[Federal Register Volume 83, Number 133 (Wednesday, July 11, 2018)]
[Proposed Rules]
[Pages 32069-32071]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-14768]


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POSTAL REGULATORY COMMISSION

39 CFR Part 3050

[Docket No. RM2018-10; Order No. 4696]


Periodic Reporting

AGENCY: Postal Regulatory Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Commission is acknowledging a recent filing requesting the 
Commission initiate an informal rulemaking proceeding to consider 
changes to an analytical method for use in periodic reporting (Proposal 
Seven). This document informs the public of the filing, invites public 
comment, and takes other administrative steps.

DATES: Comments are due: September 5, 2018.

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. Proposal Seven
III. Notice and Comment
IV. Ordering Paragraphs

I. Introduction

    On June 29, 2018, the Postal Service filed a petition pursuant to 
39 CFR 3050.11 requesting that the Commission initiate a rulemaking 
proceeding to consider changes to analytical principles relating to 
periodic reports.\1\ The Petition identifies the proposed analytical 
changes filed in this docket as Proposal Seven.
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    \1\ Petition of the United States Postal Service for the 
Initiation of a Proceeding to Consider Proposed Changes in 
Analytical Principles (Proposal Seven), June 29, 2018 (Petition).
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II. Proposal Seven

    Background. The Proposal Seven objective is to ``reorganize Cost 
Segment 3 and certain mail processing cost pools

[[Page 32070]]

to reflect operational changes and to better classify clerk and mail 
handler work activities.'' Petition at 1.
    Since its inception, the current Cost Segment 3 methodology has 
divided clerk and mail handler costs into costs incurred at ``MODS'' 
offices, NDCs and ``non-MODS'' facilities. Petition, Proposal Seven at 
1. Within each office group, the Cost Segment 3 model divides mail 
processing activities into activity-based cost pools. Id. The cost 
pools allow for distinct causal assignments of volume-variable costs to 
products for activities with distinct product mixes and/or distinct 
roles in the mail processing system. Id. The Postal Service states 
``[i]mprovements to the non-MODS cost methodology introduced activity-
based mail processing cost pools which currently offer finer activity 
detail than the corresponding MODS cost pools.'' Id. at 2. The Postal 
Service notes:

    The primary operational distinction is between ``Function 1'' 
mail processing (i.e. mail processing at plants) and ``Function 4'' 
activities (processing, window service, and other activities at 
customer service facilities including post offices, stations, and 
branches) and that [a] significant aim of this proposal is to align 
the Cost Segment 3 office groups with this operational distinction, 
and to provide a common set of cost pools for reporting Function 4 
costs based on the non-MODS cost pools.

Id.
    The Postal Service states ``[m]ail processing cost pools also 
require periodic revision to maintain consistency with Postal Service 
operations. This proposal includes several mail processing cost pool 
changes intended to improve the treatment of certain new equipment, as 
well as to prepare for the eventual withdrawal of other equipment from 
service.'' Id. at 2-3.
    Proposal. The Postal Service proposes the following actions to 
reorganize MODS and non-MODS office groups for the Cost Segment 3 
model, and to revise certain mail processing cost pools for MODS plant 
and NDCs (formerly BMCs):

    1. Redefine the ``MODS'' office group to include only MODS-
reporting plants, with other offices assigned to the non-MODS group. 
(footnote omitted)
    2. Consolidate LDC 15 LCREM operations (currently in cost pool 
LD15PLNT) into the D/BCS cost pool.
    3. Consolidate the FSM/1000 cost pool into the AFSM100 cost 
pool.
    4. Consolidate the 1FLATPRP cost pool (MODS operation 035) into 
the AFSM100 cost pool.
    5. Collect operations for the Low-Cost Universal Sorter (LCUS) 
and Sack Sorting Machine in new LCUS-SSM cost pools for MODS offices 
and NDCs, supplanting the current MODS 1SACKS_M cost pool as well as 
the NDC SSM cost pool.
    6. Eliminate the current plant MECPARC and NDC NMO cost pools.
    7. Reorganize the APBSPRIO and APBS OTH cost pools such that the 
former includes all applicable parcel (TPH) operations, limiting the 
latter to bundle (NATPH) operations.
    8. Move NDC LDC 14 manual Priority Mail distribution operations 
from the OTHR cost pool to the MANP cost pool. (footnote omitted)
    9. Employ non-MODS methodology to assign all Function 4 costs to 
cost pools, including costs pools currently in the MODS office 
group. (footnote omitted)
    10. Realign facility space categories and distribution keys in 
conjunction with labor cost changes.

