[Federal Register Volume 85, Number 196 (Thursday, October 8, 2020)]
[Proposed Rules]
[Pages 63473-63474]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-21416]


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POSTAL REGULATORY COMMISSION

39 CFR Part 3050

[Docket No. RM2020-13; Order No. 5694]


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 Six). This 
document informs the public of the filing, invites public comment, and 
takes other administrative steps.

DATES: Comments are due: November 24, 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 Six
III. Notice and Comment
IV. Ordering Paragraphs

I. Introduction

    On September 15, 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 Six.
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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 Six), September 15, 2020 (Petition). 
The Petition was accompanied by a study supporting its proposal. See 
A. Thomas Bozzo & Tim Huegerich, Analysis of Labor Variability for 
Automated Letter and Flat Sorting, Christensen Associates, September 
15, 2020 (Variability Report). The Postal Service also filed a 
notice of filing of public and non-public materials relating to 
Proposal Six. Notice of Filing of USPS-RM2020-13-1 and USPS-RM2020-
13-NP1 and Application for Nonpublic Treatment, September 15, 2020.
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II. Proposal Six

    Background. Proposal Six introduces a new methodology for 
estimating volume variabilities for certain mail processing cost pools: 
Delivery Barcode Sorter (DBCS), Automated Flats Sorting Machine (AFSM) 
100, and Flats Sequencing System (FSS). Petition, Proposal Six at 1. 
The cost pools at issue involve labor expenses associated with the 
distribution of letters (DBCS) and flats (AFSM 100 and FSS). Id. at 2. 
The

[[Page 63474]]

Postal Service states that accrued labor costs in these three cost 
pools totaled $2.3 billion in FY 2019. Id. at 1.
    The main factor determining labor requirements for sorting 
operations is the number of pieces inducted into the operation for 
processing, total pieces fed (TPF) in the Management Operating Data 
System (MODS). Id. at 2; Variability Report at 7. In automated 
distribution operations, the actual number of handlings are directly 
counted by the sorting equipment and automatically transmitted from the 
equipment to the Web End-of-Run (WebEOR) system. Petition, Proposal Six 
at 2. MODS collects and aggregates piece handlings and runtime data 
through automated interfaces with WebEOR. Id. Labor usage or workhour 
data by operation are derived from time clock rings reported to MODS 
through the Time and Attendance Collection System. Id; Variability 
Report at 15.
    Currently, In-Office Cost System tallies are used to partition the 
mail processing cost pools into activities assumed to be 100-percent 
volume-variable, and other activities assumed to be non-volume-
variable. Id. The basis for such determination was an assumption that 
mail processing costs should vary in proportion to the volume of mail 
or articles processed. See Variability Report at 4. For the operations 
that are the subject of this analysis, the associated mail processing 
costs were taken to be 99.1-percent volume-variable in FY 2019 under 
the accepted methodology. Id.
    This methodology has been in use since Docket No. R71-1, and its 
origins predate the Postal Reorganization Act and the development of 
the automated mail processing technologies in this proposal. Petition, 
Proposal Six at 2. The Postal Service states that the Commission 
previously declined to adopt any empirical models for mail processing 
variability, citing data and econometric issues. Id. at 3. However, the 
Postal Service explains that several factors merit re-examination, 
including volume changes, the reliability of automated counts of 
mailpiece handlings, and the availability of machine utilization data. 
Id. at 4.
    Proposal. The proposed methodology is based on econometric analysis 
of workhour and workload data collected by the Postal Service on an 
ongoing basis. Id. at 1. Specifically, the estimation of the proposed 
variabilities employs monthly MODS datasets compiled into a multi-year 
panel dataset. Id. at 5. The variabilities are derived from a 
regression equation of the natural logarithm, where workhours are used 
as a dependent variable and the TPF (current and lagged) as well as 
seasonal dummy variables are used as explanatory variables. Id. The 
regression sample periods cover the most recent 4 fiscal years and 
would be rolled forward to allow for re-estimating the variabilities 
annually. Id. The variabilities estimated for the three cost pools 
during a FY 2016-FY 2019 sample period are 0.976 for DBCS, 0.774 for 
AFSM 100, and 0.804 for FSS. Id. at 6.
    Impact. The proposed methodology would permit re-estimation of the 
variabilities because the underlying data are produced in the course of 
Postal Service operations and are already included in the Annual 
Compliance Report. Id. at 1-2. The Postal Service concludes that the 
proposed methodology would reduce FY 2019 volume-variable labor costs 
for the three cost pools by 8.3 percent overall. Id. at 6. The Postal 
Service also states that, including piggybacks, the proposal reduces 
measured volume-variable and product-specific costs in the Cost and 
Revenue Analysis C Report by 0.79 percent. Id. The Postal Service 
provides a table showing the effects of the proposed variabilities on 
product unit costs. Id. at 6-8. In a separate table filed under seal, 
the Postal Service shows the impacts of the proposal on individual 
Competitive products.\2\
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    \2\ See Library Reference USPS-RM2020-13/NP1, September 15, 
2020.
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III. Notice and Comment

    The Commission establishes Docket No. RM2020-13 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 Six 
no later than November 24, 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. RM2020-13 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 Six), filed 
September 15, 2020.
    2. Comments by interested persons in this proceeding are due no 
later than November 24, 2020.\3\
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    \3\ The Commission reminds interested persons that its revised 
and reorganized Rules of Practice and Procedure became effective 
April 20, 2020, and should be used in filings with the Commission 
after April 20, 2020. The new rules are available on the 
Commission's website and can be found in Order No. 5407. See 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. 2020-21416 Filed 10-7-20; 8:45 am]
BILLING CODE 7710-FW-P