[Federal Register Volume 78, Number 73 (Tuesday, April 16, 2013)]
[Proposed Rules]
[Pages 22490-22501]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-08805]
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POSTAL REGULATORY COMMISSION
39 CFR Part 3010
[Docket Nos. RM2011-2 and RM2013-2; Order No. 1678]
Administrative Practice and Procedure; Postal Service; Review of
Price Cap Rules
AGENCY: Postal Regulatory Commission.
ACTION: Proposed rule.
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SUMMARY: The Commission is initiating a review of its Price Cap Rules.
The review seeks to clarify how to the maximum amount of rate
adjustments in postal rate cases is determined and applied. It also
seeks to improve other aspects of the process of adjusting rates for
market dominant products. This notice informs the public of the review,
invites public comment, and takes other administrative steps.
DATES: Comments are due: May 16, 2013. Reply comments are due: May 31,
2013.
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: Stephen L. Sharfman, General Counsel,
at 202-789-6820.
Regulatory History
72 FR 5230, February 5, 2007
72 FR 29284, May 25, 2007
72 FR 33261, June 15, 2007
72 FR 50744, September 4, 2007
72 FR 63622, November 9, 2007
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Introduction
II. Background
III. Proposed Rules
IV. Comments Requested
V. Explanation of Proposed Rules
VI. Ordering Paragraphs
I. Introduction
With this notice of proposed rulemaking, the Commission is
initiating review of its rules in 39 CFR part 3010 and requesting
comments and suggestions to clarify or improve the manner in which part
3010 implements statutory directives and policies previously expressed
in Commission orders.
The purposes of this rulemaking are to clarify the Commission's
rules for determining and applying the maximum amount of rate
adjustments in rate cases before the Commission and to improve other
aspects of the process of adjusting rates for market dominant products.
The proposed rules are intended to provide more certainty for the
Postal Service and the mailing community as they make decisions that
rely upon the Postal Service's authority to adjust rates for market
dominant products under 39 U.S.C. 3622(d) and part 3010.
II. Background
Five ``regular'' rate cases have come before the Commission since
the promulgation of 39 CFR part 3010.\1\ Initially, the Commission's
rules in part 3010 were successfully applied in several proceedings
without the Postal
[[Page 22491]]
Service or other parties requesting additional clarification.\2\
However, beginning in 2010, the Commission began to identify
circumstances that led to confusion about the correct application of
the rules. The following is a summary of the Commission's more recent
experiences applying part 3010 in rate cases.
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\1\ See 39 U.S.C. 3622(d)(1)(B). The five cases are: Docket No.
R2008-1; Docket No. R2009-2; Docket No. R2011-1; Docket No. R2012-3;
and Docket No. R2013-1.
\2\ Docket No. R2008-1, United States Postal Service Notice of
Market-Dominant Price Adjustment, February 11, 2008, at 2-5; Docket
No. R2009-2, United States Postal Service Notice of Market Dominant
Price Adjustment, February 10, 2009, at 2-6. The rules have also
been relevant and discussed when the Postal Service proposed
discounted rates for summer and winter sales programs. See, e.g.,
Docket No. R2009-3, Order Approving Standard Mail Volume Incentive
Pricing Program, June 4, 2009 at 9-10; Docket No. R2009-4, Order
Approving Price Adjustment for Standard Mail High Density Flats,
July 1, 2009, at 6-9; Docket No. R2009-5, Order Approving First-
Class Mail Incentive Pricing Program, September 16, 2009, at 9;
Docket No. R2010-3, Order Approving Standard Mail Volume Incentive
Pricing Program, April 7, 2010, at 12-13. Similarly, the effect of a
temporary price decrease adjustment for mail with a certain two-
dimensional barcode was implemented without a price cap calculation.
Docket No. R2011-5, Order Approving Market Dominant Price
Adjustment, May 17, 2011.
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Postal Service request for clarification. On October 6, 2010, in
preparation for its upcoming notice of rate adjustment, the Postal
Service sought clarification of the application of 39 CFR 3010.26
(relating to the calculation of unused rate adjustment authority) to
notices of rate adjustment filed more than 12 months apart and in
periods when the CPI-U is in decline.\3\ The Commission's General
Counsel replied to the Postal Service in a letter providing ``informal
advice'' on the interpretation of part 3010.\4\ A mailer coalition also
replied to the Postal Service's request for interpretation. The
coalition suggested that the amount calculated as unused rate
adjustment authority when notices of rate adjustments are filed more
than 12 months after the previous notice of rate adjustment, should,
contrary to the Commission's view, be applied to reduce the calculated
annual limitation on market dominant rate adjustments.\5\
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\3\ Letter from R. Andrew German, Managing Counsel, Pricing &
Product Development, United States Postal Service, to Shoshana Grove
Regarding Available CPI-U Authority, October 6, 2010.
\4\ Letter from the Commission's General Counsel in Response to
Andrew German, October 12, 2010 (General Counsel's Letter).
\5\ Response of the Affordable Mail Alliance to October 6
Letter--Petition of the United States Postal Service; October 12
Letter--Ruling of the Office of General Counsel, October 13, 2010
(AMA Response). The letter also expresses procedural concerns with
the issuance of the General Counsel's Letter, arguing that it should
not be treated as a definitive or binding ruling of the Commission.
Id. at 5-8.
