[Federal Register Volume 75, Number 134 (Wednesday, July 14, 2010)]
[Notices]
[Pages 40853-40855]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-17056]


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POSTAL REGULATORY COMMISSION

[Order No. 485; Docket No. R2010-4]


Postal Rate Changes

AGENCY: Postal Regulatory Commission.

ACTION: Notice.

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SUMMARY: Under a 2006 postal reform law, a new approach to implementing 
rate changes for market dominant postal products, which include First-
Class Mail, was adopted. In general, the new approach envisions annual 
rate adjustments based on changes in a specified Consumer Price Index 
(CPI). However, the law includes a provision allowing rate changes in 
excess of CPI under extraordinary or exceptional circumstances, 
contingent on a Commission determination on certain considerations. The 
Postal Service is invoking this provision for the first time and, in a 
filing with the Commission, is seeking an overall percentage increase 
of about 5.6 percent for market dominant products beginning January 2, 
2011. It is also seeking some classification changes. This document 
provides the public with notice of the Postal Service's filing, a brief 
description of the contents, a discussion of the Commission's role and 
responsibilities, and an outline of related procedural steps.

DATES: Key dates include:
    1. July 19, 2010: first technical conference.
    2. August 5, 2010: deadline for filing suggested questions to be 
directed to Postal Service during public hearing.
    3. August 10-12: public hearings.
    4. Deadline for issuance of Commission determination.
    See SUPPLEMENTARY INFORMATION section for dates of additional 
technical conferences (if needed) and deadlines for initial and reply 
comments.

ADDRESSES: Submit comments and other filings electronically via the 
Commission's Filing Online system. Those who cannot submit comments and 
filings electronically should contact the person identified in the For 
Further Information Contact section for advice on alternative filing 
methods.

FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, General Counsel, 
at http//www.prc.gov or 202-789-6820.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction
II. Background and Postal Service Filing
III. Subsequent Procedural Steps
IV. Public Representative
V. Ordering Paragraphs

I. Introduction

    On July 6, 2010, the Postal Service filed a proposed rate 
adjustment pursuant to 39 U.S.C. 3622(d)(1)(E) and 39 CFR 3010.60, et 
seq., of the Commission's rules.\1\ The filing seeks ``to increase 
rates for market dominant products in excess of the otherwise 
applicable limitations of 39 U.S.C. 3622(b)(1)(A) and 39 CFR 3010.11.'' 
Id. at 11. The proposed prices represent an aggregate increase of 
approximately 5.6 percent and are to be implemented on January 2, 2011. 
Id.
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    \1\ Exigent Request of the United States Postal Service, July 6, 
2010 (Exigent Request).
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II. Background and Postal Service Filing

    As part of the comprehensive changes enacted by the Postal 
Accountability and Enhancement Act of 2006 (PAEA), 120 Stat. 3198, 
Congress has authorized the Postal Service to adjust rates for market-
dominant products on the basis of ``extraordinary or exceptional 
circumstances,'' provided the Commission determines 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.''\2\ 39 U.S.C. 3622(d)(1)(E).
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    \2\ Rate adjustments under section 3622(d)(1)(E) for 
extraordinary or exceptional circumstances are commonly referred to 
as ``exigent'' rate adjustments, although the term ``exigent'' does 
not appear in the statute. Recognizing that the legal standard for 
assessing section 3622(d)(1)(E) rate adjustments is the 
``extraordinary and exceptional circumstances'' standard, the 
Commission shall for convenience refer to rate adjustments proposed 
under section 3622(d)(1)(E) as ``exigent rate adjustments'' and to 
cases containing such rate adjustments as ``exigent rate cases.'' 
See also Docket No. RM2007-1, Order Establishing Ratemaking 
Regulations for Market Dominant and Competitive Products, October 
29, 2007, at 66 (Order No. 43).
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    Section 3622(d)(1)(E) also required the Commission to establish 
procedures that permit exigent rate adjustments to be made on an 
expedited basis. Id. Commission determinations that a proposed exigent 
rate adjustment is ``reasonable and equitable and necessary'' can only 
be made ``after notice and opportunity for a public hearing and 
comment, and within 90 days after any request by the Postal Service.'' 
Id. On October 29, 2007, the Commission adopted a new subpart E to its 
part 3010 market dominant product regulations. 39 CFR part 3010, 
subpart E. Subpart E established ``a functional and flexible 
framework'' for exigent rate cases. Order No. 43, at 65-73. Because of 
the statutory requirement that determinations on proposed exigent rate 
adjustments be made within 90 days of the date of filing, it was 
necessary for the Commission to adopt ``streamlined proceedings'' for 
exigent rate cases. See id. at 65-66 and 39 CFR 3010.64.
    On May 7, 2010, the Commission announced that a technical 
conference would be held on June 16, 2010, to discuss procedures for 
handling the exigent rate case that the Postmaster General had 
previously suggested might be filed.\3\ The Commission viewed the 
conference as an opportunity to discuss unique procedural 
considerations and to identify possible solutions to potential issues 
``that might otherwise complicate fair and meaningful participation by 
interested persons.'' Order No. 456 at 2. In a subsequent order, the 
Commission solicited topics for discussion at the conference.\4\
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    \3\ Docket No. PI2010-3, Notice and Order Providing for 
Technical Conference, May 7, 2010 (Order No. 456) at 1.
    \4\ Docket No. PI2010-3, Proposals for Topics of Discussion 
During the Technical Conference in Response to Order No. 456, June 
9, 2010.
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    Participants in the June 16 conference discussed a broad spectrum 
of topics, including, for example, the desirability of technical 
conferences, the nature and extent of permissible discovery, the manner 
in which participants would be permitted to submit questions to the 
Commission for response by the Postal

