[Federal Register Volume 79, Number 127 (Wednesday, July 2, 2014)]
[Proposed Rules]
[Pages 37702-37704]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-15452]


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

POSTAL REGULATORY COMMISSION

39 CFR Part 3050

[Docket No. RM2014-6; Order No. 2103]


Periodic Reporting

AGENCY: Postal Regulatory Commission.

ACTION: Petition for rulemaking; acceptance.

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

SUMMARY: The Commission is noticing a recent Postal Service filing 
concerning the initiation of a proceeding to consider proposed changes 
in analytical principles (Proposals Three through Eight). This notice 
informs the public of the filing, invites public comment, and takes 
other administrative steps.

DATES: Comments are due: July 28, 2014. Reply comments are due: August 
12, 2014.

ADDRESSES: Submit comments electronically via the Commission's Filing 
Online system at http://www.prc.gov. Those who cannot submit comments 
electronically should contact the person identified in the FOR FURTHER 
INFORMATION CONTACT section by telephone for advice on filing 
alternatives.

FOR FURTHER INFORMATION CONTACT: David A. Trissell, General Counsel, at 
202-789-6820.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Introduction
II. Summary of Proposals
III. Notice and Opportunity for Comment
IV. Ordering Paragraphs

I. Introduction

    On June 20, 2014, the Postal Service filed a petition pursuant to 
39 CFR 3050.11 requesting that the Commission initiate an informal 
rulemaking proceeding to consider changes to six analytical methods for 
use in periodic reporting.\1\ The Petition identifies the proposed 
analytical method changes filed in this docket as Proposals Three 
through Eight. Petition at 1.
---------------------------------------------------------------------------

    \1\ Petition of the United States Postal Service for the 
Initiation of a Proceeding to Consider Proposed Changes in 
Analytical Principles (Proposals Three Through Eight), June 20, 2014 
(Petition). The Petition was accompanied by public and nonpublic 
Excel files. With respect to Proposal Six; see also Docket No. 
RM2011-3, Notice of the United States Postal Service of Filing 
Proposal to Update Highway Variabilities, June 20, 2014.
---------------------------------------------------------------------------

II. Summary of Proposals

A. Proposal Three: Revision to Parcel Return Service Full Network Cost 
Model

    The Postal Service proposes a change in modeling transportation 
costs for Parcel Return Service (PRS) Contract 4.

[[Page 37703]]

Petition, Proposal Three at 1. The model currently uses Parcel Select 
non-presort model transportation costs as a proxy. The Postal Service 
states that this was deemed appropriate since, at the time the PRS 
Contract 4 was filed, the average size and cube of Parcel Select Non-
presort was approximately equivalent to the partner pieces. Id. 
However, the Postal Service asserts that the characteristics of the 
Parcel Select Non-presort pieces have changed substantially since the 
cost model was developed. Id. In particular, it states that the average 
weight of a Parcel Select Non-presort piece has increased, whereas the 
average PRS contract piece remained much lighter. The Postal Service 
therefore proposes an adjustment to the transportation cost for the 
contract pieces to account for the difference in their size vis-
[agrave]-vis FY2013 Parcel Select Non-presort pieces. Id. It states 
that if this proposal were adopted, the FY 2013 cost coverage for PRS 
Contract 4 would increase from below 100 percent (as reported in the 
FY2013 ACR) to above 100 percent. Id. at 2.