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Docket No. R2011-1 and Order No. 606. On November 2, 2010, the
Postal Service submitted a notice of rate adjustment, in order to
provide pricing incentives for Reply Rides Free and Saturation and High
Density Standard Mail and to revise the threshold for the Move Update
Assessment Charge.\6\ On November 10, 2010, the Commission issued a
Chairman's Information Request concerning the Postal Service's
calculation of annual limitations and unused rate adjustment
authority.\7\ CHIR No. 1 prompted the Postal Service to respond that it
was still ``uncertain how the rules defining the price cap should be
applied.'' \8\ The Commission's Order No. 606 included an extensive
discussion of the price cap rules and their application to a situation
in which (1) notices of rate adjustment are filed more than 12 months
apart; and (2) CPI-U declines.\9\
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\6\ Docket No. R2011-1, United States Postal Service Notice of
Market Dominant Price Adjustment, November 2, 2010.
\7\ Chairman's Information Request No. 1, November 10, 2010
(CHIR No. 1).
\8\ Response of the United States Postal Service to Questions 1-
3 of Chairman's Information Request No. 1, November 16, 2010, at 2.
\9\ Docket No. R2011-1, Order Approving Market Dominant
Classification and Price Changes, and Applying Price Cap Rules
(Order No. 606), December 10, 2010 at 6-19.
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Petition for rulemaking. On the same day, the Commission issued
CHIR No. 1, the Postal Service filed a petition for rulemaking
regarding unused rate adjustment authority calculations.\10\ The
Petition for Rulemaking requests ``formal clarification of whether 39
CFR 3010.26(c)(1)-(3) or the CPI-U data provided on the Commission's
Web site determine the amount of unused rate adjustment authority when
rate adjustments are more than 12 months apart.'' Id. at 3. The
Commission responded to this request in Order No. 606, which the
Commission characterized as ``the formal determination sought by the
Postal Service in its Petition for Rulemaking.'' \11\ Order No. 606 did
not close the docket on the Petition for Rulemaking; instead, it
promised to initiate a rulemaking ``to avoid future confusion.'' Id.
Because this docket provides an opportunity to address the concerns
expressed by the Postal Service in its Petition for Rulemaking, the
Commission will now close Docket No. RM2011-2.
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\10\ Petition for Rulemaking Regarding the Calculation of Unused
Rate Adjustment Authority, November 10, 2010, Docket No. RM2011-2
(Petition for Rulemaking).
\11\ Docket No. R2011-1, Order Approving Market Dominant
Classification and Price Changes, and Applying Price Cap Rules,
December 10, 2010 (Order No. 606) at 5.
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Docket No. R2012-3 and Order No. 987. The confusion over the
correct application of part 3010 appeared to have abated in the 2012
rate case.\12\ The Postal Service correctly calculated the applicable
maximum rate adjustments, even though data for the full fiscal year
2011 were not yet available. Id. at 2.
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\12\ Docket No. R2012-3, Order on Price Adjustments for Market
Dominant Products and Related Mail Classification Changes (Order No.
987), November 22, 2011.
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Docket No. R2013-1 and Order Nos. 1541 and 1573. In Order No. 1541,
the Commission remanded Standard Mail Flats rates and stated that the
Postal Service had unused rate adjustment authority available to it
from Docket No. R2008-1 and Docket No. R2009-2.\13\ In its response to
Order No. 1541, the Postal Service observed that the statement appeared
to be at odds with 39 CFR 3010.28 and Order No. 606, which specified
that the unused rate adjustment authority available to the Postal
Service in any one rate case is the lesser of two percentage points or
the sum of all unused rate adjustment authority from the previous five
years.\14\ The Commission agreed, recognizing that in situations where
the sum of unused rate adjustment authority is negative, ``it appears
that rule 3010.28 is in conflict with rule 3010.27 and 39 U.S.C.
3622(d)(2)(C)(iii)(III).'' \15\ The Commission stated that it would
initiate a rulemaking to resolve the apparent conflict.
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\13\ Docket No. R2013-1, Order on Price Adjustments for Market
Dominant Products and Related Mail Classification Changes (Order No.
1541), November 16, 2012, at 49 n.66.
\14\ United States Postal Service Response to Order No. 1541,
November 26, 2012, at 3-4 n.10.
\15\ Docket No. R2013-1, Order on Standard Mail Rate Adjustments
and Related Mail Classification Changes (Order No. 1573), December
11, 2012 at 5.
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Additional issues arose in Docket No. R2013-1, further indicating
the need for clarification of part 3010. Perhaps the most notable of
these involved the calculation of the percentage change in rates for
particular Standard Mail products. Order No. 1541 at 36 and 45-46. In
addition, the Postal Service continued to use projections rather than
historical data for certain billing determinants. Id. at 17. The Postal
Service's incorporation of promotional prices into the calculation of
the percentage change in rates led to commenter requests that
promotional pricing rules be evaluated in a separate docket.\16\ One
commenter also
[[Page 22492]]
contended that comments concerning the Postal Service's compliance with
Commission orders were not appropriate, arguing that a determination of
compliance with past orders cannot be made in a rate adjustment
case.\17\
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\16\ See Comment of Pitney Bowes Inc., November 1, 2012 at 8;
Valpak Direct Marketing Systems, Inc. and Valpak Dealers'
Association, Inc. Comments on the United States Postal Service
Notice of Market-Dominant Price Adjustment, November 1, 2012, at 8;
and Public Representative Comments in Response to United States
Postal Service Notice of Market Dominant Price Adjustments, November
1, 2012, at 6. The Commission found that ``the Postal Services price
cap treatment of promotions is permissible so long as volumes are
properly ascribed to the appropriate products.'' Order No. 1541 at
18.
