[Federal Register Volume 85, Number 241 (Tuesday, December 15, 2020)]
[Rules and Regulations]
[Pages 81124-81141]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-26645]


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POSTAL REGULATORY COMMISSION

39 CFR Parts 3030, 3040, 3045, 3050, and 3055

[Docket No. RM2017-3; Order No. 5763]


System for Regulating Market Dominant Rates and Classifications

AGENCY: Postal Regulatory Commission.

ACTION: Final rule.

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SUMMARY: The Commission is adopting final rules modifying the system 
for regulating rates and classifications for Market Dominant products. 
The revised rules incorporate feedback from comments received from the 
Commission's prior proposed rulemaking. The rules as adopted are 
intended to enable the Market Dominant rate making system to achieve 
certain statutory objectives.

DATES: Effective: January 14, 2021.

ADDRESSES: For additional information, Order No. 5763 can be accessed 
electronically through the Commission's website at https://www.prc.gov.

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

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Relevant Statutory Requirements
II. Background
III. Basis and Purpose of Final Rules

I. Relevant Statutory Requirements

    The Postal Accountability and Enhancement Act (PAEA),\1\ directed 
the Commission to promulgate rules establishing a ratemaking system for 
Market Dominant products within 18 months after the law's enactment, 
which the Commission did in 2007. See 39 U.S.C. 3622(a); Docket No. 
RM2007-1. Section 3622(d)(3) of title 39 of the United States Code 
requires the Commission to review the ratemaking system 10 years after 
the PAEA's enactment to determine if the system has achieved the 9 
statutory objectives as specified by the PAEA, taking into account the 
14 statutory factors. 39 U.S.C. 3622(b), (c), and (d)(3). After making 
its determination that the ratemaking system did not achieve the 
statutory objectives, taking into account the statutory factors, the 
Commission began a public rulemaking process to make modifications to 
the ratemaking system for Market Dominant products as necessary to 
achieve the objectives pursuant to 39 U.S.C. 3622(d)(3).
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    \1\ Public Law 109-435, 120 Stat. 3198 (2006).
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II. Background

    Pursuant to section 3622(d)(3), the Commission initiated Docket No. 
RM2017-3 for the purpose of conducting its 10-year review of the Market 
Dominant ratemaking system. In Order No. 4257,\2\ the Commission found 
that in the decade following the PAEA's enactment, the ratemaking 
system had not achieved the statutory objectives, taking into account 
the statutory factors. Order No. 4257 at 275. On the same day that it 
released its findings, the Commission issued a notice of proposed 
rulemaking (NPR), setting forth a number of proposed regulatory 
modifications intended to enable the ratemaking system to achieve the 
statutory objectives and seeking public input.\3\ In response to 
comments received, the Commission issued a revised notice of proposed 
rulemaking (Revised NPR) again seeking public comment on the 
Commission's revised proposals.\4\ The Commission's further 
modifications and responses to public comments received from the 
Revised NPR are addressed in its final rules.
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    \2\ Order on the Findings and Determination of the 39 U.S.C. 
3622 Review, December 1, 2017 (Order No. 4257).
    \3\ Notice of Proposed Rulemaking for the System for Regulating 
Rates and Classes for Market Dominant Products, December 1, 2017 
(Order No. 4258), 82 FR 58280 (December 11, 2017).
    \4\ Revised Notice of Proposed Rulemaking, December 5, 2019 
(Order No. 5337), 84 FR 67685 (December 11, 2019).
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III. Basis and Purpose of Final Rules

    Order No. 4257 concluded that while the ratemaking system had 
fulfilled some of the PAEA's goals, the overall system had not achieved 
the statutory objectives, taking into account the statutory factors. 
Order No. 4257 at 3-4. For ease of organization, the Commission's 
analysis grouped the PAEA's nine statutory objectives into three 
principal areas: (1) The structure of the ratemaking system; (2) the 
financial health of the Postal Service; and (3) service.
    For the first principal area, the Commission found that the 
ratemaking system had resulted in predictable and stable rates, in 
terms of timing and magnitude (Objective 2); that it had reduced 
administrative burden and increased transparency (Objective 6); that it 
had provided the Postal Service with pricing flexibility (Objective 4); 
and that it had, on balance, maintained just prices (Objective 8). Id. 
at 142-145. However, the Commission found that the ratemaking system 
had not increased pricing efficiency (Objective 1). Id. at 146. For the 
second principal area--the financial health of the Postal Service--the 
Commission found that while the ratemaking system had been sufficient 
to provide for mail security and terrorism deterrence (Objective 7); 
had provided a sufficient mechanism to allocate institutional costs 
between Market Dominant products and Competitive products (Objective 
9); and had generally enabled the Postal Service to achieve short-term 
financial stability, medium- and long-term financial stability had not 
been achieved (Objective 5). Id. at 247-249. The Commission also found 
that cost reductions and operational efficiency improvements were not 
sufficient to achieve overall financial stability and therefore not 
maximized (Objective 1). Id. at 184-194, 221-226. Likewise due to loss-
making products and classes, the Commission found the system did not

[[Page 81125]]

have an adequate mechanism to maintain reasonable rates (Objective 8). 
Id. at 226-236.
    Finally, for the third principal area--service (Objective 3)--the 
Commission found that service standards declined during the PAEA era 
because the Postal Service had reduced the high-quality service 
standards that were initially promulgated in 2007. Id. at 273.
    In light of the deficiencies described above and in response to the 
comments received from the NPR and Revised NPR, Order No. 5763 sets 
forth regulatory changes targeted to address the identified areas where 
the ratemaking system failed to achieve the objectives set forth in 
section 3622(b).
    To address obstacles to the Postal Service's ability to maintain 
financial health and target primary drivers of net losses, the 
Commission implements two mechanisms designed to provide additional 
revenue for costs outside the Postal Service's control. The first 
mechanism, designed to address consequences of mail density declines, 
modifies the price cap to provide additional rate adjustment authority 
equal to the density-driven portion of increases in average cost-per-
piece, as calculated under the Commission's formula. Order No. 5337 at 
70-71. The second mechanism, designed to address the Postal Service's 
retirement amortization payments, modifies the price cap to provide 
additional Market Dominant rate adjustment authority equal to the 
percentage by which total revenue \5\ would need to increase to provide 
sufficient revenue for the Postal Service to meet its required 
retirement obligation payments, as calculated under the Commission's 
formula. Id. at 96-97.
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    \5\ The retirement-based rate authority is not intended to 
provide full compensation. Instead, the formula calculates the 
revenue increase that would be required from all products (both 
Market Dominant and Competitive) and authorizes only the Market 
Dominant portion in this authority. The Postal Service, at its 
discretion, may implement an equivalent rate increase on Competitive 
products.
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    In the Revised NPR, the Commission proposed to provide an 
additional 1 percentage point of performance-based rate authority per 
mail class annually contingent on Postal Service achievement of 
distinct performance-based requirements for operational efficiency and 
service standard quality. Id. at 14. In the final rules, the Commission 
has elected to withdraw that proposed authority in response to 
commenter concerns. The Commission will open a separate rulemaking to 
further study potential modifications to the ratemaking system that 
link financial incentives and/or consequences to efficiency gains, cost 
reductions, and the maintenance of service standards. Order No. 5763 at 
21. For the purposes of transparency, the Commission adopts the 
following reporting requirements: The Postal Service, when it files its 
Annual Compliance Report (ACR), must provide the input data and 
calculations used to produce the annual total factor productivity 
estimates, and provide a description of and reason for any changes to 
the service standards (including relevant business rules), or certify 
that no changes have occurred. Id.
    The Commission also adopts rules relating to non-compensatory 
classes and products to address the system's failure to maintain 
reasonable rates and promote pricing efficiency.\6\ For non-
compensatory classes of mail, the Commission provides an additional 
rate authority of 2 percentage points per class and per fiscal year the 
Postal Service may use, with an aim to narrow the cost coverage gap of 
those classes over time. Id. at 159. For non-compensatory products, the 
Postal Service is restricted from reducing rates for those products and 
will be required to enact minimum product-level price increases for 
each non-compensatory product. Id. at 182. These restrictions are 
designed to stop the trend of declining cost coverage for these 
products and move cost coverage toward 100 percent. Id. at 186.
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    \6\ Non-compensatory classes are those classes whose 
attributable cost exceeds revenue; likewise non-compensatory 
products are those products whose attributable cost exceeds revenue.
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    Also to improve pricing efficiency, the Commission adopts rules 
intended to phase out two practices impeding pricing efficiency: 
Workshare discounts that are either set substantially below avoided 
costs or substantially above avoided costs. Id. at 197. With its ``do 
no harm principle,'' the Postal Service is restricted from changing 
workshare discounts set equal to avoided costs, from reducing workshare 
discounts set below avoided costs, and from increasing workshare 
discounts set above avoided costs. Id. at 19. A low workshare discount 
or an excessive workshare discount would be permitted if it were new, 
if it would represent an improvement of 20 percent over the existing 
workshare discount passthrough, or if it were set in accordance with a 
prior Commission order (via the proposed waiver process). Id. at 199. A 
low workshare discount would also be permitted if the proposed 
workshare discount would produce a passthrough of at least 85 percent. 
Id. Additionally, an excessive workshare discount would be permitted if 
it would be provided in connection with a subclass of mail (product), 
consisting exclusively of mail matter of educational, cultural, 
scientific, or informational (ECSI) value (39 U.S.C. 3622(e)(2)(C)) and 
accompanied by certain information to ensure transparency. Id.
    The final rules also include new annual reporting requirements 
intended to facilitate the tracking of costs and monitoring of the 
Postal Service's efforts to reduce costs. Id. at 228. The final rules 
require the Postal Service to provide information consisting of three 
separate components: (1) A consolidated cost analysis; (2) detailed 
information regarding planned and active large-scale cost-reduction 
initiatives; and (3) summary information pertaining to approved 
Decision Analysis Reports, which are internal Postal Service documents 
used to justify and obtain approval for certain proposed capital 
spending projects. Id.
    The Commission also modifies the schedule for regular and 
predictable rate adjustments by requiring the Postal Service to update 
it annually and provide certain information designed to increase 
transparency for mailers with regard to the Postal Service's planned 
price changes. Id. at 242. It will also extend the minimum notice 
period between the date the Postal Service filed a notice of proposed 
rate adjustment and the date the proposed rates could go into effect 
from 45 days to 90 days. Id. at 243. The final rules discontinue the 
practice that the Commission addresses the objectives and factors of 39 
U.S.C. 3622(b) and (c) in individual rate adjustment proceedings. Id. 
at 243-244.
    Finally, the rules provide for a 5-year review period for a 
holistic review of the effects of the Commission's rule changes. Id. at 
266. The Commission retains flexibility to adjust certain components of 
the system sooner than that if serious ill effects are evident. Id.

List of Subjects

39 CFR Part 3030

    Administrative practice and procedure, Fees, Postal Service.

39 CFR Part 3040

    Administrative practice and procedure, Foreign relations, Postal 
Service.

39 CFR Part 3045

    Administrative practice and procedure, Postal Service.

[[Page 81126]]

39 CFR Part 3050

    Administrative practice and procedure, Postal Service, Reporting 
and recordkeeping requirements.

39 CFR Part 3055

    Administrative practice and procedure, Reporting and recordkeeping 
requirements.

    By the Commission.
Erica A. Barker,
Secretary.

