[Federal Register Volume 74, Number 139 (Wednesday, July 22, 2009)]
[Proposed Rules]
[Pages 36132-36133]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-17322]


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

POSTAL REGULATORY COMMISSION

39 CFR Part 3010

[Docket No. RM2009-8; Order No. 246]


Postal Rates

AGENCY: Postal Regulatory Commission.

ACTION: Notice of proposed rulemaking.

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

SUMMARY: The Commission is proposing to revise a rounding convention 
used in the statutory price cap calculation for purposes of 
establishing rates for certain postal products. This document invites 
public comment on the proposal.

DATES: Initial comments due August 21, 2009; reply comments due 
September 8, 2009.

ADDRESSES: Submit comments electronically via the Commission's 
electronic Filing Online system at http://www.prc.gov.

FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, General Counsel, 
at 202-789-6824 and [email protected].

SUPPLEMENTARY INFORMATION: 

Regulatory History

    72 FR 63662 (November 9, 2007).
    74 FR 27843 (June 11, 2009).

I. Introduction
II. Background and Proposed Amendments
III. Public Representative
IV. Ordering Paragraphs

I. Introduction

    This rulemaking is an outgrowth of issues raised in Docket No. 
R2009-4, the most recent price adjustment filed by the Postal Service 
and approved by the Commission. The Postal Accountability and 
Enhancement Act (PAEA), Public Law No. 109-435, 120 Stat. 3198 (2006), 
affords the Postal Service significant flexibility in setting prices, 
provided it complies with certain objectives and factors and does not 
raise rates in excess of an inflation-based cap.
    In Order No. 43, the Commission established ratemaking regulations 
for market dominant and competitive products.\1\ In that order, the 
Commission created a formula to derive a ratemaking authority 
limitation for the Postal Service based upon the Consumer Price Index 
for All Urban Consumers (CPI-U) as reported by the Bureau of Labor 
Statistics (BLS). Id. at 47-48, 121-122. The limitation is calculated 
as the ratio of the most recent 12 month average of the CPI-U to the 
preceding 12 month average of the CPI-U and subtracting 1. Id. As noted 
in Order No. 43, the BLS began reporting the CPI-U index to three 
decimal places (when previously it was reported to one decimal place). 
Id. at 48.
---------------------------------------------------------------------------

    \1\ Docket No. RM2007-1, Order Establishing Ratemaking 
Regulations for Market Dominant and Competitive Products, October 
29, 2007 (Order No. 43).
---------------------------------------------------------------------------

II. Background and Proposed Amendments

    The Commission elected to round the result and express the 
percentage change in the CPI-U using one decimal place. Id. This result 
was driven by practical considerations. Precision requires both the 
recent average and the

[[Page 36133]]

base average have the same number of significant digits; at the 
conclusion of Docket No. RM2007-1, neither the recent average nor the 
base average could be calculated to three decimal places. Inflation is 
also commonly expressed to one decimal place, and when the percentage 
change is reported by BLS, it is reported to one decimal place.
    Due to several developments, the Commission believes calculating 
the CPI-U cap to three decimal places is now appropriate. The Postal 
Service, in utilizing its pricing flexibility under the PAEA, has 
proposed small rate adjustments that require more precision than a one 
decimal place cap allows. Adding two decimal places to the level of 
precision to the adjustment authority allows the Postal Service to 
fully exercise that flexibility. Enough time has lapsed since the BLS 
began reporting CPI-U indexes to 3 digits that both the recent average 
and the base average (a total of 24 months) may be calculated using the 
3-digit method. The consistent reporting since January of 2007 (in 
terms of the number of significant digits) in the CPI-U indexes allows 
the Commission to calculate the rate adjustment authority to three 
decimal places without sacrificing precision. Moreover, the Postal 
Service's unused rate adjustment authority is calculated to three 
decimal places; therefore, calculating the annual or less than annual 
rate adjustment authority should use the same number of significant 
digits.
    In Docket No. R2009-4, the Postal Service proposed, and the 
Commission approved, a rate decrease for Standard Mail High Density 
flats.\2\ Intuitively, when the Postal Service implements a rate 
decrease for a class of mail, the result should be an increase in the 
amount of rate adjustment authority at the time of the next rate 
adjustment. However, as the incremental change for the Standard Mail 
class is minus 0.037 percent, the benefit from decreasing prices mid-
year, which would be included in the amount of rate adjustment 
authority in the next rate adjustment, may be lost due to rounding.\3\ 
Changing the Commission's rules on the calculation of the CPI-U cap to 
use the maximum number of significant digits allows the Postal Service 
to make more subtle adjustments for each class of mail.
---------------------------------------------------------------------------