\17\ Comments of the Association for Postal Commerce, October
31, 2012, at 3.
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The Commission also discussed difficulties in determining whether
some pricing structures were workshare discounts subject to the
requirements of 39 U.S.C. 3622(e) based on data provided by the Postal
Service. Order No. 1541 at 48, 60-61. Docket No. R2013-1 also pointed
to the need to revise Commission rules to improve cost calculations.
For instance, the Commission acknowledged, in response to a comment
concerning the use of older methodologies to calculate cost avoidance
for workshare discounts, that ``the Commission's rules may need to be
revised to ensure that the most up to date methodologies are
incorporated in price adjustment filings.'' Id. at 11.
III. Proposed Rules
The proposed rules included in this notice of proposed rulemaking
reflect the Commission's efforts (1) to clarify the method for
calculating the maximum rate adjustment authority available to the
Postal Service in any given rate case; (2) to address issues with 39
CFR part 3010 that arose in Docket No. R2013-1; and (3) to address an
additional area for improvement identified by the Commission.
A. Clarification of Calculation of Maximum Rate Adjustment Authority
The majority of the proposed changes to the existing rules are
intended to clarify how to determine the maximum rate adjustment that
can be made in any one rate case. That determination requires a
calculation of the annual limitation for the rate case and a
calculation of the unused rate adjustment authority available for the
rate case.
Defined terms. At the outset, the proposed rules contain a set of
definitions intended to aid the Postal Service and postal customers in
understanding terms that are used in part 3010. These changes are not
merely stylistic. The inconsistent use of terms has played no small
part in the confusion about the proper interpretation of part 3010 by
the mailing community.\18\ The new definitions explain the meaning of
commonly used terms, and the proposed rules include conforming changes
to ensure that those terms are used consistently. For instance,
existing part 3010 variously uses the terms ``rate adjustment,'' 39 CFR
3010.4(a), ``rate changes,'' 39 CFR 3010.7(b), and ``rate increases.''
39 CFR 3010.11. The proposed rules consistently use the term ``rate
adjustment,'' mirroring the language of 39 U.S.C. 3622(d). Similarly,
the existing rules use ``annual limitation,'' 39 CFR 3010.2(a),
``applicable change in CPI-U,'' 39 CFR 3010.3(a), and ``inflation-based
limitation.'' 39 CFR 3010.6(b). The proposed rules use the term
``annual limitation'' throughout.
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\18\ See, e.g., AMA Response at 11-13, conflating the annual
limitation calculated under 39 CFR 3010.21 and 3010.22 with the
unused rate adjustment authority calculated under 39 CFR 3010.26.
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The proposed rules replace the term ``price cap,'' with the term
``maximum rate adjustment.'' The existing rules use the terms
``limitation on rate increase'' and ``price cap'' interchangeably,
which leads to confusion. Existing rule 3010.11 is a useful example.
The heading purports to describe a ``limit on size of rate increases.''
Paragraph (a) of existing rule 3010.11 states that ``rate increases for
each class of market dominant products in any 12-month period are
limited.'' But paragraph (d) of that same existing rule states that
``In any 12-month period the inflation-based limitation combined with
the allowable recapture of unused rate authority equals the price cap
applicable to each class of mail.'' It is unclear whether the price cap
referred to in paragraph (d) is the same as the ``rate increase''
limited under paragraph (a) and described in the heading (and, for that
matter, the heading of subpart C of part 3010). Although previous
orders have used the term ``price cap,'' for purposes of the
Commission's rules, the term ``maximum rate adjustment'' is both
clearer and more consistent with 39 U.S.C. 3622(d).
In the proposed rules, the inflation-based limitation on rate
adjustments under 39 U.S.C. 3622(d)(1)(A) is referred to as the
``annual limitation.'' Unused rate adjustment authority, as defined in
39 U.S.C. 3622(d)(2)(C)(i), is also called ``unused rate adjustment
authority'' in the proposed rules. The total limit on the amount of a
rate adjustment that can be made for a class in any one rate case
includes both the ``annual limitation'' and the ``unused rate
adjustment authority,'' and is called the ``maximum rate adjustment.''
Calculation of annual limitation. The Commission proposes
amendments to rules 3010.21 and 3010.22 in response to confusion in
Docket No. R2011-2 concerning the appropriate method for calculating
the annual limitation when rate cases are more than 12 months apart.
Supra; Order No. 606 at 6-19. Depending on the length of time that has
elapsed between rate cases, the annual limitation will be either a full
year limitation or a partial year limitation. Proposed rule 3010.21
clarifies that when notices of rate adjustment are 12 or more months
apart, as was the case in Docket No. R2011-2, a full year limitation is
calculated in accordance with 39 CFR 3010.21. This full year limitation
is calculated using only the most recent 12 monthly CPI-U values,
regardless of whether more than 12 months have elapsed since the last
rate case. Proposed rule 3010.22 clarifies that when notices of rate
adjustment are less than 12 months apart, a partial year limitation is
calculated in accordance with 39 CFR 3010.22. In addition, both
proposed rules contain provisions regarding the source of CPI-U data,
taken from existing rule 3010.12, a change intended to assist postal
customers and the Postal Service in identifying the correct source of
data for the calculation of the annual limitation.