    For the reasons discussed in the preamble, the Commission amends 
chapter III of title 39 of the Code of Federal Regulations as follows:

0
1. Revise part 3030 to read as follows:

PART 3030--REGULATION OF RATES FOR MARKET DOMINANT PRODUCTS

Subpart A--General Provisions
Sec.
3030.100 Applicability.
3030.101 Definitions.
3030.102 Schedule for regular and predictable rate adjustments.
Subpart B--Rate Adjustments
3030.120 General.
3030.121 Postal Service rate adjustment filing.
3030.122 Contents of a rate adjustment filing.
3030.123 Supporting technical documentation.
3030.124 Docket and notice.
3030.125 Opportunity for comments.
3030.126 Proceedings.
3030.127 Maximum rate adjustment authority.
3030.128 Calculation of percentage change in rates.
3030.129 Exceptions for de minimis rate increases.
Subpart C--Consumer Price Index Rate Authority
3030.140 Applicability.
3030.141 CPI-U data source.
3030.142 CPI-U rate authority when rate adjustment filings are 12 or 
more months apart.
3030.143 CPI-U rate authority when rate adjustment filings are less 
than 12 months apart.
Subpart D--Density Rate Authority
3030.160 Applicability.
3030.161 Density calculation data sources.
3030.162 Calculation of density rate authority.
Subpart E--Retirement Obligation Rate Authority
3030.180 Definitions.
3030.181 Applicability.
3030.182 Retirement obligation data sources.
3030.183 Calculation of retirement obligation rate authority.
3030.184 Required minimum remittances.
3030.185 Forfeiture.
Subpart F--[Reserved]
Subpart G--Non-Compensatory Classes or Products
3030.220 Applicability.
3030.221 Individual product requirement.
3030.222 Class requirement and additional class rate authority.
Subpart H--Accumulation of Unused and Disbursement of Banked Rate 
Adjustment Authority
3030.240 General.
3030.241 Schedule of banked rate adjustment authority.
3030.242 Calculation of unused rate adjustment authority for rate 
adjustments that involve a rate increase which are filed 12 months 
apart or less.
3030.243 Calculation of unused rate adjustment authority for rate 
adjustments that involve a rate increase which are filed more than 
12 months apart.
3030.244 Calculation of unused rate adjustment authority for rate 
adjustments that only include rate decreases.
3030.245 Application of banked rate authority.
Subpart I--Rate Adjustments Due to Extraordinary and Exceptional 
Circumstances
3030.260 General.
3030.261 Contents of a rate adjustment filing.
3030.262 Supplemental information.
3030.263 Docket and notice.
3030.264 Public hearing.
3030.265 Opportunity for comments.
3030.266 Deadline for Commission decision.
3030.267 Treatment of banked rate adjustment authority.
Subpart J--Workshare Discounts
3030.280 Applicability.
3030.281 Calculation of passthroughs for workshare discounts.
3030.282 Increased pricing efficiency.
3030.283 Limitations on excessive discounts.
3030.284 Limitations on discounts below avoided cost.
3030.285 Proposal to adjust a rate associated with a workshare 
discount.
3030.286 Application for waiver.

    Authority: 39 U.S.C. 503; 3622.

Subpart A--General Provisions


Sec.  3030.100  Applicability.

    (a) The rules in this part implement provisions in 39 U.S.C. 
chapter 36, subchapter I, establishing the modern system of ratemaking 
for regulating rates and classes for market dominant products. The 
rules in this part are applicable whenever the Postal Service proposes 
to adjust a rate of general applicability for any market dominant 
product, which includes the addition of a new rate, the removal of an 
existing rate, or a change to an existing rate. Current rates may be 
found in the Mail Classification Schedule appearing on the Commission's 
website at www.prc.gov.
    (b) Rates may be adjusted either subject to the rules appearing in 
subpart B of this part, which includes a limitation on rate increases, 
or subject to the rules appearing in subpart I of this part, which does 
not include a limitation on rate increases but requires either 
extraordinary or exceptional circumstances. The rules applicable to the 
calculation of the limitations on rate increases appear in subparts C 
through H of this part. The rules for workshare discounts, which are 
applicable whenever market dominant rates are adjusted, appear in 
subpart J of this part.


Sec.  3030.101  Definitions.

    (a) The definitions in paragraphs (b) through (l) of this section 
apply to this part.
    (b) Annual limitation means the annual limitation on the percentage 
change in rates equal to the change in the Consumer Price Index for all 
Urban Consumers (CPI-U) unadjusted for seasonal variation over the most 
recently available 12-month period preceding the date the Postal 
Service files a request to review its notice of rate adjustment, as 
determined by the Commission.
    (c) Banked rate authority means unused rate adjustment authority 
accumulated for future use pursuant to the rules in this part.
    (d) A class of mail means the First-Class Mail, USPS Marketing 
Mail, Periodicals, Package Services, or Special Services groupings of 
market dominant Postal Service products or services. Generally, the 
regulations in this part are applicable to individual classes of mail.
    (e) Density rate authority means rate authority that is available 
to all classes to address the effects of decreases in density of mail.
    (f) Maximum rate adjustment authority means the maximum percentage 
change in rates available to a class for any planned increase in rates. 
It is the sum of: The consumer price index rate authority, and any 
available density rate authority, retirement obligation rate authority, 
banked rate authority, and rate authority applicable to non-
compensatory classes.
    (g) Rate authority applicable to non-compensatory classes means 
rate authority available to classes where revenue for each product 
within the class was insufficient to cover that product's attributable 
costs as determined by the Commission.
    (h) Rate cell means each and every separate rate identified as a 
rate of general applicability.

[[Page 81127]]

    (i) Rate incentive means a discount that is not a workshare 
discount and that is designed to increase or retain volume, improve the 
value of mail for mailers, or improve the operations of the Postal 
Service.
    (j) Rate of general applicability means a rate applicable to all 
mail meeting standards established by the Mail Classification Schedule, 
the Domestic Mail Manual, and the International Mail Manual. A rate is 
not a rate of general applicability if eligibility for the rate is 
dependent on factors other than the characteristics of the mail to 
which the rate applies, including the volume of mail sent by a mailer 
in a past year or years. A rate is not a rate of general applicability 
if it benefits a single mailer. A rate that is only available upon the 
written agreement of both the Postal Service and a mailer, a group of 
mailers, or a foreign postal operator is not a rate of general 
applicability.
    (k) Retirement obligation rate authority means rate authority that 
is available to all classes to provide revenue for remittance towards 
the statutorily mandated amortization payments for unfunded 
liabilities.
    (l) A seasonal or temporary rate is a rate that is in effect for a 
limited and defined period of time.


Sec.  3030.102  Schedule for regular and predictable rate adjustments.

    (a) The Postal Service shall develop a Schedule for Regular and 
Predictable Rate Adjustments applicable to rate adjustments subject to 
this part. The Schedule for Regular and Predictable Rate Adjustments 
shall:
    (1) Schedule rate adjustments at specific regular intervals of 
time;
    (2) Provide estimated filing and implementation dates (month and 
year) for future rate adjustments for each class of mail expected over 
a minimum of the next 3 years; and
    (3) Provide an explanation that will allow mailers to predict with 
reasonable accuracy, by class, the amounts of future scheduled rate 
adjustments.
    (b) The Postal Service shall file a current Schedule for Regular 
and Predictable Rate Adjustments annually with the Commission at the 
time of filing the Postal Service's section 3652 report (see Sec.  
3050.1(g) of this chapter). The Commission shall post the current 
schedule on the Commission's website at www.prc.gov.
    (c) Whenever the Postal Service deems it appropriate to change the 
Schedule for Regular and Predictable Rate Adjustments, it shall file a 
revised schedule.
    (d) The Postal Service may vary the magnitude of rate adjustments 
from those estimated by the Schedule for Regular and Predictable Rate 
Adjustments. In such case, the Postal Service shall provide an 
explanation for such variation with its rate adjustment filing.

Subpart B--Rate Adjustments


Sec.  3030.120  General.

    This subpart describes the process for the periodic adjustment of 
rates subject to the percentage limitations specified in Sec.  3030.127 
that are applicable to each class of mail.


Sec.  3030.121  Postal Service rate adjustment filing.

    (a) In every instance in which the Postal Service determines to 
exercise its statutory authority to adjust rates for a class of mail, 
the Postal Service shall comply with the requirements specified in 
paragraphs (b) through (d) of this section.
    (b) The Postal Service shall take into consideration how the 
planned rate adjustments are in accordance with the provisions of 39 
U.S.C. chapter 36.
    (c) The Postal Service shall provide public notice of its planned 
rate adjustments in a manner reasonably designed to inform the mailing 
community and the general public that it intends to adjust rates no 
later than 90 days prior to the planned implementation date of the rate 
adjustments.
    (d) The Postal Service shall file a request to review its notice of 
rate adjustment with the Commission no later than 90 days prior to the 
planned implementation date of the rate adjustment.


Sec.  3030.122  Contents of a rate adjustment filing.

    (a) A rate adjustment filing under Sec.  3030.121 shall include the 
items specified in paragraphs (b) through (j) of this section.
    (b) A representation or evidence that public notice of the planned 
changes has been issued or will be issued at least 90 days before the 
effective date(s) for the planned rate adjustments.
    (c) The intended effective date(s) of the planned rate adjustments.
    (d) A schedule of the planned rate adjustments, including a 
schedule identifying every change to the Mail Classification Schedule 
that will be necessary to implement the planned rate adjustments.
    (e) The identity of a responsible Postal Service official who will 
be available to provide prompt responses to requests for clarification 
from the Commission.
    (f) The supporting technical documentation as described in Sec.  
3030.123.
    (g) A demonstration that the planned rate adjustments are 
consistent with 39 U.S.C. 3626, 3627, and 3629.
    (h) A certification that all cost, avoided cost, volume, and 
revenue figures submitted with the rate adjustment filing are developed 
from the most recent applicable Commission accepted analytical 
principles.
    (i) For a rate adjustment that only includes a decrease in rates, a 
statement of whether the Postal Service elects to generate unused rate 
adjustment authority.
    (j) Such other information as the Postal Service believes will 
assist the Commission in issuing a timely determination of whether the 
planned rate adjustments are consistent with applicable statutory 
policies.


Sec.  3030.123  Supporting technical documentation.

    (a) Supporting technical documentation shall include the items 
specified in paragraphs (b) through (k) of this section, as applicable 
to the specific rate adjustment filing. This information must be 
supported by workpapers in which all calculations are shown and all 
relevant values (e.g., rates, CPI-U values, billing determinants) are 
identified with citations to original sources. The information must be 
submitted in machine-readable, electronic format. Spreadsheet cells 
must be linked to underlying data sources or calculations (not hard-
coded), as appropriate.
    (b) The maximum rate adjustment authority, by class, as summarized 
by Sec.  3030.127 and calculated separately for each of subparts C 
through H of this part, as appropriate.
    (c) A schedule showing the banked rate adjustment authority 
available, by class, and the available amount for each of the preceding 
5 years calculated as required by subpart H of this part.
    (d) The calculation of the percentage change in rates, by class, 
calculated as required by Sec.  3030.128.
    (e) The planned usage of rate adjustment authority, by class, and 
calculated separately for each of subparts C through H of this part, as 
appropriate.
    (f) The amount of new unused rate adjustment authority, by class, 
if any, that will be generated by the rate adjustment calculated as 
required by subpart H of this part, as applicable.
    (g) A schedule of the workshare discounts included with the planned 
rate adjustments, and a companion

[[Page 81128]]

schedule listing the avoided costs that underlie each such discount.
    (h) Whenever the Postal Service establishes a new workshare 
discount rate, it must include with its filing:
    (1) A statement explaining its reasons for establishing the 
workshare discount;
    (2) All data, economic analyses, and other information relied on to 
justify the workshare discount; and
    (3) A certification based on comprehensive, competent analyses that 
the discount will not adversely affect either the rates or the service 
levels of users of postal services who do not take advantage of the 
workshare discount.
    (i) Whenever the Postal Service establishes a new discount or 
surcharge rate it does not view as creating a workshare discount, it 
must include with its filing:
    (1) An explanation of the basis for its view that the discount or 
surcharge rate is not a workshare discount; and
    (2) A certification that the Postal Service applied accepted 
analytical principles to the discount or surcharge rate.
    (j) Whenever the Postal Service includes a rate incentive with its 
planned rate adjustment, it must include with its filing:
    (1) Whether the rate incentive is being treated under Sec.  
3030.128(f)(2) or under Sec.  3030.128(f)(1) and (g);
    (2) If the Postal Service seeks to include the rate incentive in 
the calculation of the percentage change in rates under Sec.  
3030.128(f)(2), whether the rate incentive is available to all mailers 
equally on the same terms and conditions; and
    (3) If the Postal Service seeks to include the rate incentive in 
the calculation of the percentage change in rates under Sec.  
3030.128(f)(2), sufficient information to demonstrate that the rate 
incentive is a rate of general applicability, which at a minimum 
includes: The terms and conditions of the rate incentive; the factors 
that determine eligibility for the rate incentive; a statement that 
affirms that the rate incentive will not benefit a single mailer; and a 
statement that affirms that the rate incentive is not only available 
upon the written agreement of both the Postal Service and a mailer, or 
group of mailers, or a foreign postal operator.
    (k) For each class or product where the attributable cost for that 
class or product exceeded the revenue from that class or product as 
determined by the Commission, a demonstration that the planned rate 
adjustments comply with the requirements in subpart G of this part.


