[Federal Register Volume 86, Number 61 (Thursday, April 1, 2021)]
[Proposed Rules]
[Pages 17100-17101]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-06633]


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POSTAL REGULATORY COMMISSION

39 CFR Part 3050

[Docket No. RM2021-4; Order No. 5852]


Periodic Reporting

AGENCY: Postal Regulatory Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Commission is acknowledging a recent filing requesting the 
Commission initiate a rulemaking proceeding to consider changes to 
analytical principles relating to periodic reports (Proposal Two). This 
document informs the public of the filing, invites public comment, and 
takes other administrative steps.

DATES: Comments are due: May 14, 2021.

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

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

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction
II. Proposal Two
III. Notice and Comment
IV. Ordering Paragraphs

I. Introduction

    On March 24, 2021, the Postal Service filed a petition pursuant to 
39 CFR 3050.11 requesting that the Commission initiate a rulemaking 
proceeding to consider changes to analytical principles relating to 
periodic reports.\1\ The Petition identifies the proposed analytical 
changes filed in this docket as Proposal Two.
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    \1\ Petition of the United States Postal Service for the 
Initiation of a Proceeding to Consider Proposed Changes in 
Analytical Principles (Proposal Two), March 24, 2021 (Petition).
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II. Proposal Two

    Background. To estimate costs avoided by mailer presort activities 
for First-Class Mail letters, a workshare model is developed and filed 
each year as part of the Postal Service's Annual Compliance Report 
(ACR). Petition, Proposal Two at 1. Mail processing flow is ``modeled 
by rate category, and the activities involved are assigned costs based 
on the appropriate wage rate, productivity, and related indirect (i.e.

[[Page 17101]]

``piggyback'') costs of each operation.'' Id. The resulting costs are 
called ``directly modeled'' costs. Id. Mail processing costs are 
separately calculated as part of the Cost and Revenue Analysis (CRA) 
Report using In-Office Cost System (IOCS) data for the same activities 
at the product level, or within the same cost pools. Id. However, the 
``directly modeled'' costs can differ from those calculated as part of 
the CRA Report for several reasons.\2\ As a result, the ``CRA 
Adjustment Factor'' was developed in order to ``calibrate the model and 
`true-up' the modeled costs to the costs reported in the CRA Report,'' 
using the following equation: \3\
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    \2\ Id. The Postal Service notes that CRA costs are not only 
subject to sampling variation, but the data used to calculate costs 
for the CRA Report capture additionally incurred costs from 
activities that cannot be directly modeled. Id.
    \3\ See id. at 1-2. The CRA Adjustment Factor was initially 
developed in Docket No. R2006-1. Id. at 2-3; see generally Docket 
No. R2006-1, Opinion and Recommended Decision, Volume 1, February 
26, 2007.
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MailProcUnitCosti = ModelUnitCosti * CRAAdjustmentFactor + 
FixedUnitCost

    The Postal Service notes that, under the current methodology, 
``cost pools that are directly modeled are treated as proportional, 
cost pools that are operationally determined to be unrelated to 
workshare are treated as fixed, and the remaining cost pools are 
treated as partly proportional.'' Petition, Proposal Two at 3. It 
further notes that, for the last group of cost pools, ``unit costs are 
divided into proportional and fixed components based on costs in the 
directly assigned cost pools.'' Id.
    The Postal Service indicates that, in the years since the 
methodology described above was first established, ``the structure of 
cost pools has been configured to better align with operational 
practice, enhancing the ability to conduct operational analysis of cost 
pools.'' Id. The Postal Service further indicates that, ``[w]ith these 
developments in data availability, the current methodology for 
calibrating the [cost avoidance] models to CRA costs is in need of 
refinement.'' Id.
    Proposal. With Proposal Two, the Postal Service seeks to ``revise 
cost pool classifications for the determination of the proportional and 
fixed adjustment to modeled costs'' and ``update the cost pool 
classification vocabulary to better reflect how the cost pools are 
treated in the calibration methodology.'' Id. at 4. The Postal Service 
proposes three new cost pool classifications: ``Modeled/Proportional 
Pools,'' ``Unrelated to Presort'' and ``Correlated with Presort.'' Id.
    ``Modeled/Proportional Pools'' include ``cost pools where the 
mailflow model directly characterizes the flow of mail through the 
pools and measures the cost of the component activities.'' Id. at 5. 
``Unrelated to Presort'' include cost pools where the ``activities 
performed are incurred because of piece characteristics unrelated to 
presort and thus the costs are invariant to presort, and pools where 
the costs have spurious correlation with presort.'' Id. at 6. 
``Correlated with Presort'' include cost pools that are generally 
associated with non-piece sorting allied labor and support operations. 
Id. at 8. The Postal Service notes that ``Correlated with Presort'' 
cost pools may include costs that are ``partly avoidable with a greater 
degree of presorting, but not directly proportional to modeled piece 
costs.'' Id.
    Finally, the Postal Service notes that the model would be modified 
in one additional way. The Postal Service indicates that costs 
associated with the distribution of mailpieces to P.O. Boxes will no 
longer be included as part of the model. Id. at 10. It describes 
subsequent ``costing enhancements'' that have eliminated the need to 
model these costs, which it states are ``explicitly measured'' as part 
of the ACR. Id. at 10-11.
    Impact. Under the Postal Service's proposed methodology, avoided 
costs and passthroughs associated with First-Class Mail letters would 
be affected. Those effects are presented in Table 3 of the proposal. 
See id. at 14.

III. Notice and Comment

    The Commission establishes Docket No. RM2021-4 for consideration of 
matters raised by the Petition. More information on the Petition may be 
accessed via the Commission's website at http://www.prc.gov. Interested 
persons may submit comments on the Petition and Proposal Two no later 
than May 14, 2021. Pursuant to 39 U.S.C. 505, Katalin K. Clendenin is 
designated as an officer of the Commission (Public Representative) to 
represent the interests of the general public in this proceeding.

IV. Ordering Paragraphs

    It is ordered:
    1. The Commission establishes Docket No. RM2021-4 for consideration 
of the matters raised by the Petition of the United States Postal 
Service for the Initiation of a Proceeding to Consider Proposed Changes 
in Analytical Principles (Proposal Two), filed March 24, 2021.
    2. Comments by interested persons in this proceeding are due no 
later than May 14, 2021.
    3. Pursuant to 39 U.S.C. 505, the Commission appoints Katalin K. 
Clendenin to serve as an officer of the Commission (Public 
Representative) to represent the interests of the general public in 
this docket.
    4. The Secretary shall arrange for publication of this order in the 
Federal Register.

    By the Commission.
Erica A. Barker,
Secretary.
[FR Doc. 2021-06633 Filed 3-31-21; 8:45 am]
BILLING CODE 7710-FW-P