Calculation of unused rate adjustment authority. Confusion
concerning the calculation of unused rate adjustment authority in cases
where notices of rate adjustments were 12 or more months apart also
surfaced in Docket No. R2011-2. Although the annual limitation in such
a case takes into account only CPI-U data from the previous 12 months,
unused rate adjustment authority accrues over the entire period between
notices of rate adjustments. Proposed rule 3010.26 seeks to clarify the
manner in which unused rate adjustment authority is calculated, both in
cases where notices of rate adjustments are 12 months or less apart and
in cases where notices of rate adjustments are more than 12 months
apart. Annual unused rate adjustment authority is calculated in both
cases. However, in a case where notices of rate adjustment are filed
more than 12 months apart, interim unused rate adjustment authority is
also calculated. In such a case, annual unused rate adjustment
authority is generated during the 12-month period ending on the date
the second notice of rate adjustment is filed. Interim unused rate
adjustment authority is generated during the period beginning on the
date the first notice of rate adjustment is filed
[[Page 22493]]
and ending on the day before the date that is 12 months before the date
on which the second notice of rate adjustment is filed. The proposed
rule also specifies that interim rate adjustment authority may be used
in the same case in which it is generated and that all unused rate
adjustment authority lapses 5 years after the filing of the notice of
rate adjustment leading to its calculation.
Organization. To improve the organization of part 3010, the
proposed rules move sections 3010.11 and 3010.12 from subpart B (which
is largely concerned with general procedural requirements) to subpart C
(which is a more detailed set of requirements for calculating the
maximum rate adjustment). This change is designed to assist postal
customers and the Postal Service in understanding how the maximum rate
adjustment is calculated.
Calculation of maximum unused rate adjustment authority. Proposed
rule 3010.28 brings the Commission's rules concerning the use of unused
rate adjustment authority in line with the requirements of 39 U.S.C.
3622(d)(2)(C)(iii)(IV). As discussed above, the Commission's rules did
not anticipate extended periods of declining CPI-U. Proposed rule
3010.28 specifies that the maximum unused rate adjustment authority
that may be used in a Type 1-A, Type 1-B, or Type 2 rate adjustment is
2 percentage points. This is true even in situations where the sum of
all 5 years of available unused rate adjustment authority is less than
2 percentage points.
Exhaustion of annual limitation. Finally, the proposed rules
include a change to 39 CFR 3010.25 to specify that unused rate
adjustment authority may only be used after the entire annual
limitation is exhausted. This change is consistent with past Commission
practice.
B. Changes Addressing Issues in Docket No. R2013-1
Several of the proposed rules reflect the Commission's efforts to
address issues that arose during Docket No. R2013-1. Those proposed
rules are discussed in this section.
Calculation of percentage change in rates for products. In Docket
No. R2013-1, the Postal Service used different methods to calculate the
percentage change in rates for Standard Mail Flats and the percentage
change in rates for the Standard Mail class as a whole. Order No. 1541
at 36, 46. The sum of the rate adjustments for all products within the
Standard Mail class, as calculated by the Postal Service, exceeded the
actual rate adjustment requested by the Postal Service for the class.
Id. at 46 n.61. The Commission explained, ``While the Commission rules
do not specifically address the method to calculate a percentage change
in rates by product, the Postal Service should use the same methodology
as prescribed for a market dominant class of mail when calculating a
percentage change for a market dominant product.'' Id. at 46. Proposed
rule 3010.23(b) seeks to restate that Commission directive in the
Commission's rules.
Adjustments to billing determinants. The Commission has repeatedly
emphasized that, for purposes of calculating a percentage change in
rates, adjustments to billing determinants should not be based on
anticipated changes in mailer behavior. Order No. 1541 at 17, 37; Order
No. 606 at 19. This position is consistent with the existing rule
3010.23(d), which requires that ``[w]henever possible, adjustments
shall be based on known mail characteristics.'' Proposed rule
3010.23(d) expresses more strongly the Commission's preference for
using historical data in the calculation of percentage change in rates
by prohibiting the use of data based on anticipated changes in mailer
behavior.
Temporary promotional rates and incentive programs. Paragraphs (e)
and (f) of proposed rule 3010.23 reflect past Postal Service practice
concerning the inclusion of temporary promotional rates and incentive
programs in the calculation of percentage change in rates. In past rate
cases, the Postal Service chose not to include temporary promotional
rates and incentive programs in the calculation of percentage change in
rates when those rates and programs resulted in overall rate decreases.
Order No. 1541 at 18. Proposed rule 3010.23(e) states the Commission's
approval of this practice. Proposed rule 3010.23(f) explains how the
Commission expects rates to be calculated in cases where the Postal
Service chooses to begin to include a temporary promotional rate or
incentive program in a calculation of percentage change in rates after
previously excluding the rate or program from the calculation pursuant
to proposed rule 3010.23(e).
Content of comments. In Docket No. R2013-1, interested persons
submitted comments concerning the Postal Service's compliance with
orders and directives of the Commission, as well as with statutory
provisions other than those contained in subchapter 1 of chapter 36 of
title 39, United States Code. See, e.g., Order No. 1541 at 33-34. One
interested person objected to the Commission considering such comments.
Id. at 35. Proposed rule 3010.11(c) clarifies the Commission's position
that such comments are appropriately before the Commission in a rate
case. Id.