Sec.  3030.124  Docket and notice.

    (a) The Commission will establish a docket for each rate adjustment 
filed by the Postal Service under Sec.  3030.121, promptly publish 
notice of the filing in the Federal Register, and post the filing on 
its website. The notice shall include the items specified in paragraphs 
(b) through (g) of this section.
    (b) The general nature of the proceeding.
    (c) A reference to legal authority under which the proceeding is to 
be conducted.
    (d) A concise description of the planned changes in rates, fees, 
and the Mail Classification Schedule.
    (e) The identification of an officer of the Commission to represent 
the interests of the general public in the docket.
    (f) A period of 30 days from the date of the filing for public 
comment.
    (g) Such other information as the Commission deems appropriate.


Sec.  3030.125  Opportunity for comments.

    Public comments should focus on whether planned rate adjustments 
comport with applicable statutory and regulatory requirements.


Sec.  3030.126  Proceedings.

    (a) If the Commission determines that the rate adjustment filing 
does not substantially comply with the requirements of Sec. Sec.  
3030.122 and 3030.123, the Commission may:
    (1) Inform the Postal Service of the deficiencies and provide an 
opportunity for the Postal Service to take corrective action;
    (2) Toll or otherwise modify the procedural schedule until such 
time the Postal Service takes corrective action;
    (3) Dismiss the rate adjustment filing without prejudice; or
    (4) Take other action as deemed appropriate by the Commission.
    (b) Within 21 days of the conclusion of the public comment period 
the Commission will determine whether the planned rate adjustments are 
consistent with applicable law and issue an order announcing its 
findings. Applicable law means only the applicable requirements of this 
part, Commission directives and orders, and 39 U.S.C. 3626, 3627, and 
3629.
    (c) If the planned rate adjustments are found consistent with 
applicable law, they may take effect.
    (d) If the planned rate adjustments are found inconsistent with 
applicable law, the Commission will notify and require the Postal 
Service to respond to any issues of noncompliance.
    (e) Following the Commission's notice of noncompliance, the Postal 
Service may submit an amended rate adjustment filing that describes the 
modifications to its planned rate adjustments that will bring its rate 
adjustments into compliance. An amended rate adjustment filing shall be 
accompanied by sufficient explanatory information to show that all 
deficiencies identified by the Commission have been corrected.
    (f) The Commission will allow a period of 10 days from the date of 
the amended rate adjustment filing for public comment.
    (g) The Commission will review the amended rate adjustment filing 
together with any comments filed for compliance and issue an order 
announcing its findings within 21 days after the comment period ends.
    (h) If the planned rate adjustments as amended are found to be 
consistent with applicable law, they may take effect. However, no 
amended rate shall take effect until 45 days after the Postal Service 
transmits its rate adjustment filing specifying that rate.
    (i) If the planned rate adjustments in an amended rate adjustment 
filing are found to be inconsistent with applicable law, the Commission 
shall explain the basis for its determination and suggest an 
appropriate remedy. Noncompliant rates may not go into effect.
    (j) A Commission finding that a planned rate adjustment is in 
compliance with the applicable requirements of this part, Commission 
directives and orders, and 39 U.S.C. 3626, 3627, and 3629 is decided on 
the merits. A Commission finding that a planned rate adjustment does 
not contravene other policies of 39 U.S.C. chapter 36, subchapter I, is 
provisional and subject to subsequent review.


Sec.  3030.127  Maximum rate adjustment authority.

    (a) The maximum rate adjustment authority available to the Postal 
Service for each class of market dominant mail is limited to the sum of 
the percentage points developed in subparts C through E and G through H 
of this part.
    (b) For any product where the attributable cost for that product 
exceeded the revenue from that product as determined by the Commission, 
rates may not be reduced.


Sec.  3030.128  Calculation of percentage change in rates.

    (a) For the purpose of calculating the percentage change in rates, 
the current rate is the rate in effect at the time of the rate 
adjustment filing under Sec.  3030.121 with the following exceptions:
    (1) A seasonal or temporary rate shall be identified and treated as 
a rate cell

[[Page 81129]]

separate and distinct from the corresponding non-seasonal or permanent 
rate. When used with respect to a seasonal or temporary rate, the 
current rate is the most recent rate in effect for the rate cell, 
regardless of whether the seasonal or temporary rate is available at 
the time of the rate adjustment filing.
    (2) When used with respect to a rate cell that corresponds to a 
rate incentive that was previously excluded from the calculation of the 
percentage change in rates, the current rate is the full undiscounted 
rate in effect for the rate cell at the time of the rate adjustment 
filing, not the discounted rate in effect for the rate cell at such 
time.
    (b) For the purpose of calculating the percentage change in rates, 
the volume for each rate cell shall be obtained from the most recently 
available 12 months of Postal Service billing determinants with the 
following permissible adjustments:
    (1) The Postal Service shall make reasonable adjustments to the 
billing determinants to account for the effects of classification 
changes such as the introduction, deletion, or redefinition of rate 
cells. The Postal Service shall identify and explain all adjustments. 
All information and calculations relied upon to develop the adjustments 
shall be provided together with an explanation of why the adjustments 
are appropriate.
    (2) Whenever possible, adjustments shall be based on known mail 
characteristics or historical volume data, as opposed to forecasts of 
mailer behavior.
    (3) For an adjustment accounting for the effects of the deletion of 
a rate cell when an alternate rate cell is not available, the Postal 
Service should adjust the billing determinants associated with the rate 
cell to 0. If the Postal Service does not adjust the billing 
determinants for the rate cell to 0, the Postal Service shall include a 
rationale for its treatment of the rate cell with the information 
required under paragraph (b)(1) of this section.
    (c) For a rate adjustment that involves a rate increase, for each 
class of mail and product within the class, the percentage change in 
rates is calculated in three steps. First, the volume of each rate cell 
in the class is multiplied by the planned rate for the respective cell 
and the resulting products are summed. Second, the same set of rate 
cell volumes is multiplied by the corresponding current rate for each 
cell and the resulting products are summed. Third, the percentage 
change in rates is calculated by dividing the results of the first step 
by the results of the second step and subtracting 1 from the quotient. 
The result is expressed as a percentage.
    (d) For rate adjustments that only involve a rate decrease, for 
each class of mail and product within the class, the percentage change 
in rates is calculated by amending the workpapers attached to the 
Commission's order relating to the most recent rate adjustment filing 
that involved a rate increase to replace the planned rates under the 
most recent rate adjustment filing that involves a rate increase with 
the corresponding planned rates applicable to the class from the rate 
adjustment filing involving only a rate decrease.
    (e) The formula for calculating the percentage change in rates for 
a class, described in paragraphs (c) and (d) of this section, is as 
follows:
[GRAPHIC] [TIFF OMITTED] TR15DE20.000

Where:

N = number of rate cells in the class.
i = denotes a rate cell (i = 1, 2, . . ., N).
Ri,n = planned rate of rate cell i.
Ri,c = current rate of rate cell i (for rate adjustment involving a 
rate increase) or rate from most recent rate adjustment involving a 
rate increase for rate cell i (for a rate adjustment only involving 
a rate decrease).
Vi = volume of rate cell i.

    (f)(1) Rate incentives may be excluded from a percentage change in 
rates calculation. If the Postal Service elects to exclude a rate 
incentive from a percentage change in rates calculation, the rate 
incentive shall be treated in the same manner as a rate under a 
negotiated service agreement (as described in paragraph (g) of this 
section).
    (2) A rate incentive may be included in a percentage change in 
rates calculation if it meets the following criteria:
    (i) The rate incentive is in the form of a discount or can be 
easily translated into a discount;
    (ii) Sufficient billing determinants are available for the rate 
incentive to be included in the percentage change in rate calculation 
for the class, which may be adjusted based on known mail 
characteristics or historical volume data (as opposed to forecasts of 
mailer behavior);
    (iii) The rate incentive is a rate of general applicability; and
    (iv) The rate incentive is made available to all mailers equally on 
the same terms and conditions.
    (g)(1) Mail volumes sent at rates under a negotiated service 
agreement or a rate incentive that is not a rate of general 
applicability are to be included in the calculation of the percentage 
change in rates under this section as though they paid the appropriate 
rates of general applicability. Where it is impractical to identify the 
rates of general applicability (e.g., because unique rate categories 
are created for a mailer), the volumes associated with the mail sent 
under the terms of the negotiated service agreement or the rate 
incentive that is not a rate of general applicability shall be excluded 
from the calculation of the percentage change in rates.
    (2) The Postal Service shall identify and explain all assumptions 
it makes with respect to the treatment of negotiated service agreements 
and rate incentives that are not rates of general applicability in the 
calculation of the percentage change in rates and provide the rationale 
for its assumptions.


Sec.  3030.129  Exceptions for de minimis rate increases.

    (a) The Postal Service may request that the Commission review a de 
minimis rate increase without immediately calculating the maximum rate 
adjustment authority or banking unused rate adjustment authority. For 
the exception in this paragraph (a) to apply, requests to review de 
minimis rate adjustments must be filed separately from any other 
request to review a rate adjustment filing.
    (b) Rate adjustments resulting in rate increases are de minimis if:
    (1) For each affected class, the rate increases do not result in 
the percentage change in rates for the class equaling or exceeding 
0.001 percent; and
    (2) For each affected class, the sum of all rate increases included 
in de minimis rate increases since the most recent rate adjustment 
resulting in a rate increase, or the most recent rate adjustment due to 
extraordinary and exceptional circumstances, that was not a de minimis 
rate increase does not result in the percentage change in rates

[[Page 81130]]

for the class equaling or exceeding 0.001 percent.
    (c) If the rate adjustments are de minimis, no unused rate 
adjustment authority will be added to the schedule of banked rate 
adjustment authority maintained under subpart G of this part as a 
result of the de minimis rate increase.
    (d) If the rate adjustments are de minimis, no rate decreases may 
be taken into account when determining whether rate increases comply 
with paragraphs (b)(1) and (2) of this section.
    (e) In the next rate adjustment filing proposing to increase rates 
for a class that is not a de minimis rate increase:
    (1) The maximum rate adjustment authority shall be calculated as if 
the de minimis rate increase had not been filed; and
    (2) For purposes of calculating the percentage change in rates, the 
current rate shall be the current rate from the de minimis rate 
increase.
    (f) The Postal Service shall file supporting workpapers with each 
request to review a de minimis rate increase that demonstrate that the 
sum of all rate increases included in de minimis rate increases since 
the most recent rate adjustment resulting in a rate increase that was 
not de minimis, or the most recent rate adjustment due to extraordinary 
and exceptional circumstances, does not result in a percentage change 
in rates for the class equaling or exceeding 0.001 percent.
    (g) For any product where the attributable cost for that product 
exceeded the revenue from that product as determined by the Commission, 
rates may not be reduced.

Subpart C--Consumer Price Index Rate Authority


Sec.  3030.140  Applicability.

    The Postal Service may adjust rates based upon changes in the 
Consumer Price Index for all Urban Consumers (CPI-U) identified in 
Sec.  3030.141. If rate adjustment filings involving rate increases are 
filed 12 or more months apart, rate adjustments are subject to a full 
year limitation calculated pursuant to Sec.  3030.142. If rate 
adjustment filings involving rate increases are filed less than 12 
months apart, rate adjustments are subject to a partial year limitation 
calculated pursuant to Sec.  3030.143.


Sec.  3030.141  CPI-U data source.

    The monthly CPI-U values needed for the calculation of rate 
adjustment limitations under this subpart shall be obtained from the 
Bureau of Labor Statistics (BLS) Consumer Price Index--All Urban 
Consumers, U.S. All Items, Not Seasonally Adjusted, Base Period 1982-84 
= 100. The current Series ID for the index is ``CUUR0000SA0.''


Sec.  3030.142  CPI-U rate authority when rate adjustment filings are 
12 or more months apart.