B. Proposal Four: Proposed Change in International Mail Costing 
Methodology

    The Postal Service proposes to revise the costing methodology of 
the non-Negotiated Service Agreement (NSA) portion of International 
Priority Mail (IPA) and International Surface Airlift (ISAL) (the IPA 
and ISAL published rates). Petition, Proposal Four at 1. The proposal 
stems from cost coverage and costing concerns raised in the FY 2013 
ACD. Id. The Postal Service's proposed solution to these concerns is to 
adjust how NSA costs are developed for application to the NSA data in 
the ``ICM Costing Module.'' Id. at 4. The Postal Service explains that 
pricing group costs by product are developed in the reporting section 
of the ICRA and then staged for use in the ICM Costing Module. Id. It 
states that this staging has been based on unitizing settlement and 
transportation costs by gross weight (as that is the basis for costing 
in the ICRA), but describes how procedures using net weight can be 
employed. Id. at 4-5. For consistency, the Postal Service proposes that 
the same type of staging based on net weights be applied to ePackets, 
PMI parcels and PMI envelopes, which also have differences in the 
costing system between gross and net weight.\2\ Id. at 5. The Postal 
Service further proposes that the allocation of NSA data to the four 
country groupings (Canada, Mexico, Universal Postal Union (UPU) Target 
countries and UPU Transition countries) be discontinued and that 
competitive pages A-3, A-4, B-3 and B-4 be discontinued from the ICRA 
reporting. Id.
---------------------------------------------------------------------------

    \2\ The reference costing system is System for International 
Revenue and Volume Outbound.
---------------------------------------------------------------------------

C. Proposal Five: Proposed Change in PRIME Expr[egrave]s Costing 
Methodology

    The Postal Service proposes to revise the costing methodology 
underlying its response to USPS-ACR-FY13, Chairman's Information 
Request No. 3, question 8 and implemented by the Commission in PRC-
ACR2013-NP-LR1--Imputed ICRA and PRC-ACR2013-NP-LR1--Booked files. 
Petition, Proposal Five at 1. The Postal Service states that this 
revision affects both the Booked and Imputed version of Postal 
Service's Reports files. Id. The proposal is based on the Postal 
Service's conclusion that the PRIME adjustment incorporated in the 
referenced Excel files is not correct. Id. at 2. The proposed remedy is 
to subtract the Expr[egrave]s amounts, except volume, from the 
appropriate Target or Transition Countries. Id.
    The Postal Service further observes that two separate products are 
associated with each PRIME mailpiece: the Expr[egrave]s product and the 
Inbound Single-Piece First-Class Mail product. Id. at 3. Its proposal 
includes reporting the two products separately by using a methodology 
similar to treating the Expr[egrave]s product as if it were a special 
service. Id. To avoid double counting, the reporting totals would not 
include the special service volumes because those pieces are included 
with the mail-piece (also called the host mail-piece or parent 
product). Id. at 3-4.

D. Proposal Six: Updating the Highway Transportation Variabilities

    The Postal Service proposes to update the variabilites used to 
determine the levels of attribution for purchased highway 
transportation expenses in Cost Segment 14.\3\ Id. It states that the 
unit of analysis is the contract cost segment, not the contract. Id. It 
also states that as in previous analyses of purchased highway 
transportation, a translog functional form was used to estimate the 
relevant equations; describes other steps; and presents several 
supporting tables. Id. at 2-5.
---------------------------------------------------------------------------

    \3\ The Postal Service states that it provides a more complete 
discussion in public folder USPS-RM2014-6/1, along with the complete 
data set and econometric results, plus all necessary documentation. 
Petition, Proposal Six at 1.
---------------------------------------------------------------------------

E. Proposal Seven: Modification of the Standard Mail Destination Entry 
Cost Model and the Standard Mail Parcel Mail Processing Cost Model

    The Postal Service proposes to modify the Standard Mail destination 
entry cost model and the Standard Mail parcel mail processing cost 
model. Petition, Proposal Seven at 1.
    Standard Mail destination entry cost model (USPS-FY13-13). For this 
model, the Postal Service proposes: (1) Consolidating three EXCEL 
workbooks (letters, flats, and parcels/total) into one workbook; (2) 
correcting two errors; \4\ (3) removing obsolete operations and input 
data; (4) incorporating more recent productivity data; and (5) adding a 
new parcel mail characteristics profile to the model to separately 
estimate parcel cost avoidance values.\5\ Id. at 1-2.
---------------------------------------------------------------------------