    \2\ See Docket No. R2009-4, Order Approving Price Adjustment for 
Standard Mail High Density Flats, July 1, 2009 (Order No. 236).
    \3\ See Library Reference PRC-RM2009-8-LR-1 for a numerical 
example of this result.
---------------------------------------------------------------------------

    The Commission, therefore, proposes to revise the last sentence of 
paragraph (a) of rule 3010.21 and paragraph (b) of rule 3010.22 to read 
``The result is expressed as a percentage, rounded to three decimal 
places.'' Though the Commission's proposed changes are limited to these 
two sentences, the rules are presented in their entirety to provide 
useful additional context. In addition, the Commission is revising the 
heading of 39 CFR part 3010 to read as follows: Part 3010--Regulation 
of Rates for Market Dominant Products. This revision corrects an 
inadvertent error in the current heading, which reads, ``Regulation of 
Rules for Market Dominant Products.''

III. Public Representative

    Pursuant to 39 U.S.C. 505, Emmett Rand Costich is appointed the 
officer of the Commission (Public Representative) to represent the 
interests of the general public in the captioned docket.

IV. Ordering Paragraphs

    It is ordered:
    1. Docket No. RM2009-8 is established for the purpose of proposing 
amendments to the Commission's rules governing the price cap 
calculation in the system of ratemaking, 39 CFR part 3010.
    2. Pursuant to 39 U.S.C. 505, Emmett Rand Costich is appointed to 
serve as officer of the Commission (Public Representative) to represent 
the interests of the general public in these proceedings.
    3. Interested persons may submit initial comments no later than 30 
days from the date of publication of this notice in the Federal 
Register.
    4. Reply comments may be filed no later than 45 days from the date 
of publication of this Notice in the Federal Register.
    5. The Secretary shall arrange for publication of this Notice in 
the Federal Register.

List of Subjects in 39 CFR Part 3010

    Administrative practice and procedure; Postal Service.

    Issued: July 10, 2009.

    By the Commission.
Judith M. Grady,
Acting Secretary.

    For the reasons discussed in the preamble, the Postal Regulatory 
Commission proposes to amend title 39 chapter III of the U.S. Code as 
follows:

PART 3010--REGULATION OF RATES FOR MARKET DOMINANT PRODUCTS

    1. The authority citation for 39 CFR part 3010 continues to read as 
follows:

    Authority:  39 U.S.C. 503; 3622.

    2. Revise Sec.  3010.21 to read as follows:


Sec.  3010.21  Calculation of annual limitation.

    (a) The calculation of an annual limitation involves three steps. 
First, a simple average CPI-U index is calculated by summing the most 
recently available 12 monthly CPI-U values from the date the Postal 
Service files its notice of rate adjustment and dividing the sum by 12 
(Recent Average). Then, a second simple average CPI-U index is 
similarly calculated by summing the 12 monthly CPI-U values immediately 
preceding the Recent Average and dividing the sum by 12 (Base Average). 
Finally, the annual limitation is calculated by dividing the Recent 
Average by the Base Average and subtracting 1 from the quotient. The 
result is expressed as a percentage, rounded to three decimal places.
    (b) The formula for calculating an annual limitation is as follows: 
Annual Limitation = (Recent Average/Base Average)-1.
    3. Revise Sec.  3010.22 to read as follows:


Sec.  3010.22  Calculation of less than annual limitation.

    (a) If a notice of rate adjustment is filed less than 1 year after 
the last Type 1-A or Type 1-B notice of rate adjustment applicable to 
an affected class of mail, then the annual limitation will recognize 
the rate increases that have occurred during the preceding 12 months. 
When the effects of those increases are removed, the remaining partial 
year limitation is the applicable restriction on rate increases.
    (b) The applicable partial year limitation is calculated in two 
steps. First, a simple average CPI-U index is calculated by summing the 
12 most recently available monthly CPI-U values from the date the 
Postal Service files its notice of rate adjustment and dividing the sum 
by 12 (Recent Average). The partial year limitation is then calculated 
by dividing the Recent Average by the Recent Average from the most 
recent previous notice of rate adjustment (Previous Recent Average) 
applicable to each affected class of mail and subtracting 1 from the 
quotient. The result is expressed as a percentage, rounded to three 
decimal places.
    (c) The formula for calculating the partial year limitation for a 
notice of rate adjustment filed less than 1 year after the last notice 
is as follows: Partial Year Limitation = (Recent Average/Previous 
Recent Average)-1.

[FR Doc. E9-17322 Filed 7-21-09; 8:45 am]
BILLING CODE 7710-FW-P