    (a) If a rate adjustment filing involving a rate increase is filed 
12 or more months after the most recent rate adjustment filing 
involving a rate increase, then the calculation of an annual limitation 
for the class (full year limitation) involves three steps. First, a 
simple average CPI-U index is calculated by summing the most recently 
available 12 monthly CPI-U values from the date of the rate adjustment 
filing and dividing the sum by 12 (Recent Average). Second, a second 
simple average CPI-U index is similarly calculated by summing the 12 
monthly CPI-U values immediately preceding the Recent Average and 
dividing the sum by 12 (Base Average). Third, the full year limitation 
is calculated by dividing the Recent Average by the Base Average and 
subtracting 1 from the quotient. The result is expressed as a 
percentage, rounded to three decimal places.
    (b) The formula for calculating a full year limitation for a rate 
adjustment filing filed 12 or more months after the last rate 
adjustment filing is as follows: Full Year Limitation = (Recent 
Average/Base Average)-1.


Sec.  3030.143  CPI-U rate authority when rate adjustment filings are 
less than 12 months apart.

    (a) If a rate adjustment filing involving a rate increase is filed 
less than 12 months after the most recent rate adjustment filing 
involving a rate increase, then the annual limitation for the class 
(partial year limitation) will recognize the rate increases that have 
occurred during the preceding 12 months. When the effects of those 
increases are removed, the remaining partial year limitation is the 
applicable restriction on rate increases.
    (b) The applicable partial year limitation is calculated in two 
steps. First, a simple average CPI-U index is calculated by summing the 
12 most recently available monthly CPI-U values from the date of the 
rate adjustment filing and dividing the sum by 12 (Recent Average). 
Second, the partial year limitation is then calculated by dividing the 
Recent Average by the Recent Average from the most recent previous rate 
adjustment filing (Previous Recent Average) applicable to each affected 
class of mail and subtracting 1 from the quotient. The result is 
expressed as a percentage, rounded to three decimal places.
    (c) The formula for calculating the partial year limitation for a 
rate adjustment filing filed less than 12 months after the last rate 
adjustment filing is as follows: Partial Year Limitation = (Recent 
Average/Previous Recent Average)-1.

Subpart D--Density Rate Authority


Sec.  3030.160  Applicability.

    (a) This subpart allocates rate authority to address the effects of 
decreases in the density of mail as measured by the sources identified 
in Sec.  3030.161. The calculation of the additional rate authority 
corresponding to the change in density is described in Sec.  3030.162.
    (b) The Postal Service shall file a notice with the Commission by 
December 31 of each year that calculates the amount of density rate 
authority that is eligible to be authorized under this subpart.
    (c) The Commission shall review the Postal Service's notice and 
determine how much, if any, rate authority will be authorized under 
this subpart. Any rate authority allocated under this subpart:
    (1) Shall be made available to the Postal Service as of the date of 
the Commission's determination;
    (2) Must be included in the calculation of the maximum rate 
adjustment authority in the first generally applicable rate adjustment 
filed after the Commission's determination; and
    (3) May be used to generate unused rate authority, if unused, 
within 12 months of the Commission's announcement.


Sec.  3030.161  Density calculation data sources.

    (a) The data needed for the calculation of the density rate 
authority in Sec.  3030.162 shall be obtained from the values reported 
by the Postal Service as specified in paragraphs (b) through (d) of 
this section. When both originally filed and annually revised data are 
available, the originally filed data shall be used. When the originally 
filed data are corrected through a refiling or in the Commission's 
Annual Compliance Determination report, the corrected version of the 
originally filed data shall be used.
    (b) Market dominant volume and total volume from the Revenue, 
Pieces, and Weight report, filed by the Postal Service under Sec.  
3050.25 of this chapter;
    (c) Institutional costs and total costs from the Cost and Revenue 
Analysis report, filed with the Postal Service's

[[Page 81131]]

section 3652 report (see Sec.  3050.1(g) of this chapter); and
    (d) The number of delivery points, from the input data used to 
produce the Total Factor Productivity estimates, filed with the Postal 
Service's section 3652 report.


Sec.  3030.162  Calculation of density rate authority.

    (a) Formulas. (1) The formula for calculating the amount of density 
rate authority, in conformance with paragraph (b)(1) of this section, 
is as follows:
[GRAPHIC] [TIFF OMITTED] TR15DE20.001

Where:

T = most recently completed fiscal year.
T-1 = fiscal year prior to fiscal year T.
ICT = institutional cost in fiscal year T.
TCT = total cost in fiscal year T.
%[Delta]D[T-1,T] = Percentage change in density from 
fiscal year T-1 to fiscal year T.

    (2) The formula for calculating the percentage change in density, 
in conformance with paragraph (b)(2) of this section, is as follows:
[GRAPHIC] [TIFF OMITTED] TR15DE20.002

Where:

T = most recently completed fiscal year.
T-1 = fiscal year prior to fiscal year T.
VT = volume in fiscal year T (either market dominant 
volume or total volume as discussed in paragraph (b)(2) of this 
section).
DPT = delivery points in fiscal year T.

    (b) Calculation. (1) The amount of density rate authority available 
under this section shall be calculated in three steps. First, the 
percentage change in density during the most recently completed fiscal 
year shall be calculated using the formula in paragraph (a)(2) of this 
section as described in paragraph (b)(2) of this section. Second, this 
percentage change shall be multiplied by the institutional cost ratio, 
which is calculated as institutional costs for the most recently 
completed fiscal year divided by total costs for that fiscal year. 
Finally, this product shall be multiplied by negative 1 so that 
declines in density correspond to a positive increase in rates. If the 
result of this calculation is less than 0, the amount of additional 
rate authority shall be 0.
    (2) The percentage change in density from the prior fiscal year 
shall be calculated as the ratio of volume to delivery points for the 
most recently completed fiscal year, divided by the same ratio for the 
prior fiscal year, and subtracting 1 from the quotient. The result is 
expressed as a percentage, rounded to three decimal places. To ensure 
that decreases in competitive product volume will not result in the 
Postal Service receiving greater additional rate adjustment authority 
under this subpart, the percentage change in density shall be 
calculated two ways: Using market dominant volume and using total 
volume. The greater of the two results (not using absolute value) shall 
be used as the percentage change in density from the prior fiscal year.

Subpart E--Retirement Obligation Rate Authority


Sec.  3030.180  Definitions.

    (a) The definitions in paragraphs (b) through (e) of this section 
apply to this subpart.
    (b) Amortization payments mean the amounts that the Postal Service 
is invoiced by the U.S. Office of Personnel Management to provide for 
the liquidation of the specific and supplemental unfunded liabilities 
by statutorily predetermined dates, as described in Sec.  3030.182(a).
    (c) Phase-in period means the period of time spanning the fiscal 
years of issuance of the first five determinations following January 
14, 2021, as specified by the timing provisions in Sec.  3030.181.
    (d) Required minimum remittance means the minimum amount the Postal 
Service is required to remit during a particular fiscal year, as 
calculated under Sec.  3030.184.
    (e) Revenue collected under this subpart means the amount of 
revenue collected during a fiscal year as a result of all previous rate 
increases authorized under this subpart, as calculated under Sec.  
3030.184.


Sec.  3030.181  Applicability.

    (a) This subpart allocates additional rate authority to provide the 
Postal Service with revenue for remittance towards the statutorily 
mandated amortization payments for supplemental and unfunded 
liabilities identified in Sec.  3030.182. As described in Sec.  
3030.184, for retirement obligation rate authority to be made 
available, the Postal Service must annually remit towards these 
amortization payments all revenue collected under this subpart 
previously. The full retirement obligation rate authority, calculated 
as described in Sec.  3030.183, shall be phased in over 5 fiscal years, 
taking into account changes in volume during the phase-in period. If 
combined with an equal rate increase on Competitive products, the 
compounded rate increase resulting from retirement obligation rate 
authority is calculated to generate sufficient additional revenue at 
the end of the phase-in period to permit the Postal Service to remit 
the entire invoiced amount of its amortization payments.
    (b) Until the conclusion of the phase-in period, the Postal Service 
shall file a notice with the Commission by December 31 of each year 
that calculates the amount of retirement obligation rate authority that 
is eligible to be authorized under this subpart.
    (c) The Commission shall review the Postal Service's notice and 
determine how much, if any, rate authority will be authorized under 
this subpart. Any rate authority allocated under this subpart:
    (1) Shall be made available to the Postal Service as of the date of 
the Commission's determination;
    (2) Must be included in the calculation of the maximum rate 
adjustment authority in the first generally applicable rate adjustment

[[Page 81132]]

filed after the Commission's determination;
    (3) Shall lapse if not used in the first generally applicable rate 
adjustment filed after the Commission's determination;
    (4) Shall lapse if unused, within 12 months of the Commission's 
determination, however this paragraph (c)(4) shall not prohibit the 
Postal Service from making a stand-alone adjustment to one or two 
generally applicable rate cells, if such a case were to be followed by 
a broader rate adjustment in the class later in the same fiscal year; 
and
    (5) May not be used to generate unused rate authority, nor shall it 
affect existing banked rate authority.


Sec.  3030.182  Retirement obligation data sources.

    (a) The amounts of the amortization payments needed for the 
calculation of retirement obligation rate adjustment authority in Sec.  
3030.183 shall be obtained from notifications to the Postal Service by 
the Office of Personnel Management of annual determinations of the 
funding amounts specific to payments at the end of each fiscal year for 
Retiree Health Benefits as computed under 5 U.S.C. 8909a(d)(2)(B) and 
(d)(3)(B)(ii); the Civil Service Retirement System as computed under 5 
U.S.C. 8348(h)(2)(B); and the Federal Employees Retirement System as 
computed under 5 U.S.C. 8423(b)(1)(B), (b)(2), and (b)(3)(B), filed 
with the Postal Service's section 3652 report.
    (b) The values for market dominant revenue, total revenue and 
market dominant volumes needed for the calculation of retirement 
obligation rate authority in Sec.  3030.183 shall be obtained from 
values reported in the Revenue, Pieces, and Weight report, filed by the 
Postal Service under Sec.  3050.25 of this chapter.
    (c) The values for additional rate authority previously provided 
under this subpart, if any, needed for the calculation of retirement 
obligation rate authority in Sec.  3030.183 and the calculation of 
required minimum remittances under Sec.  3030.184 shall be obtained 
from the Commission's prior determinations.


Sec.  3030.183  Calculation of retirement obligation rate authority.

    (a) Formulas. (1) The formula for calculating the amount of 
retirement obligation rate authority available under this subpart, 
described in paragraph (b)(1) of this section, is as follows:
[GRAPHIC] [TIFF OMITTED] TR15DE20.003

Where:

T = most recently completed fiscal year.
APT = total amortization payment for fiscal year T.
TRT = total revenue in fiscal year T.
PARAT = previously authorized retirement obligation rate 
authority, compounded through fiscal year T, expressed as a 
proportion of the market dominant rate base and calculated using the 
formula in paragraph (a)(2) of this section as described in 
paragraph (b)(2) of this section.
N = number of previously issued determinations in which retirement 
obligation rate authority was made available under this subpart.

    (2) The formula for calculating the amount of previously authorized 
retirement obligation rate authority through fiscal year T, described 
in paragraph (b)(2) of this section, is as follows:
[GRAPHIC] [TIFF OMITTED] TR15DE20.004

Where:

T = most recently completed fiscal year.
rt = retirement obligation rate authority authorized in 
fiscal year T.
N = number of previously issued determinations in which retirement 
obligation rate authority was made available under this subpart.

    (b) Calculations. (1) The amount of retirement obligation rate 
authority available for a fiscal year shall be calculated in four 
steps. First, the ratio of the total amortization payment for the 
fiscal year under review to the total revenue in the fiscal year under 
review shall be added to 1. This sum represents the factor by which an 
equal increase in market dominant and competitive rates in the fiscal 
year under review would generate sufficient additional revenue to make 
the full amortization payment. It does not account, however, for any 
previous rate authority authorized under this subpart. The second step 
is therefore to subtract the proportion of the market dominant rate 
base resulting from previously authorized retirement obligation rate 
authority. That proportion is calculated using the formula in paragraph 
(a)(2) of this section as described in paragraph (b)(2) of this 
section. Third, to amortize the resulting amount of retirement 
obligation rate authority over the remainder of the phase-in period, 
the difference shall be raised to the power of the inverse of the 
number of determinations remaining in the phase-in period, including 
the current determination. Finally, 1 shall be subtracted from the 
result to convert from a proportional change in rates to a percentage 
of rate adjustment authority.
    (2) The amount of previously authorized retirement obligation rate 
authority shall be calculated in two steps. First, the sums of 1 and 
the amount of retirement obligation rate authority authorized in each 
of the previous fiscal years shall be multiplied together. This product 
represents the compounded amount of such rate authority, expressed as a 
net rate increase. To express this product as a proportion of the 
market dominant rate base, the second step is to subtract the inverse 
of this product from 1.