Workshare discounts. The Commission has the authority to define
workshare discounts. 39 U.S.C. 3622(e). In order to exercise that
authority, the Commission requires the Postal Service to include
information concerning workshare discounts in notices of rate
adjustment. 39 CFR 3010.14. However, in Docket No. R2013-1, the
Commission had reason to believe that the Postal Service's
determination of what constituted a workshare discount might differ
from the Commission's determination. Order No. 1541 at 47-48 and 61. In
order to allow the Commission to determine which discounts and
surcharges offered by the Postal Service constitute workshare discounts
within the meaning of 39 U.S.C. 3622(e), proposed rule 3010.12(c) would
require that the Postal Service submit certain supporting information
concerning all discounts and surcharges.
Calculation of costs, avoided costs, volumes, and revenues.
Proposed rule 3010.12(e) would require the Postal Service to calculate
costs, avoided costs, volumes, and revenues using the most recent
analytical principles approved by the Commission, rather than the
principles used in the most recent Annual Compliance Report. Initially,
the Postal Service filed notices of rate adjustments more or less
contemporaneously with the Annual Compliance Report. However, in recent
years, the Postal Service has filed notices of rate adjustments at
other intervals between Annual Compliance Reports. Often, those notices
are filed after the Commission has approved changes to the analytical
principles used for the most recent Annual Compliance Report. The
proposed rule reflects the Commission's position that the Postal
Service will be able to make more accurate calculations in notices of
rate adjustments if its calculations use the most recent approved
analytical principles. See Order No. 1541 at 11.
C. Additional Issue
The Commission has identified an additional change that the
Commission believes would improve the application of part 3010 to rate
cases. The Commission recently conducted proceedings concerning an
amended notice of rate adjustment filing in Docket No. R2013-1. In
those proceedings, a 7-day period for public comment was sufficient.
Proposed rule 3010.13(g) reflects this experience by
[[Page 22494]]
providing 7, rather than 10, days for comment in such proceedings.
IV. Comments Requested
Interested persons are invited to provide written comments and
suggestions to clarify or improve part 3010 of the Commission's
regulations. These comments may address the changes discussed in this
order, and they also may suggest additional changes. Comments may
include specific language amending part 3010.
Comments are due no later than 30 days after the date of
publication of this notice in the Federal Register. All comments and
suggestions received will be available for review on the Commission's
Web site, http://www.prc.gov. Interested persons are further invited to
review the submissions and provide follow-up comments and suggestions
within 15 additional days (that is, within 45 days of the publication
of this notice in the Federal Register).
Emmett Rand Costich is designated the Public Representative to
represent the interests of the general public in this docket.
V. Explanation of Proposed Rules
Attached to this Order are proposed rules to clarify and improve
the manner in which part 3010 implements statutory directives and
policies previously expressed in Commission orders. Following is a
section-by-section analysis of the proposed rules.
Proposed rule 3010.1 defines the terms ``annual limitation,''
``class,'' ``maximum rate adjustment,'' ``Type 1-A rate adjustment,''
``Type 1-B rate adjustment,'' ``Type 2 rate adjustment,'' ``Type 3 rate
adjustment,'' and ``unused rate adjustment authority.''
Proposed rule 3010.2 revises a statutory reference and is revised
to ensure consistent use of terms.
Proposed rule 3010.3 is revised to ensure consistent use of terms
and to move the requirement that the Postal Service maintain a schedule
tracking unused rate adjustment authority to proposed rule 3010.26(f).
Proposed rule 3010.4 is revised to ensure consistent use of terms.
Proposed rule 3010.5 strikes duplicative provisions.
Proposed rule 3010.6 is revised to ensure consistent use of terms.
Proposed rule 3010.7 is revised to ensure consistent use of terms.
Proposed rule 3010.8(d) strikes an obsolete transition requirement.
Proposed rule 3010.8 is revised throughout to ensure consistent use
of terms.
Proposed rule 3010.10 is revised to ensure consistent use of terms.
Existing rules 3010.11 and 3010.12 are stricken. The content of
these rules is included in proposed rules 3010.20, 3010.21, and
3010.22.
Proposed rule 3010.11(c) clarifies that comments on compliance with
relevant statutory provisions and Commission orders and directives are
permitted.
Proposed rule 3010.11(g) changes the comment period from 10 days to
7 days and provides that comments on amended notices may address
subjects described in paragraph (c).
Proposed rule 3010.11 is revised throughout to ensure consistent
use of terms.
Proposed rule 3010.12 is revised by amending paragraph (b)(5) and
adding a paragraph (e) to require that cost, avoided cost, volume, and
revenue figures be developed from the most recent approved analytical
principles. Proposed rule 3010.12(c) is revised to require the filing
of information concerning all new discounts and surcharges.
Proposed rule 3010.12 is revised to ensure consistent use of terms
and to strike paragraph headings.
Proposed rule 3010.20 is revised to incorporate provisions from
existing rule 3010.11 and to ensure the consistent use of terms.
Proposed rule 3010.21 is revised to specify that it applies to rate
adjustments filed 12 or more months apart, to incorporate provisions
from existing rule 3010.12, and to ensure the consistent use of terms.
Proposed rule 3010.22 is revised to specify that it applies to rate
adjustments filed less than 12 months apart, to incorporate provisions
from existing rule 3010.12, and to ensure the consistent use of terms.