[[Page 40854]]

Service, and procedures for filing written comments.\5\
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    \5\ See Docket No. PI2010-3, Technical Conference, June 16, 
2010, TR 1.
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    In its July 6 filing, the Postal Service states that the Exigent 
Request is only one of several steps that it has taken to improve its 
financial condition. Exigent Request at 2. It states further that 
without the authority to increase rates beyond current limitations, it 
would be confined to an overall rate increase of only 0.578 percent, an 
amount which it asserts would prevent it ``from making discernible 
progress towards closing the multi-billion dollar shortfall between 
projected expenses and projected revenues for FY 2011.'' Id. at 2-3. 
The Postal Service states that while the proposed increases will not 
eliminate the revenue shortfall, this is one of the few options that 
can reasonably be expected to have a short-term positive impact. Id. at 
3.
    In support of its filing, the Postal Service asserts that the 
circumstances it faces are ``extraordinary or exceptional'' and that 
the proposed rates are reasonable, equitable, and necessary. Id. at 4-
8. The Postal Service goes on to describe the structure of its proposed 
rate adjustment stating that the concept it has followed involves the 
identification of available price caps by class, the presentation of an 
explanation of why the revenue generated from increases limited by 
price caps would be inadequate, and the presentation of an alternative 
proposed set of higher-percentage price increases. Id. at 9. The 
proposed increases are evaluated against factors set forth in the 
Commission's rules. Id. at 10. According to the Postal Service, this 
methodology could be viewed as an exercise in borrowing against future 
price caps and that if future circumstances permit, the Postal Service 
might be able to ``pay back'' some or all of the exigent increase by 
basing future price increases on price caps calculated below levels 
that future CPI-U calculations might otherwise indicate. Id. at 10-11.
    Using its proposed methodology, the Postal Service states that the 
percentage changes by class implicit in its proposed exigent prices are 
as follows:
    First-Class Mail: 5.417%
    Standard Mail: 5.616%
    Periodicals: 8.035%
    Package Services: 6.700%
    Special Services: 5.225%
    Cumulatively, these percentage increases result in an overall 
percentage increase for market dominant products of approximately 5.6 
percent. Id. at 15.
    All of the proposed rates are set forth on Attachment A to the 
Exigent Request.\6\ The Postal Service also includes several proposed 
changes to the mail classification schedule (MCS) in the Exigent 
Request.
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    \6\ The Exigent Request is posted on the Postal Regulatory 
Commission's Web site at 
http[sol][sol]www.prc.gov[sol]docs[sol]68[sol]68792[sol]request.final
.pdf.
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    The Postal Service states that while it has attempted to minimize 
the scope of MCS changes, some beneficial programs requiring MCS 
changes are warranted. Exigent Request at 19. The following changes are 
identified:
     In First-Class Mail, a Reply Rides Free Program is added 
for Presorted Letters.
     For First-Class Mail Parcels, a Single-Piece Commercial 
price category is added.
     In Standard Mail, a Saturation and High Density Incentive 
Program is added.
     The Standard Mail Not Flat-Machinable/Parcels product is 
renamed Standard Parcels and, as renamed, is divided into Marketing 
parcels and Fulfillment parcels. The Not Flat-Machinables price 
category is replaced by a Regular Marketing Parcels category.
     For Bound Printed Matter, half-pound rate cells are 
eliminated.
     Standard Mail denominations for Stamped Envelopes are 
eliminated.
    All of the proposed changes are shown in legislative format based 
upon the Postal Service's understanding of the current version of the 
MCS draft. Id. Supporting justification for the proposal is provided in 
the statements of three postal officials: Joseph Corbett, Chief 
Financial Officer; Stephen J. Masse, Vice President, Finance and 
Planning; and James M. Kiefer, Pricing Economist. Mr. Corbett provides 
financial context for the request for an exigent rate increase. Mr. 
Masse relates the financial context to the increases proposed for the 
different mailing services products. Mr. Kiefer explains the policy 
reasons for the pricing decisions underlying proposed rates.
    Also provided are Attachment A which shows the requested rate 
schedules and changes to the Mail Classification Schedule; Attachment B 
which provides calculations underlying what the CPI-U cap would be if 
the Postal Service were to file a Type 1 rate adjustment; Attachment C 
which is a list of supporting materials; and Attachment D which is an 
application for non-public treatment of a non-public annex.