[[Page 81133]]

Sec.  3030.184  Required minimum remittances.

    (a) Minimum remittances. During each fiscal year subsequent to 
January 14, 2021, the Postal Service shall remit towards the 
liabilities identified in Sec.  3030.182 an amount equal to or greater 
than the amount of revenue collected as a result of all previous rate 
increases under this subpart during the previous fiscal year, as 
calculated using the formulas in paragraph (b) of this section, as 
described in paragraph (c) of this section.
    (b) Formulas. (1) The formula for calculating the amount of revenue 
collected under this subpart during a fiscal year, described in 
paragraph (c)(1) of this section, is as follows:
[GRAPHIC] [TIFF OMITTED] TR15DE20.005

Where:

T = most recently completed fiscal year.
MDRT = market dominant revenue in fiscal year T.
N = number of previously issued determinations in which retirement 
obligation rate authority was made available under this subpart.
rt = retirement obligation rate authority authorized in 
fiscal year t.
pt = prorated fraction of rt that was in 
effect during fiscal year T, calculated using the formula in 
paragraph (b)(2) of this section, as described in paragraph (c)(2) 
of this section.

    (2) The formula for calculating the prorated fraction of retirement 
obligation rate authority authorized in a particular fiscal year t that 
was in effect during the most recently completed fiscal year, described 
in paragraph (c)(2) of this section, is as follows:
[GRAPHIC] [TIFF OMITTED] TR15DE20.006

Where:
T = most recently completed fiscal year.
rt = retirement obligation rate authority authorized 
under this subpart in fiscal year t.
Q = the number of the quarter during the fiscal year of the 
effective date of the price increase including retirement obligation 
rate authority made available under this subpart.
EQ = number of days in quarter Q subsequent to and 
including the effective date of the price increase.
DQ = total number of days in quarter Q.
QMDVQ = market dominant volume in quarter Q.
MDVT = market dominant volume in fiscal year T.

    (c) Calculations. (1) The amount of revenue collected under this 
subpart during a fiscal year, as calculated by the formula in paragraph 
(b)(1) of this section, shall be calculated in three steps. First, the 
sums of 1 and the amount of retirement obligation rate authority made 
available under this subpart during each previous fiscal year--prorated 
to account for mid-year price increases as described in paragraph 
(b)(2) of this section--shall be multiplied together. This product 
represents the proportion by which prices were higher during the most 
recently completed fiscal year as a result of retirement obligation 
rate authority. Second, to express this net price increase as a 
proportion of market dominant revenue, the inverse of this product 
shall be subtracted from 1. Finally, the result shall be multiplied by 
market dominant revenue for the fiscal year to change the proportion 
into a dollar amount.
    (2)(i) The prorated fraction of retirement obligation rate 
authority authorized in a particular fiscal year that was in effect 
during the most recently completed fiscal year, as calculated by the 
formula in paragraph (b)(2) of this section, shall be a piecewise 
function of three parts. First, if the retirement obligation rate 
authority authorized in a particular year was not in effect during the 
most recently completed fiscal year, the prorated fraction shall be 0. 
Second, if the retirement obligation rate authority authorized in a 
particular year was in effect during the entirety of the most recently 
completed fiscal year, the prorated fraction shall be 1. Finally, if 
the retirement obligation rate authority authorized in a particular 
fiscal year was used to raise prices during the most recently completed 
fiscal year, the prorated fraction shall be the proportion of volume 
sent during the fiscal year after that rate increase went into effect.
    (ii) The proportion in paragraph (c)(2)(i) of this section shall be 
calculated in four steps. First, the number of days of the fiscal 
quarter after and including the effective date of the price adjustment 
including the retirement obligation rate authority shall be divided by 
the total number of days in that fiscal quarter. This quotient 
determines the proportion of days in that quarter in which the higher 
rates were in effect. Second, that quotient shall be multiplied by the 
market dominant volume from that fiscal quarter to determine the amount 
of volume during the quarter receiving the higher rates. Third, that 
product shall be added to the market dominant volume from any 
subsequent quarters of the fiscal year because the volume in those 
quarters was also sent under the higher rates. Finally, this sum shall 
be divided by the total market dominant volume from the fiscal year to 
determine the proportion of annual volume sent after the rate increase 
went into effect.


Sec.  3030.185  Forfeiture.

    (a) If any of the circumstances described in paragraphs (b) through 
(d)

[[Page 81134]]

of this section occur, the Postal Service shall not be eligible for 
future retirement obligation rate authority under this subpart, and the 
Commission may commence additional proceedings as appropriate.
    (b) If, subsequent to March 1, 2021, and prior to the end of the 
phase-in period, the Postal Service fails to timely file the notice 
required under Sec.  3030.181(b);
    (c) In any fiscal year in which retirement obligation rate 
authority was determined to be available under this subpart, the Postal 
Service fails to timely file under Sec.  3030.122 for a rate increase 
including the full amount of retirement obligation rate authority 
authorized under this subpart during that fiscal year, to take effect 
prior to the end of that fiscal year; or
    (d) In any fiscal year including or subsequent to the first fiscal 
year in which rate authority under this subpart was used to adjust 
market dominant rates, the Postal Service's total payments towards the 
supplemental and unfunded liabilities identified in Sec.  3030.182 are 
not equal to or greater than the minimum remittance required for that 
fiscal year under Sec.  3030.184(a).

Subpart F--[Reserved]

Subpart G--Non-compensatory Classes or Products


Sec.  3030.220  Applicability.

    This subpart is applicable to a class or product where the 
attributable cost for that class or product exceeded the revenue from 
that class or product as determined by the Commission. Section 3030.221 
is applicable where the attributable cost for a product within a class 
exceeded the revenue from that particular product where the product is 
classified within a class where the overall class revenue exceeded the 
attributable cost for that class. Section 3030.222 is applicable where 
the attributable cost for an entire class exceeded the revenue from 
that class.


Sec.  3030.221  Individual product requirement.

    Whenever the Postal Service files a rate adjustment filing 
affecting a class of mail which includes a product where the 
attributable cost for that product exceeded the revenue from that 
product, as determined by the Commission, the Postal Service shall 
increase the rates for each non-compensatory product by a minimum of 2 
percentage points above the percentage increase for that class. This 
section does not create additional rate authority applicable to any 
class of mail. This section only applies to products classified within 
classes for which the overall class revenue exceeded the attributable 
cost for that class. This section does not apply to a non-compensatory 
product for which the Commission has determined that the Postal Service 
lacks independent authority to set rates (such as rates set by treaty 
obligation).


Sec.  3030.222  Class requirement and additional class rate authority.

    (a) This section provides 2 percentage points of additional rate 
authority for any class of mail where the attributable cost for that 
class exceeded the revenue from that class as determined by the 
Commission. This additional rate authority is optional and may be used 
at the Postal Service's discretion.
    (b) The Commission shall announce how much, if any, rate authority 
will be authorized under this subpart. Any rate authority allocated 
under this subpart:
    (1) Shall be made available to the Postal Service as of the date of 
the Commission's announcement;
    (2) Must be included in the calculation of the maximum rate 
adjustment authority change in rates in the first generally applicable 
rate adjustment filed after the Commission's announcement; and
    (3) May be used to generate unused rate authority, if unused, 
within 12 months of the Commission's announcement.

Subpart H--Accumulation of Unused and Disbursement of Banked Rate 
Adjustment Authority


Sec.  3030.240  General.

    Unless a specific exception applies, unused rate adjustment 
authority, on a class-by-class basis, shall be calculated for each rate 
adjustment filing. Unused rate adjustment authority shall be added to 
the schedule of banked rate authority in each instance, and be 
available for application to rate adjustments pursuant to the 
requirements of this subpart.


Sec.  3030.241  Schedule of banked rate adjustment authority.

    Upon the establishment of unused rate adjustment authority, the 
Postal Service shall devise and maintain a schedule that tracks the 
establishment and subsequent use of banked rate authority on a class-
by-class basis. At a minimum, the schedule must track the amount of 
banked rate authority available immediately prior to the rate 
adjustment filing and the amount of banked rate authority available 
upon acceptance of the rates included in the rate adjustment filing. It 
shall also track all changes to the schedule, including the docket 
numbers of Commission decisions affecting the schedule, the dates and 
amounts that any rate authority was generated or subsequently expended, 
and the expiration dates of all rate adjustment authority. The schedule 
shall be included with any rate adjustment filing purporting to modify 
the amount of banked rate adjustment authority.


Sec.  3030.242  Calculation of unused rate adjustment authority for 
rate adjustments that involve a rate increase which are filed 12 months 
apart or less.

    (a) When rate adjustment filings that involve a rate increase are 
filed 12 months apart or less, unused rate adjustment authority for a 
class is equal to the difference between the maximum rate adjustment 
authority as summarized by Sec.  3030.127 and calculated pursuant to 
subparts C through G of this part and this subpart, as appropriate, and 
the percentage change in rates for the class calculated pursuant to 
Sec.  3030.128, subject to the limitations described in paragraph (b) 
of this section.
    (b) For rate adjustment filings that involve a rate increase, 
unused rate adjustment authority cannot exceed the unused portion of 
rate authority calculated pursuant to subparts C and D of this part and 
Sec.  3030.222.


Sec.  3030.243  Calculation of unused rate adjustment authority for 
rate adjustments that involve a rate increase which are filed more than 
12 months apart.

    (a) When rate adjustment filings that involve a rate increase are 
filed more than 12 months apart, any interim rate adjustment authority 
must first be added to the schedule of banked rate authority before the 
unused rate adjustment authority is calculated.
    (b) Interim rate adjustment authority for a class is equal to the 
Base Average applicable to the second rate adjustment filing (as 
developed pursuant to Sec.  3030.142) divided by the Recent Average 
utilized in the first rate adjustment filing (as developed pursuant to 
Sec.  3030.142) and subtracting 1 from the quotient. The result is 
expressed as a percentage and immediately added to the schedule of 
banked rate authority as of the date the rate adjustment filing is 
filed. If the Commission announces that rate authority calculated 
pursuant to subpart D of this part or Sec.  3030.222 are available and 
no rate adjustment is filed before the Commission subsequently 
announces that further rate authority calculated pursuant to subpart D 
of this part or Sec.  3030.222 are available, then the amount of rate 
authority calculated pursuant to subpart D of this part and Sec.  
3030.222 in the first Commission

[[Page 81135]]

announcement shall be added to the interim rate adjustment authority.
    (c) Unused rate adjustment authority for a class is equal to the 
difference between the maximum rate adjustment authority as summarized 
by Sec.  3030.127 and calculated pursuant to subparts C through G of 
this part and this subpart, as appropriate, and the percentage change 
in rates for the class calculated pursuant to Sec.  3030.128, subject 
to the limitations described in paragraph (d) of this section.
    (d) For rate adjustment filings that involve a rate increase, 
unused rate adjustment authority cannot exceed the unused portion of 
rate authority calculated pursuant to subparts C and D of this part and 
Sec.  3030.222.


Sec.  3030.244  Calculation of unused rate adjustment authority for 
rate adjustments that only include rate decreases.