Proposed rule 3010.23(b) is revised to specify that the percentage
change in rates for a product is calculated in the same manner as for a
class.
Proposed rule 3010.23(d) is revised to specify that adjustments to
billing determinants may not be based on anticipated changes in mailer
behavior.
Proposed rule 3010.23(e) allows the exclusion of temporary
promotional rates and incentive programs from percentage change in
rates calculations if they result in overall rate decreases.
Proposed rule 3010.23(f) clarifies the manner in which the current
rate for a rate cell is calculated.
Proposed rule 3010.23 is revised throughout to ensure consistent
use of terms.
Proposed rule 3010.24 is revised to specify that it applies to
calculations under proposed rule 3010.23.
Proposed rule 3010.25 is revised to clarify that unused rate
adjustment authority may only be applied after applying the annual
limitation.
Proposed rule 3010.26 is revised clarify the manner in which unused
rate adjustment authority is calculated.
Proposed rule 3010.27 is revised to ensure the consistent use of
terms.
Proposed rule 3010.28 is revised to conform with 39 U.S.C.
3622(d)(2)(C)(iii)(IV) and to ensure the consistent use of terms.
Existing rule 3010.29 is stricken as an obsolete transition
provision.
Proposed rule 3010.42 is revised to use consistent formatting and
to ensure the consistent use of terms.
Proposed rule 3010.43 is revised to specify that both a plan and a
report are required and that the net financial position of the Postal
Service should be reported.
Proposed rule 3010.44 is revised to ensure consistent use of terms.
The heading of subpart E is revised to ensure consistent use of
terms.
Proposed rule 3010.60 is revised to ensure terms are consistent
with 39 U.S.C. 3622(d) and to ensure consistent use of terms.
Proposed rule 3010.61 is revised to ensure terms are consistent
with 39 U.S.C. 3622(d) and to ensure consistent use of terms.
Proposed rule 3010.63 is revised to be consistent with proposed
rule 3010.14(d) and to ensure the consistent use of terms.
Proposed rule 3010.65 is revised to ensure the consistent use of
terms.
Proposed rule 3010.66 is revised to ensure the consistent use of
terms.
VI. Ordering Paragraphs
It is ordered:
1. Docket No. RM2011-2 is closed.
2. Docket No. RM2013-2 is established for the purpose of receiving
comments with respect to the proposed rules attached to this notice.
3. Interested persons may submit comments no later than 30 days
after the date of publication of this proposed rulemaking in the
Federal Register.
4. Reply comments may be filed no later than 45 days after the date
of publication of this proposed rulemaking in the Federal Register.
5. Emmett Rand Costich is designated the Public Representative to
represent the interests of the general public in this docket.
6. The Secretary shall arrange for publication of this notice in
the Federal Register.
List of Subjects in 39 CFR Part 3010
Administrative practice and procedure; Postal Service.
[[Page 22495]]
By the Commission.
Shoshana M. Grove,
Secretary.
For the reasons stated above, the Postal Regulatory Commission
proposes to amend 39 CFR chapter III as follows:
PART 3010--REGULATION OF RATES FOR MARKET DOMINANT PRODUCTS
0
1. Revise part 3010 to read as follows:
PART 3010--REGULATION OF RATES FOR MARKET DOMINANT PRODUCTS
Subpart A--General Provisions
Sec.
3010.1 Definitions
3010.2 Applicability.
3010.3 Types of rate adjustments for market dominant products.
3010.4 Type 1-A rate adjustment--in general.
3010.5 Type 1-B rate adjustment--in general.
3010.6 Type 2 rate adjustment--in general.
3010.7 Type 3 rate adjustment--in general.
3010.8 Schedule for Regular and Predictable Rate Adjustments.
Subpart B--Rules for Rate Adjustments for Rates of General
Applicability (Type 1-A and 1-B Rate Adjustments)
3010.10 Procedures.
3010.11 Proceedings for Type 1-A and Type 1-B rate adjustment
filings.
3010.12 Contents of notice of rate adjustment.
Subpart C--Rules for Determining the Maximum Rate Adjustment
3010.20 Calculation of maximum rate adjustment.
3010.21 Calculation of annual limitation when notices of rate
adjustment are 12 or more months apart.
3010.22 Calculation of annual limitation when notices of rate
adjustment are less than 12 months apart.
3010.23 Calculation of percentage change in rates.
3010.24 Treatment of volume associated with negotiated service
agreements.
3010.25 Limitation on application of unused rate adjustment
authority. Unused rate adjustment authority may only be applied
after applying the annual limitation calculated pursuant to Sec.
3010.21 or Sec. 3010.22.
3010.26 Calculation of unused rate adjustment authority.
3010.27 Application of unused rate adjustment authority.
3010.28 Maximum size of unused rate adjustment authority rate
adjustments.
Subpart D--Rules for Rate Adjustments for Negotiated Service Agreements
(Type 2 Rate Adjustments)
3010.40 Negotiated service agreements.
3010.41 Procedures.
3010.42 Contents of notice of agreement in support of a Type 2 rate
adjustment.
3010.43 Data collection plan and report.
3010.44 Proceedings for Type 2 rate adjustments.
Subpart E--Rules for Rate Adjustments in Extraordinary and Exceptional
Circumstances (Type 3 Rate Adjustments)
3010.60 Applicability.
3010.61 Contents of exigent requests.
3010.62 Supplemental information.
3010.63 Treatment of unused rate adjustment authority.
3010.64 Expeditious treatment of exigent requests.
3010.65 Special procedures applicable to exigent requests.
3010.66 Deadline for Commission decision.
Authority: 39 U.S.C. 503; 3622.