III. Subsequent Procedural Steps

    The Postal Service's July 6, 2010 exigent rate case filing is the 
first such filing tobe made since enactment by the PAEA of section 
3622(d)(1)(E). The Commission's regulations in subpart E of part 3010 
govern the filing. In adopting those regulations, the Commission 
acknowledged that further procedures might be needed to ensure an 
orderly but expeditious proceeding that protects the rights of all 
interested persons to participate. Order No. 43 at 33.
    The June 16 conference has provided the Commission with a number of 
potentially useful suggestions and comments. One of the suggestions was 
that the Commission include a tentative schedule in the Commission's 
initial order. Tr. 1/40-41. The following schedule responds to that 
suggestion:
    July 6, 2010 Exigent Request filed.
    July 19, 2010 First Technical Conference (topics to be 
determined), to start at 2 p.m.
    July 23, 2010 Second Technical Conference (if needed).
    July 27, 2010 Third Technical Conference (if needed).
    August 5, 2010 Deadline for filing suggested questions to be 
asked of the Postal Service during the public hearing. 39 CFR 
3010.65(c).
    August 10-12, 2010 Public Hearings.
    August 17, 2010 Deadline for filing initial comments. 39 CFR 
3010.65(f).
    September 2, 2010 Deadline for filing reply comments. 39 
CFR3010.65(g).
    October 4, 2010 Deadline for Commission determination. 39 CFR 
3010.66.
    Absent specific notice to the contrary, all technical conferences 
and hearings will convene at 9:30 a.m., eastern daylight time in the 
Commission's hearing room in Suite 200, 901 New York Ave., NW., 
Washington, DC 20268-0001. Further review of the Postal Service filing 
may warrant adoption of additional procedural dates and/or 
requirements. If so, the Commission will issue further procedural 
orders as it deems advisable or necessary in order to ensure both 
efficiency and fairness. In that connection, the Commission has taken 
under advisement the further comments and suggestions made by 
participants at the June 16, 2010 conference.\7\
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    \7\ All future procedural rulings will be posted in Docket No. 
R2010-4 on the Commission's website at http[sol][sol]www.prc.gov. 
Interested persons are urged to monitor that docket to stay abreast 
of such further rulings.
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    Comments may address, among other things: (1) The suffiency of the 
justification for an exigent rate increase; (2) the adequacy of the 
justification for increases in the amounts requested by the Postal 
Service; and (3) whether the specific rate adjustments requested are 
reasonable and equitable. See rule 3010.65(f).
    To be included in the formal docket being established in this 
proceeding,

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submissions must be filed online as provided by rule 9 of the 
Commission's rules of practice, 39 CFR 3001.9, unless a waiver is 
obtained.\8\ All submissions that do not conform to the rules of 
practice for online filings and do not obtain a waiver from the online 
filing requirements will be treated as informal statements of views and 
shall be placed in a separate file to be maintained by the Secretary as 
provided in 39 CFR 3001.20b.
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    \8\ Formal intervention is not necessary.
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IV. Public Representative

    Pursuant to 39 U.S.C. 505, the Commission hereby appoints James 
Waclawski to serve as officer of the Commission (Public Representative) 
to represent the interests of the general public in this proceeding. 
Technical assistance will be provided by Pamela A. Thompson and Natalie 
L. Rea. Neither Mr. Waclawski nor any staff assigned to assist him 
shall participate in or provide any advice on any Commission decision 
in this proceeding other than in their designated capacity.

V. Ordering Paragraphs

    It is ordered:
    1. The Commission establishes Docket No. R2010-4 to consider 
matters raised in the Postal Service's July 6, 2010 filing.
    2. Subject to further orders, the Commission adopts the procedural 
schedule as set forth in the body of this order.
    3. The Commission will sit en banc in this proceeding.
    4. Pursuant to 39 U.S.C. 505, the Commission appoints James 
Waclawski to represent the interests of the general public in this 
proceeding.
    5. The Secretary shall arrange for publication of this order in the 
Federal Register.

    By the Commission.
Shoshana M. Grove,
Secretary.
[FR Doc. 2010-17056 Filed 7-13-10; 8:45 am]
BILLING CODE 7710-FW-S