    (a) For rate adjustment filings that only include rate decreases, 
unused rate adjustment authority for a class is calculated in two 
steps. First, the difference between the maximum rate adjustment 
authority as summarized by Sec.  3030.127 and calculated pursuant to 
subparts C through G of this part and this subpart, as appropriate, for 
the most recent rate adjustment that involves a rate increase and the 
percentage change in rates for the class calculated pursuant to Sec.  
3030.128(d) is calculated. Second, the unused rate adjustment authority 
generated in the most recent rate adjustment that involves a rate 
increase is subtracted from that result.
    (b) Unused rate adjustment authority generated under paragraph (a) 
of this section for a class shall be added to the unused rate 
adjustment authority generated in the most recent rate adjustment that 
involves a rate increase on the schedule maintained under Sec.  
3030.241. For purposes of this section, the unused rate adjustment 
authority generated under paragraph (a) of this section for a class 
shall be deemed to have been added to the schedule maintained under 
Sec.  3030.241 on the same date as the most recent rate adjustment 
filing that involves a rate increase.
    (c) For rate adjustment filings that only include rate decreases, 
the sum of unused rate adjustment authority generated under paragraph 
(a) of this section and the unused rate adjustment authority generated 
in the most recent rate adjustment that involves a rate increase cannot 
exceed the unused portion of rate adjustment authority calculated 
pursuant to subparts C and D of this part and Sec.  3030.222 in the 
most recent rate adjustment that involves a rate increase.
    (d) Unused rate adjustment authority generated under paragraph (a) 
of this section shall be subject to the limitation under Sec.  
3030.245, regardless of whether it is used alone or in combination with 
other existing unused rate adjustment authority.
    (e) For rate adjustment filings that only include rate decreases, 
unused rate adjustment authority generated under this section lapses 5 
years from the date of filing of the most recent rate adjustment filing 
that involves a rate increase.
    (f) A rate adjustment filing that only includes rate decreases that 
is filed immediately after a rate adjustment due to extraordinary or 
exceptional circumstances (i.e., without an intervening rate adjustment 
involving a rate increase) may not generate unused rate adjustment 
authority.


Sec.  3030.245  Application of banked rate authority.

    (a) Banked rate authority may be applied to any planned rate 
adjustment subject to the limitations appearing in paragraphs (b) 
through (f) of this section.
    (b) Banked rate authority may only be applied to a proposal to 
adjust rates after applying rate authority as described in subparts C 
through F of this part and in Sec.  3030.222.
    (c) A maximum of 2 percentage points of banked rate authority may 
be applied to a rate adjustment for any class in any 12-month period. 
If banked rate authority is used, it shall be subtracted from the 
schedule of banked rate adjustment authority as of the date of the 
final order accepting the rates.
    (d) Subject to paragraphs (b) and (c) of this section, interim rate 
adjustment authority may be used to make a rate adjustment pursuant to 
the rate adjustment filing that led to its calculation. If interim rate 
adjustment authority is used to make such a rate adjustment, the 
interim rate adjustment authority generated pursuant to the rate 
adjustment filing shall first be added to the schedule of banked rate 
adjustment authority pursuant to Sec.  3030.241 as the most recent 
entry. Then, any interim rate adjustment authority used in accordance 
with this paragraph (d) shall be subtracted from the existing banked 
rate adjustment authority using a first-in, first-out (FIFO) method, 
beginning 5 years before the instant rate adjustment filing.
    (e) Banked rate authority for a class must be applied, using a 
first-in, first-out (FIFO) method, beginning 5 years before the instant 
rate adjustment filing.
    (f) Banked rate adjustment authority calculated under this section 
shall lapse 5 years from the date of the rate adjustment filing leading 
to its calculation.

Subpart I--Rate Adjustments Due to Extraordinary and Exceptional 
Circumstances


Sec.  3030.260  General.

    The Postal Service may request to adjust rates for market dominant 
products due to extraordinary or exceptional circumstances pursuant to 
39 U.S.C. 3622(d)(1)(E). The rate adjustments are not subject to rate 
adjustment limitations or the restrictions on the use of unused rate 
adjustment authority. The rate adjustment request may not include 
material classification changes. The request is subject to public 
participation and Commission review within 90 days.


Sec.  3030.261  Contents of a rate adjustment filing.

    (a) Each exigent request shall include the items specified in 
paragraphs (b) through (i) of this section.
    (b) A schedule of the planned rates.
    (c) Calculations quantifying the increase for each affected product 
and class.
    (d) A full discussion of the extraordinary or exceptional 
circumstances giving rise to the request, and a complete explanation of 
how both the requested overall increase and the specific rate 
adjustments requested relate to those circumstances.
    (e) A full discussion of why the requested rate adjustments are 
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.
    (f) A full discussion of why the requested rate adjustments are 
reasonable and equitable as among types of users of market dominant 
products.
    (g) An explanation of when, or under what circumstances, the Postal 
Service expects to be able to rescind the exigent rate adjustments in 
whole or in part.
    (h) An analysis of the circumstances giving rise to the exigent 
request, which should, if applicable, include a discussion of whether 
the circumstances were foreseeable or could have been avoided by 
reasonable prior action.
    (i) Such other information as the Postal Service believes will 
assist the Commission in issuing a timely determination of whether the 
requested rate adjustments are consistent with applicable statutory 
policies.

[[Page 81136]]

Sec.  3030.262  Supplemental information.

    The Commission may require the Postal Service to provide 
clarification of its request or to provide additional information in 
order to gain a better understanding of the circumstances leading to 
the request or the justification for the specific rate adjustments 
requested. The Postal Service shall include within its request the 
identification of one or more knowledgeable Postal Service official(s) 
who will be available to provide prompt responses to Commission 
requests for clarification or additional information.


Sec.  3030.263  Docket and notice.

    (a) The Commission will establish a docket for each request to 
adjust rates due to extraordinary or exceptional circumstances, publish 
notice of the request in the Federal Register, and post the filing on 
its website. The notice shall include the items specified in paragraphs 
(b) through (g) of this section.
    (b) The general nature of the proceeding.
    (c) A reference to legal authority under which the proceeding is to 
be conducted.
    (d) A concise description of the proposals for changes in rates, 
fees, and the Mail Classification Schedule.
    (e) The identification of an officer of the Commission to represent 
the interests of the general public in the docket.
    (f) A specified period for public comment.
    (g) Such other information as the Commission deems appropriate.


Sec.  3030.264  Public hearing.

    (a) The Commission will hold a public hearing on the Postal 
Service's request. During the public hearing, responsible Postal 
Service officials will appear and respond under oath to questions from 
the Commissioners or their designees addressing previously identified 
aspects of the Postal Service's request and supporting information.
    (b) Interested persons will be given an opportunity to submit to 
the Commission suggested relevant questions that might be posed during 
the public hearing. Such questions, and any explanatory materials 
submitted to clarify the purpose of the questions, should be filed in 
accordance with Sec.  3010.120 of this chapter, and will become part of 
the administrative record of the proceeding.
    (c) The timing and length of the public hearing will depend on the 
nature of the circumstances giving rise to the request and the clarity 
and completeness of the supporting materials provided with the request.
    (d) If the Postal Service is unable to provide adequate 
explanations during the public hearing, supplementary written or oral 
responses may be required.


Sec.  3030.265  Opportunity for comments.

    (a) Following the conclusion of the public hearings and submission 
of any supplementary materials, interested persons will be given the 
opportunity to submit written comments on:
    (1) The sufficiency of the justification for an exigent rate 
adjustment;
    (2) The adequacy of the justification for adjustments in the 
amounts requested by the Postal Service; and
    (3) Whether the specific rate adjustments requested are reasonable 
and equitable.
    (b) An opportunity to submit written reply comments will be given 
to the Postal Service and other interested persons.


Sec.  3030.266  Deadline for Commission decision.

    Requests under this subpart seek rate relief required by 
extraordinary or exceptional circumstances and will be treated with 
expedition at every stage. It is Commission policy to provide 
appropriate relief as quickly as possible consistent with statutory 
requirements and procedural fairness. The Commission will act 
expeditiously on the Postal Service's request, taking into account all 
written comments. In every instance, a Commission decision will be 
issued within 90 days of the filing of an exigent request.


Sec.  3030.267  Treatment of banked rate adjustment authority.

    (a) Each request will identify the banked rate adjustment authority 
available as of the date of the request for each class of mail and the 
available amount for each of the preceding 5 years.
    (b) Rate adjustments may use existing banked rate adjustment 
authority in amounts greater than the limitations described in Sec.  
3030.245.
    (c) Increases will exhaust all banked rate adjustment authority for 
each class of mail before imposing additional rate adjustments in 
excess of the maximum rate adjustment for any class of mail.

Subpart J--Workshare Discounts


Sec.  3030.280  Applicability.

    This subpart is applicable whenever the Postal Service proposes to 
adjust a rate associated with a workshare discount. For the purpose of 
this subpart, the cost avoided by the Postal Service for not providing 
the applicable service refers to the amount identified in the most 
recently applicable Annual Compliance Determination, unless the 
Commission otherwise provides.


Sec.  3030.281  Calculation of passthroughs for workshare discounts.

    For the purpose of this subpart, the percentage passthrough for any 
workshare discount shall be calculated by dividing the workshare 
discount by the cost avoided by the Postal Service for not providing 
the applicable service and expressing the result as a percentage.


Sec.  3030.282  Increased pricing efficiency.

    (a) For a workshare discount that is equal to the cost avoided by 
the Postal Service for not providing the applicable service, no 
proposal to adjust a rate associated with that workshare discount may 
change the size of the discount.
    (b) For a workshare discount that exceeds the cost avoided by the 
Postal Service for not providing the applicable service, no proposal to 
adjust a rate associated with that workshare discount may increase the 
size of the discount.
    (c) For a workshare discount that is less than the cost avoided by 
the Postal Service for not providing the applicable service, no 
proposal to adjust a rate associated with that workshare discount may 
decrease the size of the discount.


Sec.  3030.283  Limitations on excessive discounts.

    (a) No proposal to adjust a rate may set a workshare discount that 
would exceed the cost avoided by the Postal Service for not providing 
the applicable service, unless at least one of the following reasons 
provided in paragraphs (b) through (e) of this section applies.
    (b) The proposed workshare discount is associated with a new postal 
service, a change to an existing postal service, or a new workshare 
initiative.
    (c) The proposed workshare discount is a minimum of 20 percent less 
than the existing workshare discount.
    (d) The proposed workshare discount is set in accordance with a 
Commission order issued pursuant to Sec.  3030.286.
    (e) The proposed workshare discount is provided in connection with 
a subclass of mail, consisting exclusively of mail matter of 
educational, cultural, scientific, or informational value (39 U.S.C. 
3622(e)(2)(C)) and is in compliance with Sec.  3030.285(c).


Sec.  3030.284  Limitations on discounts below avoided cost.

    (a) No proposal to adjust a rate may set a workshare discount that 
would be below the cost avoided by the Postal

[[Page 81137]]

Service for not providing the applicable service, unless at least one 
of the following reasons provided in paragraphs (b) through (e) of this 
section applies.
    (b) The proposed workshare discount is associated with a new postal 
service, a change to an existing postal service, or a new workshare 
initiative.
    (c) The proposed workshare discount is a minimum of 20 percent more 
than the existing workshare discount.
    (d) The proposed workshare discount is set in accordance with a 
Commission order issued pursuant to Sec.  3030.286.
    (e) The percentage passthrough for the proposed workshare discount 
is at least 85 percent.


Sec.  3030.285  Proposal to adjust a rate associated with a workshare 
discount.

    (a) Each proposal to adjust a rate associated with a workshare 
discount shall be supported by substantial evidence and demonstrate 
that each proposed workshare discount has been set in compliance with 
39 U.S.C. 3622(e) and this subpart. Substantial evidence means such 
relevant evidence as a reasonable mind might accept as adequate to 
support a conclusion.
    (b) For each proposed workshare discount that would exceed the cost 
avoided by the Postal Service for not providing the applicable service, 
the rate adjustment filing shall indicate the applicable paragraph of 
Sec.  3030.283 under which the Postal Service is justifying the 
excessive discount and include any relevant analysis supporting the 
claim.
    (c) For each proposed workshare discount that is provided in 
connection with a subclass of mail, consisting exclusively of mail 
matter of educational, cultural, scientific, or informational value (39 
U.S.C. 3622(e)(2)(C)), would exceed the cost avoided by the Postal 
Service for not providing the applicable service, and would not be set 
in accordance with at least one specific provision appearing in Sec.  
3030.283(b) through (d), the rate adjustment filing shall provide the 
information specified in paragraphs (c)(1) through (3) of this section:
    (1) The number of mail owners receiving the workshare discount 
during the most recent full fiscal year and for the current fiscal year 
to date;
    (2) The number of mail owners for the applicable product or 
products in the most recent full fiscal year and for the current fiscal 
year to date; and
    (3) An explanation of how the proposed workshare discount would 
promote the public interest, even though the proposed workshare 
discount would substantially exceed the cost avoided by the Postal 
Service.
    (d) For each proposed workshare discount that would be below the 
cost avoided by the Postal Service for not providing the applicable 
service, the rate adjustment filing shall indicate the applicable 
paragraph of Sec.  3030.284 under which the Postal Service is 
justifying the discount that is below the cost avoided and include any 
relevant analysis supporting the claim.


