 
Determination, FY 2007, p. 24.
---------------------------------------------------------------------------

    The Postal Service has taken the initiative to obtain data for the 
Parcel Post products directly from the cost data systems. The In-Office 
Cost System (IOCS) and Carrier Cost Systems (CCS) can identify each of 
the three products separately for all of FY08. The Transportation Cost 
System (TRACS) can separate Parcel Post Single-Piece from Bulk Parcel 
Post for all of FY08, but can only separate Parcel Select from PRS 
starting quarter 2 of FY08.
    Proposal: For FY2008, we propose to develop mail processing and 
delivery costs for Parcel Post Single-Piece, Parcel Select and PRS 
using IOCS and CCS data. For transportation costs, we propose to use 
TRACS data to develop separate Parcel Post Single-Piece and Bulk Parcel 
Post, and to use the accepted methodology to split costs for Bulk 
Parcel Post into Parcel Select and PRS. These inputs would then be used 
in the CRA Model to develop a bottom-up cost estimate for each product 
(i.e., displaying each product as a separate row in the CRA).
    Impact: The impact on costs will be unknown until the completion of 
the FY08 ACR. To the extent that the FY07 procedure implicitly focused 
only on cost differences deemed relevant for worksharing, and thus may 
have tended to overstate PRS costs, and to the extent that the proposed 
bottom-up FY08 procedures develop cost estimates intended to reflect 
all cost differences, and thus hopefully should neither overstate nor 
understate PRS costs, the new methodology perhaps may reduce PRS costs 
relative to the FY07 methodology.
    Proposal Eleven: Proposed Change in Distribution Key for Volume-
Variable Carrier Costs Relating to Blue Collection Boxes.
    Objective: The purpose of this document is to propose a methodology 
change, for FY2008, in the manner in which cost segment 7 (city street 
activity) volume variable costs incurred by blue collection boxes are 
distributed to products.
    Background: Cost Segment 7 blue collection box costs are incurred 
on both special purpose routes and letter routes. For special purpose 
routes, the accrued and volume variable costs are derived from the 
study of special purpose routes submitted in Docket No. R97-1. For 
letter routes, the accrued and volume variable costs are derived from 
the 2002 City Carrier Street Time Study (CCSTS), which was submitted in 
Docket No. R2005-1. In FY2007, the volume variable costs resulting from 
blue collection boxes were $46.7 million and $9.4 million from special 
purpose routes and letter routes, respectively. Currently, the same 
distribution factors are applied to attribute the volume variable costs 
from special purpose routes and letter routes to products. The existing 
factors are primarily derived from a special study submitted in Docket 
No. R84-1, but are adjusted annually based on current Revenue Pieces 
and Weight (RPW) data.
    Proposal: The Postal Service is proposing to distribute the volume 
variable costs incurred by blue collection boxes to products based on 
updated distribution factors from current data collected on City 
Carrier Cost System (CCCS) tests.
    Rationale: Collection mail volumes from customer delivery points 
have been captured by CCCS for several years. In FY2008, CCCS augmented 
the type of collection volume data recorded. On letter routes, CCCS now 
records, separately, the same information about blue collection box 
contents as it does for collection mail from customer delivery points. 
Utilizing updated distribution factors based on the current mail 
contents in blue boxes collected on letter routes signifies a 
methodology improvement for two reasons. First, the existing factors 
are largely derived from a study conducted approximately 25 years ago, 
whereas the new factors estimate the current mail contents of blue 
collection boxes. Second, the proposed approach would directly assign 
costs to Priority Mail, Express Mail, Free mail, USPS mail, and 
International mail based on the actual frequency of each within the 
sampled data from collection boxes, rather than the current two-step 
process of first assigning a fixed proportion of collection costs to 
``Other'', and then further distributing the ``Other'' costs to those 
products based on RPW volume. The current process is described in 
detail at pages 6-7 of the copies of materials provided at the 
technical conference with Notice of the United States Postal Service 
Regarding Materials Distributed or Requested at the August 27, 2008 
Technical Conference, Docket No. RM2008-2 (August 29, 2008).
    Impact: A preliminary review of partial-year new distribution data 
indicates First Class Mail constituting a higher percentage (i.e., in 
excess of 99 percent) of mail in blue collection boxes, as compared 
with the study submitted in Docket No. R84-1. If this result holds, 
then First Class Mail will receive a higher percentage of volume 
variable costs incurred as a result of blue collection boxes than in 
previous years. In FY07, $53.8 million in volume variable costs from 
blue collection boxes was distributed to First Class Mail. Given that 
there was only $56.1 million in such costs to distribute to the 
products, the dollar impact on products due to this methodology 
proposal will be small. However, considering the numerous changes since 
1984, such as a more complicated rate structure, Carrier Pickup, and 
rigid security regulations, the primary result of the preliminary 
review (i.e., that less than one percent of mail in the collection

[[Page 55466]]

boxes is other than First Class Mail) seems reasonable.

III. Ordering Paragraphs

    It is Ordered:
    1. The Petition of the United States Postal Service Requesting 
Initiation of a Proceeding to Consider Further Proposed Methodology 
Changes for the FY 2008 ACR (Proposals Ten and Eleven), filed September 
12, 2008, is granted.
    2. Interested persons may submit initial comments on or before 
September 26, 2008. The proposals described in this order will be 
considered under the current procedural schedule in Docket No. RM2008-
2.
    3. Reply comments may be submitted on or before October 3, 2008.
    4. William C. Miller is designated as the Public Representative 
representing the interests of the general public in this proceeding.
    5. The Secretary shall arrange for publication of this notice in 
the Federal Register.

    Authority: 39 U.S.C. 3652.

    By the Commission.
Steven W. Williams,
Secretary.
[FR Doc. E8-22639 Filed 9-24-08; 8:45 am]
BILLING CODE 7710-FW-P