PART 3010--REGULATION OF RATES FOR MARKET DOMINANT PRODUCTS
Subpart A--General Provisions
Sec. 3010.1 Definitions.
In this subpart,
(a) Annual limitation means:
(1) in the case of a notice of a Type 1-A or Type 1-B rate
adjustment filed 12 or more months after the last Type 1-A or Type 1-B
notice of rate adjustment, the full year limitation on the size of rate
adjustments calculated pursuant to Sec. 3010.21; and
(2) in the case of a notice of a Type 1-A or Type 1-B rate
adjustment filed less than 12 months after the last Type 1-A or Type 1-
B notice of rate adjustment, the partial year limitation on the size of
rate adjustments calculated pursuant to Sec. 3010.22.
(b) Class means a class of market dominant products.
(c) Maximum rate adjustment means the maximum rate adjustment that
the Postal Service may make for a class pursuant to a notice of Type 1-
A or Type 1-B rate adjustment. The maximum rate adjustment is
calculated in accordance with Sec. 3010.20.
(d) Type 1-A rate adjustment means a rate adjustment described in
Sec. 3010.4.
(e) Type 1-B rate adjustment means a rate adjustment described in
Sec. 3010.5.
(f) Type 2 rate adjustment means a rate adjustment described in
Sec. 3010.6.
(g) Type 3 rate adjustment means a rate adjustment described in
Sec. 3010.7.
(h) Unused rate adjustment authority means the percentage
calculated pursuant to Sec. 3010.26.
Sec. 3010.2 Applicability.
The rules in this part implement provisions in subchapter I of
chapter 36 of title 39, United States Code, establishing ratesetting
policies and procedures for market dominant products. With the
exception of Type 3 rate adjustments, these procedures allow a minimum
of 45 days for advance public notice of the Postal Service's planned
rate adjustments. Type 3 rate adjustments require the Postal Service to
file a formal request with the Commission and are subject to special
procedures.
Sec. 3010.3 Types of rate adjustments for market dominant products.
(a) There are four types of rate adjustments for market dominant
products. A Type 1-A rate adjustment is authorized under 39 U.S.C.
3622(d)(1)(D). A Type 1-B rate adjustment is authorized under 39 U.S.C.
3622(d)(2)(C). A Type 2 rate adjustment is authorized under 39 U.S.C.
3622(c)(10). A Type 3 rate adjustment is authorized under 39 U.S.C.
3622(d)(1)(E).
(b) The Postal Service may combine Type 1-A, Type 1-B, and Type 2
rate adjustments for purposes of filing with the Commission.
Sec. 3010.4 Type 1-A rate adjustment--in general.
(a) A Type 1-A rate adjustment is a rate adjustment based on the
annual limitation.
(b) A Type 1-A rate adjustment may result in a rate adjustment that
is less than or equal to the annual limitation, but may not exceed the
annual limitation.
(c) A Type 1-A rate adjustment for any class that is less than the
applicable annual limitation results in unused rate adjustment
authority associated with that class. Part or all of the unused rate
adjustment authority may be used in a subsequent rate adjustment for
that class, subject to the expiration terms in Sec. 3010.26(e).
Sec. 3010.5 Type 1-B rate adjustment--in general.
A Type 1-B rate adjustment is a rate adjustment which uses unused
rate adjustment authority in whole or in part.
Sec. 3010.6 Type 2 rate adjustment--in general.
A Type 2 rate adjustment is based on a negotiated service
agreement. A negotiated service agreement entails a rate adjustment
negotiated between the Postal Service and a customer or group of
customers.
Sec. 3010.7 Type 3 rate adjustment--in general.
(a) A Type 3 rate adjustment is a rate adjustment that is
authorized only when justified by exceptional or extraordinary
circumstances.
(b) A Type 3 rate adjustment is not subject to the annual
limitation or the restrictions on the use of unused rate adjustment
authority, and does not
[[Page 22496]]
implement a negotiated service agreement.
(c) A Postal Service request for a Type 3 rate adjustment is
subject to public participation and Commission review within 90 days.
Sec. 3010.8 Schedule for regular and predictable rate adjustments.
(a) The Postal Service shall maintain on file with the Commission a
Schedule for Regular and Predictable Rate Adjustments. The Commission
shall display the Schedule for Regular and Predictable Rate Adjustments
on the Commission Web site, http://www.prc.gov.
(b) The Schedule for Regular and Predictable Rate Adjustments shall
provide mailers with estimated implementation dates for future Type 1-A
rate adjustments for each separate class of mail, should such
adjustments be necessary and appropriate. Rate adjustments will be
scheduled at specified regular intervals.
(c) The Schedule for Regular and Predictable Rate Adjustments shall
provide an explanation that will allow mailers to predict with
reasonable accuracy the amounts of future scheduled rate adjustments.
(d) The Postal Service should balance its financial and operational
needs with the convenience of mailers of each class of mail in
developing the Schedule for Regular and Predictable Rate Adjustments.
(e) Whenever the Postal Service deems it appropriate to change the
Schedule for Regular and Predictable Rate Adjustments, it shall file a
revised schedule and explanation with the Commission.