Sec.  3030.286  Application for waiver.

    (a) In every instance in which the Postal Service determines to 
adjust a rate associated with a workshare discount in a manner that 
does not comply with the limitations imposed by Sec. Sec.  3030.283 
through 3030.284, the Postal Service shall file an application for 
waiver. The Postal Service must file any application for waiver at 
least 60 days prior to filing the proposal to adjust a rate associated 
with the applicable workshare discount. In its application for waiver, 
the Postal Service shall indicate the approximate filing date for its 
next rate adjustment filing.
    (b) The application for waiver shall be supported by a 
preponderance of the evidence and demonstrate that a waiver from the 
limitations imposed by Sec. Sec.  3030.283 through 3030.284 should be 
granted. Preponderance of the evidence means proof by information that, 
compared with that opposing it, leads to the conclusion that the fact 
at issue is more probably true than not.
    (c) The application for waiver shall include a specific and 
detailed statement signed by one or more knowledgeable Postal Service 
official(s) who sponsors the application and attests to the accuracy of 
the information contained within the statement. The statement shall set 
forth the information specified in paragraphs (c)(1) through (8) of 
this section, as applicable to the specific workshare discount for 
which a waiver is sought:
    (1) The reason(s) why a waiver is alleged to be necessary (with 
justification thereof), including all relevant supporting analysis and 
all assumptions relied upon.
    (2) The length of time for which a waiver is alleged to be 
necessary (with justification thereof).
    (3) For each subsequent rate adjustment filing planned to occur 
during the length of time for which a waiver is sought, a 
representation of the proposed minimum amount of the change to the 
workshare discount.
    (4) For a claim that the amount of the workshare discount exceeding 
the cost avoided by the Postal Service for not providing the applicable 
service is necessary in order to mitigate rate shock (39 U.S.C. 
3622(e)(2)(B)), the Postal Service shall provide an explanation 
addressing all of the items specified in paragraphs (c)(4)(i) through 
(iii) of this section:
    (i) A description of the customers that the Postal Service claims 
would be adversely affected.
    (ii) Prices and volumes for the workshare discount at issue (the 
benchmark and workshared mail category) for the last 10 years.
    (iii) Quantitative analysis or, if not available, qualitative 
analysis indicating the nature and extent of the likely harm to the 
customers that would result from setting the workshare discount in 
compliance with Sec.  3030.283(c).
    (5) For a claim that setting an excessive or low workshare discount 
closer or equal to the cost avoided by the Postal Service for not 
providing the applicable service would impede the efficient operation 
of the Postal Service, the Postal Service shall provide an explanation 
addressing all of the items specified in paragraphs (c)(5)(i) through 
(iii) of this section:
    (i) A description of the operational strategy at issue.
    (ii) Quantitative analysis or, if not available, qualitative 
analysis indicating how the workshare discount at issue is related to 
that operational strategy.
    (iii) How setting the workshare discount in compliance with Sec.  
3030.283(c) or Sec.  3030.284(c), whichever is applicable, would impede 
that operational strategy.
    (6) For a claim that reducing or eliminating the excessive 
workshare discount would lead to a loss of volume in the affected 
category of mail and reduce the aggregate contribution to the Postal 
Service's institutional costs from the mail that is subject to the 
discount (39 U.S.C. 3622(e)(3)(A)), the Postal Service shall provide an 
explanation addressing all of the items specified in paragraphs 
(c)(6)(i) through (iii) of this section:
    (i) A description of the affected category of mail.
    (ii) Quantitative analysis or, if not available, qualitative 
analysis indicating the expected loss of volume and reduced 
contribution that is claimed would result from reducing or eliminating 
the excessive workshare discount.
    (iii) How setting the excessive workshare discount in compliance 
with Sec.  3030.283(c) would lead to the expected loss of volume and 
reduced contribution.
    (7) For a claim that reducing or eliminating the excessive 
workshare

[[Page 81138]]

discount would result in a further increase in the rates paid by 
mailers not able to take advantage of the workshare discount (39 U.S.C. 
3622(e)(3)(B)), or a claim that increasing or eliminating a low 
workshare discount for a non-compensatory product would result in a 
further increase in the rates paid by mailers not able to take 
advantage of the workshare discount, the Postal Service shall provide 
an explanation addressing all of the items specified in paragraphs 
(c)(7)(i) through (iii) of this section:
    (i) A description of the mailers not able to take advantage of the 
discount.
    (ii) Quantitative analysis or, if not available, qualitative 
analysis indicating the expected size of the rate increase that is 
claimed would result in the rates paid by mailers not able to take 
advantage of the discount.
    (iii) How setting the excessive workshare discount in compliance 
with Sec.  3030.283(c) or the low workshare discount for a non-
compensatory product in compliance with Sec.  3030.284(c) or (e), 
whichever is applicable, would result in a further increase in the 
rates paid by mailers not able to take advantage of the discount.
    (8) Any other relevant factors or reasons to support the 
application for waiver.
    (d) Unless the Commission otherwise provides, commenters will be 
given at least 7 calendar days to respond to the application for waiver 
after it has been filed by the Postal Service.
    (e) To better evaluate the waiver application, the Commission may, 
on its own behalf or by request of any interested person, order the 
Postal Service to provide experts on the subject matter of the waiver 
application to participate in technical conferences, prepare statements 
clarifying or supplementing their views, or answer questions posed by 
the Commission or its representatives.
    (f) For a proposed workshare discount that would exceed the cost 
avoided by the Postal Service for not providing the applicable service, 
the application for waiver shall be granted only if at least one 
provision appearing in 39 U.S.C. 3622(e)(2)(A) through (e)(2)(D) or 39 
U.S.C. 3622(e)(3)(A) through (e)(3)(B) is determined to apply.
    (g) For a proposed workshare discount that would be set below the 
cost avoided by the Postal Service for not providing the applicable 
service, the application for waiver shall be granted only if setting 
the workshare discount closer or equal to the cost avoided by the 
Postal Service for not providing the applicable service would impede 
the efficient operation of the Postal Service or if increasing or 
eliminating a low workshare discount for a non-compensatory product 
would result in a further increase in the rates paid by mailers not 
able to take advantage of the workshare discount.
    (h) The Commission will issue an order announcing, at a minimum, 
whether the requested waiver will be granted or denied no later than 21 
days following the close of any comment period(s). An order granting 
the application for waiver shall specify all conditions upon which the 
waiver is granted, including the date upon which the waiver shall 
expire.

PART 3040--PRODUCT LISTS AND THE MAIL CLASSIFICATION SCHEDULE

0
2. The authority citation for part 3040 continues to read as follows:

    Authority: 39 U.S.C. 503; 3622; 3631; 3642; 3682.


0
3. Amend Sec.  3040.132 by revising paragraphs (a) and (b) to read as 
follows:


Sec.  3040.132  Supporting justification.

* * * * *
    (a) Explain the reason for initiating the docket and explain why 
the change is not inconsistent with the applicable requirements of this 
part and any applicable Commission directives and orders;
    (b) Explain why, as to market dominant products, the change is not 
inconsistent with the policies and the applicable criteria of chapter 
36 of title 39 of the United States Code;
* * * * *

0
4. Amend Sec.  3040.152 by revising paragraphs (a) and (b) to read as 
follows:


Sec.  3040.152  Supporting justification.

* * * * *
    (a) Explain the reason for initiating the docket and explain why 
the change is not inconsistent with the applicable requirements of this 
part and any applicable Commission directives and orders;
    (b) Explain why, as to market dominant products, the change is not 
inconsistent with the policies and the applicable criteria of chapter 
36 of title 39 of the United States Code;
* * * * *

0
5. Amend Sec.  3040.172 by revising paragraphs (a) and (b) to read as 
follows:


Sec.  3040.172  Supporting justification.

* * * * *
    (a) Explain the reason for initiating the docket and explain why 
the change is not inconsistent with the applicable requirements of this 
part and any applicable Commission directives and orders;
    (b) Explain why, as to market dominant products, the change is not 
inconsistent with the policies and the applicable criteria of chapter 
36 of title 39 of the United States Code;
* * * * *

0
6. Amend Sec.  3040.181 by revising paragraph (b)(1) to read as 
follows:


Sec.  3040.181  Supporting justification for material changes to 
product descriptions.

* * * * *
    (b)(1) As to market dominant products, explain why the changes are 
not inconsistent with the policies and the applicable criteria of 
chapter 36 of title 39 of the United States Code, the applicable 
requirements of this part, and any applicable Commission directives and 
orders; or
* * * * *

0
7. Amend Sec.  3040.182 by revising paragraph (e) to read as follows:


Sec.  3040.182  Docket and notice of material changes to product 
descriptions.

* * * * *
    (e) Provide interested persons with an opportunity to comment on 
whether the proposed changes are consistent with the policies and the 
applicable criteria of chapter 36 of title 39 of the United States 
Code, the applicable requirements of this part, and any applicable 
Commission directives and orders.

0
8. Amend Sec.  3040.190 by revising paragraph (c)(2) to read as 
follows:


Sec.  3040.190  Minor corrections to product descriptions.

* * * * *
    (c) * * *
    (2) Explain why the proposed corrections are consistent with the 
policies and the applicable criteria of chapter 36 of title 39 of the 
United States Code, the applicable requirements of this part, and any 
applicable Commission directives and orders; and
* * * * *

0
9. Amend Sec.  3040.191 by revising paragraph (e) to read as follows:


Sec.  3040.191  Docket and notice of minor corrections to product 
descriptions.

* * * * *
    (e) Provide interested persons with an opportunity to comment on 
whether the proposed corrections are consistent with the policies and 
the applicable criteria of chapter 36 of title 39 of the United States 
Code, the applicable requirements of this part, and any applicable 
Commission directives and orders.

0
10. Add subpart G to read as follows:

[[Page 81139]]

Subpart G--Requests for Market Dominant Negotiated Service 
Agreements

Sec.
3040.220 General.
3040.221 Additional supporting justification for negotiated service 
agreements.
3040.222 Data collection plan and report for negotiated service 
agreements.


Sec.  3040.220  General.

    This subpart imposes additional requirements whenever there is a 
request to add a negotiated service agreement to the market dominant 
product list. The additional supporting justification appearing in 
Sec.  3040.221 also should be provided whenever the Postal Service 
proposes to modify the terms of an existing market dominant negotiated 
service agreement. Commission findings that the addition of a special 
classification is not inconsistent with 39 U.S.C. 3622 are provisional 
and subject to subsequent review. No rate(s) shall take effect until 45 
days after the Postal Service files a request for review of a notice of 
a new rate or rate(s) adjustment specifying the rate(s) and the 
effective date.


Sec.  3040.221  Additional supporting justification for negotiated 
service agreements.

    (a) Each request shall also include the items specified in 
paragraphs (b) through (j) of this section.
    (b) A copy of the negotiated service agreement.
    (c) The planned effective date(s) of the planned rates.
    (d) The identity of a responsible Postal Service official who will 
be available to provide prompt responses to requests for clarification 
from the Commission.
    (e) A statement identifying all parties to the agreement and a 
description clearly explaining the operative components of the 
agreement.
    (f) Details regarding the expected improvements in the net 
financial position or operations of the Postal Service (39 U.S.C. 
3622(c)(10)(A)(i) and (ii)). The projection of the change in net 
financial position as a result of the agreement shall be based on 
accepted analytical principles. The projection of the change in net 
financial position as a result of the agreement shall include for each 
year of the agreement:
    (1) The estimated mailer-specific costs, volumes, and revenues of 
the Postal Service absent the implementation of the negotiated service 
agreement;
    (2) The estimated mailer-specific costs, volumes, and revenues of 
the Postal Service which result from implementation of the negotiated 
service agreement;
    (3) An analysis of the effects of the negotiated service agreement 
on the contribution to institutional costs from mailers not party to 
the agreement;
    (4) If mailer-specific costs are not available, the source and 
derivation of the costs that are used shall be provided, together with 
a discussion of the currency and reliability of those costs and their 
suitability as a proxy for the mailer-specific costs; and
    (5) If the Postal Service believes the Commission's accepted 
analytical principles are not the most accurate and reliable 
methodology available:
    (i) An explanation of the basis for that belief; and
    (ii) A projection of the change in net financial position resulting 
from the agreement made using the Postal Service's alternative 
methodology.
    (g) An identification of each component of the agreement expected 
to enhance the performance of mail preparation, processing, 
transportation, or other functions in each year of the agreement, and a 
discussion of the nature and expected impact of each such enhancement.
    (h) Details regarding any and all actions (performed or to be 
performed) to assure that the agreement will not result in unreasonable 
harm to the marketplace (39 U.S.C. 3622(c)(10)(B)).
    (i) A discussion in regard to how functionally similar negotiated 
service agreements will be made available on public and reasonable 
terms to similarly situated mailers.
    (j) Such other information as the Postal Service believes will 
assist the Commission in issuing a timely determination of whether the 
requested changes are consistent with applicable statutory policies.


