[Federal Register Volume 85, Number 74 (Thursday, April 16, 2020)]
[Proposed Rules]
[Pages 21130-21131]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-07974]


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POSTAL REGULATORY COMMISSION

39 CFR Part 3050

[Docket No. RM2020-7; Order No. 5478]


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 a rulemaking proceeding to consider changes to 
analytical principles relating to periodic reports (Proposal Two). This 
document informs the public of the filing, invites public comment, and 
takes other administrative steps.

DATES: Comments are due: May 22, 2020.

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 Two
III. Notice and Comment
IV. Ordering Paragraphs

I. Introduction

    On April 7, 2020, 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 Two.
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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 Two), April 7, 2020 (Petition). The 
Petition was accompanied by a study supporting its proposal. See 
Professor Michael D. Bradley A Methodology for Updating the City 
Carrier Regular Delivery Variabilities*, April 7, 2020 (Bradley 
Report). The Postal Service also filed a notice of filing of public 
and non-public materials relating to Proposal Two. Notice of Filing 
of USPS-RM2020-7-1 and USPS-RM2020-7-NP1 and Application for 
Nonpublic Treatment, April 7, 2020.
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II. Proposal Two

    Background. The Postal Service currently calculates unit delivery 
costs by rate category to provide insight into the nature of those 
costs at a detailed level. Petition, Proposal Two at 1. A review of 
those costs revealed large differences between the street time unit 
delivery costs for flats in Flats Sequencing System (FSS) and non-FSS 
zones. Id. This gap was surprising because it did not exist for the 
marginal times on which the costs were based. Id.
    The Postal Service states that upon investigation, it uncovered the 
source of the discrepancy between relative costs and volumes: Volume 
proportions from the City Carrier Street Time Study (CCSTS) data 
collected in FY 2013, and used in the established model, do not match 
the current volume proportions. Id. at 2.
    The shift in volume proportions has implications for calculated 
unit delivery costs because city carrier street time variabilities 
depend upon the volumes used to calculate them. Id. Failure to account 
for volume changes can lead to the calculation of inappropriate 
variabilities. Id. The Postal Service states that if a particular type 
of mail experiences a volume decline and the current variability 
calculation does not account for that decline, the volume variable cost 
for this type of mail will be higher than it should be, leading to high 
calculated unit costs. Id. at 2-3. The Postal Service explains that 
``[c]hanges in the relative volumes of letter and flat mail create the 
need for a process of updating the regular delivery activity cost 
pools.'' Id. at 3.
    Proposal. Proposal Two would ``introduce a methodology for updating 
the delivery time variabilities for city carrier regular delivery time, 
so that they reflect changes in relative volumes.'' \2\ City carrier 
delivery activity cost pools are found by multiplying city carrier 
street time variabilities by accrued regular delivery time. Id. at 4. 
Each street time variability has three parts: The marginal time for the 
type of mail, the volume for the type of mail, and the total regular 
delivery time. Id. Any of the three parts can change when volume 
changes. Id. In updating variability, the approach underlying Proposal 
Two ``allows for responses in all three parts due to a volume change.'' 
Id.
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    \2\ Id. at 1. A ``full discussion of the research supporting the 
proposal'' is provided in the Bradley Report, attached to the 
Petition electronically as a separate PDF file. See id. at 3.
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    The Postal Service states that while the mean volumes used to 
calculate regular delivery time elasticities are typically calculated 
directly from the FY 2013 CCSTS data, to facilitate an update of the 
calculated variabilities, it is possible to ``derive the mean volumes 
as proportions of the total average letter and flat delivered volume.'' 
Id. The Postal Service clarifies that letter and flat delivered volume 
is the sum of the volumes of four components (mail shapes) for which 
delivery variabilities are calculated: delivery point sequence (DPS) 
mail, cased mail, FSS mail, and sequenced mail. Id. at 3-5. 
Consequently, the average volume for any component can be calculated 
``by multiplying the component's proportion of total letter and flat 
delivery volume by the overall average volume.'' Id. at 4. The Postal 
Service asserts that its proposed version of the mean formulation 
``makes it easy to update the regular delivery time variabilities using 
more recent volume means . . . [which are] . . . calculated by forming 
the needed volume proportions with the more recent data, here the FY 
2019 [City Carrier Cost System] volumes.'' \3\ The Postal Service 
states that ``the proposed new methodology would be applied again each 
year to achieve annual updates.'' Id. at 1.
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    \3\ Id. at 5 (footnote omitted). In a footnote, the Postal 
Service explains that the regular delivery time equation includes 
volumes from customers' receptacles, but that it lacks recent data 
that would permit it to update that volume. Id. n.1.

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[[Page 21131]]

    Impact. To see if a recalculation of variabilities using current 
volumes mitigates the gap between FSS and non-FSS unit city carrier 
street time flats costs, the Postal Service compares these costs for FY 
2019 using the old variabilities and the new variabilities. Id. at 6-7. 
It concludes that the updated variabilities reduce the gap between FSS 
and non-FSS unit street time costs for flats. Id. at 7. The reduction 
is in the range between 2.5 cents and 4.0 cents, depending on the mail 
category. Id. at 7-8.
    The updated variabilities also result in some changes in the unit 
volume variable city carrier costs for nearly all products.\4\ Id. at 
8. For all but one domestic market dominant mail products, the change 
in unit volume variable costs is in the range between -0.9 cents and 
0.2 cents. Id. at 10. The largest impact of Proposal Two on unit volume 
variable costs is observed for High Density and Saturation Flats/
Parcels, which has the unit costs fall by 1.2 cents. Id. at 9-10. For 
domestic competitive mail products and services, Proposal Two results 
in a decrease of unit volume variable costs by 0.2 cents on average. 
Id. at 10.
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    \4\ These costs include both office and street time cost, as 
well as related indirect cost. Id. at 9.
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III. Notice and Comment

    The Commission establishes Docket No. RM2020-7 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 Two no later 
than May 22, 2020. Pursuant to 39 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. RM2020-7 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 Two), filed April 7, 2020.
    2. Comments by interested persons in this proceeding are due no 
later than May 22, 2020.\5\
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    \5\ The Commission reminds interested persons that its revised 
and reorganized Rules of Practice and Procedure become effective 
April 20, 2020, and should be used in filings with the Commission 
after April 20, 2020. Beginning on that date, the rules will be 
available on the Commission's website. In the meantime, the new 
rules can be found in Order No. 5407, which was issued on January 
16, 2020. Docket No. RM2019-13, Order Reorganizing Commission 
Regulations and Amending Rules of Practice, January 16, 2020 (Order 
No. 5407).
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    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.
Erica A. Barker,
Secretary.
[FR Doc. 2020-07974 Filed 4-15-20; 8:45 am]
BILLING CODE 7710-FW-P