Id. at 3-4.
    Rationale and impact: The Postal Service lists separately the 
rationale for each revision in Proposal Seven as follows:

    1. Redefine the ``MODS'' office group to include only MODS-
reporting plants, with other offices assigned to non-MODS group. 
Redefinition will ``make it easier to analyze mail processing costs 
at post offices, stations, and branches under a common set of cost 
pools. The offices that are proposed to shift to the non-MODS group, 
[are] nearly all of the mail processing costs which are in 
``Function 4'' (LDC41-49) cost pools.'' Id. at 5. This will provide 
a more consistent treatment of Function 4 costs. ``Currently, costs 
for otherwise similar activities--particularly manual mail 
processing at customer service facilities--may be treated 
differently depending on whether they occur at a MODS or non-MODS 
finance number.'' Id. at 6.
    2. Consolidate LDC15LCREM operations in cost pool LD15PLNT into 
the D/BCS cost pool. The Low-Cost Reject Encoding Machine (LCREM) 
cost pool is assigned to a small cost pool and will be included with 
other LCREM operations already included in LDC 11, currently part of 
the much larger D/BCS cost pool. Id. at 6.
    3. Consolidate FSM/1000 into AFSM 100 cost pool. This is to 
provide for the phase-out of remaining operations for UFSM 1000 
equipment. Continuing decline is expected and the activity in FSM/
1000 cost pools no longer has a material effect on mail processing 
costs. Id. at 6-7.
    4. Consolidate the 1FLATPRP cost pool (MODS operation 035) into 
the AFSM100 cost pool. This is to harmonize treatment of 1FLATPRP 
(MODS operation 035) with other flat preparation operations in the 
Cost Segment 3.1 model. The declining scale of remaining FSM/10000 
operations no longer justifies separate treatment of 1FLATPRP. Id. 
at 7.
    5. Collect operations for the low-Cost Universal Sorter (LCUS) 
and Sack sorting Machine in new LCUS-SSM cost pools for MODS offices 
and NDCs, supplanting the current MODS 1SACKS_M cost pool as well as 
the NDC SSM cost pool. Consolidation should limit the potential 
impact of clocking errors within LCUS operations and also facilitate 
computation of operation-specific piggyback costs. Id. at 8.
    6. Eliminate the current plant MECPARC and NDC NMO cost pools. 
``[T]here are no other valid plant operations remaining in the 
MECPARC cost pool after the universal sorter operations have been 
gathered into the new LCUS-SSM cost pool.'' New automated parcel 
equipment would be assigned to the APBSPRIO cost pool. Therefore, 
``there will be no valid workhours for the NDC NMO cost pool going 
forward.'' Id. at 9.
    7. Reorganize the APBSPRIO and APBS OTH cost pools. Moving minor 
parcel operations with a small number of workhours from APBS OTH to 
APBSPRIO will be consistent with the treatment of other parcel 
operations and reinforce the conceptual definition of APBS as the 
automated bundle sorting cost pool. Id.
    8. Move NDC LDC 14 manual Priority Mail distribution operations 
from the OTHR cost pool to the MANP cost pool. ``[T]reating these 
operations as part of the MANP distribution cost pool will reduce 
the possibility that mixed-mail costs will be distributed to non-
parcels and/or parcel products that receive automated processing.'' 
Id. at 10.
    9. Employ non-MODS methodology to assign all Function 4 costs to 
cost pools, including cost pools currently in the MODS office group. 
This will simplify report of Function 4 costs that are currently 
spread across cost pools in the two office groups defined similarly 
and reduce cases where costs from similar activities may be treated 
differently based on their office group. Id. at 10. ``[T]he larger 
effective sample sizes from combining MODS Function 4 tallies with 
non-MODS should result in little or no adverse effect on the 
coefficients of variation (CVs) for the sample-based cost 
estimates.'' Id. at 11.
    10. Realign facility space categories and distribution keys in 
conjunction with labor cost changes. ``[U]nder the proposed 
methodology, labor cost pool consolidations would require 
corresponding consolidations of associated facility space 
distribution keys and associated space costs (and square footage).'' 
Id.
    The Postal Service's estimate of the effect on product costs is 
presented in Table 1 in the Excel file attached to the Petition. The 
Postal Service states ``[t]he Cost Segment 3 impact includes the 
effects of the proposal on the Mail Processing, Window Service, and 
Administrative components[,]'' as well as ``revisions to 
distribution keys for piggybacked costs[,]'' which ``may variously 
reinforce or offset the direct impact on Cost Segment 3 labor 
costs.'' The impact is small in most cases. Id. at 12.

III. Notice and Comment

    The Commission establishes Docket No. RM2018-10 for consideration 
of matters raised by the Petition. More information on the Petition may 
be accessed via the Commission's website at http://www.prc.gov. 
Interested persons may submit comments on the Petition and Proposal 
Seven no later than September 5, 2018. Pursuant to 39

[[Page 32071]]

U.S.C. 505, Lawrence Fenster is designated as an 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. RM2018-10 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 (Proposal Seven), filed June 
29, 2018.
    2. Comments by interested persons in this proceeding are due no 
later than September 5, 2018.
    3. Pursuant to 39 U.S.C. 505, the Commission appoints Lawrence 
Fenster 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.
Ruth Ann Abrams,
Acting Secretary.
[FR Doc. 2018-14768 Filed 7-10-18; 8:45 am]
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