Sec.  3040.222  Data collection plan and report for negotiated service 
agreements.

    (a) The Postal Service shall include with any request concerning a 
negotiated service agreement a detailed plan for providing data or 
information on actual experience under the agreement sufficient to 
allow evaluation of whether the negotiated service agreement operates 
in compliance with 39 U.S.C. 3622(c)(10).
    (b) A data report under the plan is due 60 days after each 
anniversary date of implementation and shall include, at a minimum, the 
following information for each 12-month period the agreement has been 
in effect:
    (1) The change in net financial position of the Postal Service as a 
result of the agreement. This calculation shall include for each year 
of the agreement:
    (i) The actual mailer-specific costs, volumes, and revenues of the 
Postal Service;
    (ii) An analysis of the effects of the negotiated service agreement 
on the net overall contribution to the institutional costs of the 
Postal Service; and
    (iii) If mailer-specific costs are not available, the source and 
derivation of the costs that are used shall be provided, including a 
discussion of the currency and reliability of those costs and their 
suitability as a proxy for the mailer-specific costs.
    (2) A discussion of the changes in operations of the Postal Service 
that have resulted from the agreement. This shall include, for each 
year of the agreement, identification of each component of the 
agreement known to enhance the performance of mail preparation, 
processing, transportation, or other functions in each year of the 
agreement.
    (3) An analysis of the impact of the negotiated service agreement 
on the marketplace, including a discussion of any and all actions taken 
to protect the marketplace from unreasonable harm.

PART 3045--RULES FOR MARKET TESTS OF EXPERIMENTAL PRODUCTS

0
11. The authority citation for part 3045 continues to read as follows:

    Authority: 39 U.S.C. 503; 3641.


0
12. Amend Sec.  3045.15 by revising paragraph (a) to read as follows:


Sec.  3045.15  Dollar amount limitation.

    (a) The Consumer Price Index used for calculations under this part 
is the CPI-U index, as specified in Sec.  3030.141(a) of this chapter.
* * * * *

PART 3050--PERIODIC REPORTING

0
13. The authority citation for part 3050 continues to read as follows:

    Authority: 39 U.S.C. 503, 3651, 3652, 3653.


0
14. Amend Sec.  3050.20 by revising paragraph (c) to read as follows:


Sec.  3050.20  Compliance and other analyses in the Postal Service's 
section 3652 report.

* * * * *
    (c) It shall address such matters as non-compensatory rates and 
failures to achieve stated goals for on-time delivery standards. A more 
detailed analysis is required when the Commission observed and 
commented upon the same matter in its Annual Compliance Determination 
for the previous fiscal year.

0
15. Amend Sec.  3050.21 by:

[[Page 81140]]

0
a. Revising paragraphs (a), (e), (l), and (m); and
0
b. Adding paragraphs (n) and (o).
    The revisions and additions read as follows:


Sec.  3050.21  Content of the Postal Service's section 3652 report.

    (a) No later than 90 days after the close of each fiscal year, the 
Postal Service shall submit a report to the Commission analyzing its 
cost, volume, revenue, rate, and service information in sufficient 
detail to demonstrate that all products during such year comply with 
all applicable provisions of title 39 of the United States Code. The 
report shall provide the items in paragraphs (b) through (o) of this 
section.
* * * * *
    (e) For each market dominant workshare discount offered during the 
reporting year:
    (1) The per-item cost avoided by the Postal Service by virtue of 
such discount;
    (2) The percentage of such per-item cost avoided that the per-item 
workshare discount represents;
    (3) The per-item contribution made to institutional costs;
    (4) The factual and analytical bases for any claim that one or more 
of the exception provisions of 39 U.S.C. 3622(e)(2)(A) through 
(e)(2)(D) or 39 U.S.C. 3622(e)(3)(A) through (e)(3)(B) apply; and
    (5) For each workshare discount that is provided in connection with 
a subclass of mail, consisting exclusively of mail matter of 
educational, cultural, scientific, or informational value (39 U.S.C. 
3622(e)(2)(C)), exceeded the cost avoided by the Postal Service for not 
providing the applicable service, and was not set in accordance with at 
least one specific provision appearing in Sec.  3030.262(b) through (d) 
of this chapter, the information specified in paragraphs (e)(5)(i) 
through (iii) of this section:
    (i) The number of mail owners receiving the workshare discount;
    (ii) The number of mail owners for the applicable product or 
products; and
    (iii) An explanation of how the workshare discount promotes the 
public interest, even though the workshare discount substantially 
exceeds the cost avoided by the Postal Service;
* * * * *
    (l) For the Inbound Letter Post product, provide revenue, volume, 
attributable cost, and contribution data by Universal Postal Union 
country group and by shape for the fiscal year subject to review and 
each of the preceding 4 fiscal years;
    (m) Input data and calculations used to produce the annual Total 
Factor Productivity estimates;
    (n) Copies of notifications to the Postal Service by the Office of 
Personnel Management (OPM) of annual determinations of the funding 
amounts specific to payments at the end of each fiscal year computed 
under 5 U.S.C. 8909a(d)(2)(B) and 5 U.S.C. 8909a(d)(3)(B)(ii); 5 U.S.C. 
8348(h)(2)(B) and 5 U.S.C. 8423(b)(3)(B); 5 U.S.C. 8423(b)(1)(B) and 5 
U.S.C. 8423(b)(2); and
    (o) Provide any other information that the Postal Service believes 
will help the Commission evaluate the Postal Service's compliance with 
the applicable provisions of title 39 of the United States Code.

0
16. Add Sec.  3050.55 to read as follows:


Sec.  3050.55  Information pertaining to cost reduction initiatives.

    (a) The reports in paragraphs (b) through (f) of this section shall 
be filed with the Commission at the times indicated in paragraphs (b) 
through (f).
    (b) Within 95 days after the end of each fiscal year, the Postal 
Service shall file a financial report that analyzes cost data from the 
fiscal year. For purposes of this paragraph (b), the percentage change 
shall compare the fiscal year under review to the previous fiscal year. 
At a minimum, the report shall include:
    (1) For all market dominant mail, the percentage change in total 
unit attributable cost;
    (2) For each market dominant mail product, the percentage change in 
unit attributable cost;
    (3) For the system as a whole, total average cost per piece, which 
includes all Postal Service competitive and market dominant 
attributable costs and institutional costs;
    (4) The percentage change in total average cost per piece;
    (5) Market dominant unit attributable cost by product;
    (6) If the percentage change in unit attributable cost for a market 
dominant mail product is more than 0.0 percent and exceeds the 
percentage change in total market dominant mail unit attributable cost, 
then the following information shall be provided:
    (i) Unit attributable cost workpapers for the product disaggregated 
into the following cost categories: mail processing unit cost, delivery 
unit cost, vehicle service driver unit cost, purchased transportation 
unit cost, window service unit cost, and other unit cost;
    (ii) A narrative that identifies cost categories that are driving 
above average increases in unit attributable cost for the product and 
explains the reason for the above-average increase; and
    (iii) A specific plan to reduce unit attributable cost for the 
product; and
    (7) An analysis of volume trends and mail mix changes for each 
market dominant mail product from fiscal year 2017 through the end of 
the fiscal year under review, which shall include at a minimum:
    (i) A comparison of actual unit attributable costs and estimated 
unit attributable costs for each market dominant mail product, using 
the volume distribution from fiscal year 2017;
    (ii) A narrative that identifies the drivers of change in volume 
trends and the mail mix; and
    (iii) A narrative that explains the methodology used to calculate 
the estimated unit attributable costs as required by paragraph 
(b)(7)(i) of this section.
    (c) Within 95 days after the end of each fiscal year, the Postal 
Service shall file a report with analysis of each planned cost 
reduction initiative that is expected to require Postal Service total 
expenditures of $5 million or more over the duration of the initiative. 
At a minimum, the report shall include:
    (1) A narrative that describes each cost reduction initiative 
planned for future fiscal years, including the status, the expected 
total expenditure, start date, end date, and any intermediate 
deadlines;
    (2) Identification of a metric to measure the impact of each 
planned cost reduction initiative identified in paragraph (c)(1) of 
this section, a narrative describing the selected metric, a narrative 
explaining the reason for selecting that metric, and a schedule 
approximating the months and fiscal years in which the cost reduction 
impact is expected to be measureable; and
    (3) Estimates of the expected impact of each planned cost reduction 
initiative, with supporting workpapers, using the metric identified in 
paragraph (c)(2) of this section, total market dominant mail 
attributable unit cost, and total unit cost as calculated pursuant to 
paragraph (b)(3) of this section.
    (d) Within 95 days after the end of each fiscal year, the Postal 
Service shall file a report that describes each active cost reduction 
initiative during the fiscal year which incurred or is expected to 
incur Postal Service expenditures of $5 million or more over the 
duration of the initiative. At a minimum, the report shall include:
    (1) The information described in paragraphs (c)(1) through (3) of 
this

[[Page 81141]]

section, based on actual data for the fiscal year, and a specific 
statement as to whether the initiative actually achieved the expected 
impact as measured by the selected metric;
    (2) An explanation of the trends, changes, or other reasons that 
caused any variance between the actual information provided under 
paragraph (d)(1) of this section and the estimated information 
previously provided under paragraphs (c)(1) through (3) of this 
section, if applicable;
    (3) A description of any mid-implementation adjustments the Postal 
Service has taken or will take to align the impacts with the schedule; 
and
    (4) Any revisions to the schedule of cost reduction impacts for 
future fiscal years.
    (e) Within 95 days after the end of each fiscal year, the Postal 
Service shall file a report that summarizes all projects associated 
with a Decision Analysis Report for the fiscal year. At a minimum, the 
report shall include:
    (1) A description of each project;
    (2) The status of each project;
    (3) An estimate of cost savings or additional revenues from each 
project; and
    (4) The return on investment expected from each project.
    (f) Within 95 days after the end of each fiscal year, the Postal 
Service shall file a report that summarizes all planned projects that 
have an approved Decision Analysis Report for the next fiscal year. At 
a minimum, the report shall include:
    (1) A description of each planned project;
    (2) The status of each project;
    (3) An estimate of the cost savings or additional revenues expected 
from each project; and
    (4) The return on investment expected from each project.

0
17. Amend Sec.  3050.60 by:
0
a. Revising paragraph (a);
0
b. Removing paragraph (e);
0
c. Redesignating paragraphs (f) and (g) as paragraphs (e) and (f).
    The revision reads as follows:


Sec.  3050.60  Miscellaneous reports and documents.

    (a) The reports in paragraphs (b) through (f) of this section shall 
be provided at the times indicated in paragraphs (b) through (f).
* * * * *

PART 3055--SERVICE PERFORMANCE AND CUSTOMER SATISFACTION REPORTING

0
18. The authority citation for part 3055 continues to read as follows:

    Authority: 39 U.S.C. 503, 3622(a), 3652(d) and (e); 3657(c).


0
19. Amend Sec.  3055.2 by revising paragraph (c) to read as follows:


Sec.  3055.2  Contents of the annual report of service performance 
achievements.

* * * * *
    (c) The applicable service standard(s) for each product. If there 
has been a change to a service standard(s) since the previous report, a 
description of and reason for the change shall be provided. If there 
have been no changes to service standard(s) since the previous report, 
a certification stating this fact shall be provided.
* * * * *
[FR Doc. 2020-26645 Filed 12-14-20; 8:45 am]
BILLING CODE 7710-FW-P