    \4\ One error concerns certain entries for Basic Carrier Route 
volume and weight data by shape in USPS-FY13-13. Id. at 3. The other 
concerns the input value representing the number of letters (in 
trays) that a pallet contains. The Postal Service states that the 
average pallet contained 6,653 letters in FY 2013. Id. It proposes 
incorporating this statistic into the mail characteristics file 
(USPS-FY13-14) in the future and relying upon it to estimate the 
letters non-transportation costs. Id.
    \5\ The proposed Standard Mail destination entry cost model is 
contained in the file PROP.7.USPS-FY13-13.xlsx. Id. at 2.
---------------------------------------------------------------------------

    Standard Mail parcel mail processing cost model (USPS-FY13-12). The 
Postal Service proposes to add a worksheet to the Standard Mail parcel 
mail processing cost model. It states that this would allow the 
Standard Mail parcel arrival profile and volume data to be presented in 
a format similar to the mail characteristics profiles for Standard Mail 
letters and flats.\6\ Id. The Postal Service states that this 
modification does not affect the USPS-FY13-12 price category cost 
estimates in any way. Id. The parcel mail characteristics profile will 
then be used each fiscal year to estimate the non-transportation costs 
for Standard Mail parcels in the USPS-FY13-13 Standard Mail destination 
entry cost model (discussed above). Id.
---------------------------------------------------------------------------

    \6\ The proposed Standard Mail parcels mail processing cost 
model is contained in the file PROP.7.USPS-FY13-12.xlsx. Id.
---------------------------------------------------------------------------

F. Proposal Eight: Changes in Attributable Costs Related to USPS 
Tracking

    The Postal Service proposes changes in the methodology for 
attributing costs related to Other Ancillary Services, such as USPS 
Tracking (formerly Delivery Confirmation), which are provided for 
certain shipping products at no extra charge. Petition, Proposal Eight 
at 1. The Postal Service also proposes additional changes to the 
methodology for attributing costs for paid USPS Tracking. It asserts 
these changes reflect the evolution of postal operations and take 
advantage of the availability of census data. Id.
    Specifically, the Postal Service proposes using data from the Point 
of Service (POS) to assign window

[[Page 37704]]

acceptance costs appropriately between the paid USPS Tracking Service 
and the host pieces. This entails attributing costs related to final, 
en-route and non-window acceptance scans to the host product, not to 
the USPS Tracking Service, and performing the calculations in the B 
workpapers rather than making a D report adjustment. This means the 
cost model for USPS Tracking in NP26 will no longer be needed for the D 
report adjustment. Id. at 2. In addition, in the In-Office Cost System, 
the percentage of volume from the POS retail system that was paid for 
the extra service to attribute costs to USPS Tracking will be used for 
window-related acceptance costs. Id.

III. Notice and Opportunity for Comment

    The Commission establishes Docket No. RM2014-6 for consideration of 
matters raised by the Petition. Additional information concerning the 
Petition may be accessed via the Commission's Web site at http://www.prc.gov. Interested persons may submit comments on the Petition and 
Proposals Three through Eight no later than July 28, 2014. Reply 
comments are due no later than August 12, 2014. Pursuant to 39 U.S.C. 
505, Tracy N. Ferguson is designated as officer of the Commission 
(Public Representative) to represent the interests of the general 
public in this proceeding.

IV. Ordering Paragraphs

    It is ordered:
    1. The Commission establishes Docket No. RM2014-6 for consideration 
of the matters raised by the Petition of the United States Postal 
Service for the Initiation of a Proceeding to Consider Proposed Changes 
in Analytical Principles (Proposals Three Through Eight), filed June 
20, 2014.
    2. Comments by interested persons in this proceeding are due no 
later than July 28, 2014. Reply comments are due no later than August 
12, 2014.
    3. Pursuant to 39 U.S.C. 505, the Commission appoints Tracy N. 
Ferguson to serve as an officer of the Commission (Public 
Representative) to represent the interests of the general public in 
this docket.
    4. The Secretary shall arrange for publication of this order in the 
Federal Register.

    By the Commission.
Shoshana M. Grove,
Secretary.
[FR Doc. 2014-15452 Filed 7-1-14; 8:45 am]
BILLING CODE 7710-FW-P