(f) The Postal Service may, for good cause shown, vary rate
adjustments from those estimated by the Schedule for Regular and
Predictable Rate Adjustments. In such case, the Postal Service shall
provide a succinct explanation for such variation with its Type 1-A
filing. No explanation is required for variations involving smaller
than predicted rate adjustments.
Subpart B--Rules for Rate Adjustments for Rates of General
Applicability (Type 1-A and 1-B Rate Adjustments)
Sec. 3010.10 Procedures.
(a) The Postal Service, in every instance in which it determines to
exercise its statutory authority to make a Type 1-A or Type 1-B rate
adjustment for a class shall:
(1) Provide public notice in a manner reasonably designed to inform
the mailing community and the general public that it intends to adjust
rates no later than 45 days prior to the intended implementation date
of the rate adjustment; and
(2) Transmit a notice of rate adjustment to the Commission no later
than 45 days prior to the intended implementation date of the rate
adjustment.
(b) The Postal Service is encouraged to provide public notice and
to submit its notice of rate adjustment as far in advance of the 45-day
minimum as practicable, especially in instances where the intended rate
adjustments include classification changes or operations changes likely
to have a material impact on mailers.
Sec. 3010.11 Proceedings for Type 1-A and Type 1-B rate adjustment
filings.
(a) The Commission will establish a docket for each notice of Type
1-A or Type 1-B rate adjustment filing, promptly publish notice of the
filing in the Federal Register, and post the filing on its Web site.
The notice shall include:
(1) The general nature of the proceeding;
(2) A reference to legal authority under which the proceeding is to
be conducted;
(3) A concise description of the planned changes in rates, fees,
and the Mail Classification Schedule;
(4) The identification of an officer of the Commission to represent
the interests of the general public in the docket;
(5) A period of 20 days from the date of the filing for public
comment; and
(6) Such other information as the Commission deems appropriate.
(b) Public comments should focus primarily on whether planned rate
adjustments comply with the following mandatory requirements of 39
U.S.C. chapter 36, subchapter 1:
(1) Whether the planned rate adjustments measured using the formula
established in Sec. 3010.23(b) are at or below the annual limitation
calculated under Sec. 3010.21 or Sec. 3010.22, as applicable; and
(2) Whether the planned rate adjustments measured using the formula
established in Sec. 3010.23(b) are at or below the limitations
established in Sec. 3010.28.
(c) Public comments may also address other relevant statutory
provisions and applicable Commission orders and directives.
(d) Within 14 days of the conclusion of the public comment period
the Commission will determine, at a minimum, whether the planned rate
adjustments are consistent with the annual limitation calculated under
Sec. 3010.21 or Sec. 3010.22, as applicable, and the limitations set
forth in Sec. 3010.28 and 39 U.S.C. 3626, 3627, and 3629 and issue an
order announcing its findings.
(e) If the planned rate adjustments are found consistent with
applicable law by the Commission, they may take effect pursuant to
appropriate action by the Governors.
(f) If planned rate adjustments are found inconsistent with
applicable law by the Commission, the Postal Service will submit an
amended notice of rate adjustment that describes the modifications to
its planned rate adjustments that will bring its rate adjustments into
compliance. An amended notice of rate adjustment shall be accompanied
by sufficient explanatory information to show that all deficiencies
identified by the Commission have been corrected.
(g) The Commission will post any amended notice of rate adjustment
filing on its Web site and allow a period of 7 days from the date of
the filing for public comment. Comments in the amended notice of rate
adjustment should address the subjects identified in paragraph (b) and
may address the subjects identified in paragraph (c).
(h) The Commission will review any amended notice of rate
adjustment together with any comments filed for compliance and within
14 days issue an order announcing its findings.
(i) If the planned rate adjustments as amended are found to be
consistent with applicable law, they may take effect pursuant to
appropriate action by the Governors. However, no rate shall take effect
until 45 days after the Postal Service files a notice of rate
adjustment specifying that rate.
(j) If the planned rate adjustments in an amended notice of rate
adjustment are found to be inconsistent with applicable law, the
Commission shall explain the basis of its determination and suggest an
appropriate remedy.
(k) A Commission finding that a planned Type 1-A or Type 1-B rate
adjustment is in compliance with the annual limitation calculated under
Sec. 3010.21 or Sec. 3010.22, as applicable; the limitations set
forth in Sec. 3010.28; and 39 U.S.C. 3626, 3627, and 3629 is decided
on the merits. A Commission finding that a planned Type 1-A or Type 1-B
rate adjustment does not contravene other policies of subchapter 1 of
title 39 of the U.S. Code is provisional and subject to subsequent
review.
[[Page 22497]]
Sec. 3010.12 Contents of notice of rate adjustment.
(a) A Type 1-A or Type 1-B notice of rate adjustment must include
the following information:
(1) A schedule of the planned rates;
(2) The planned effective date(s) of the planned rates;
(3) A representation or evidence that public notice of the planned
changes has been issued or will be issued at least 45 days before the
effective date(s) for the planned rates; and
(4) The identity of a responsible Postal Service official who will
be available to provide prompt responses to requests for clarification
from the Commission.
(b) The notice of rate adjustment shall be accompanied by:
(1) The annual limitation calculated as required by Sec. 3010.21
or Sec. 3010.22, as appropriate. This information must be supported by
workpapers in which all calculations are shown, and all input values
including all relevant CPI-U values are listed with citations to the
original sources;
(2) A schedule showing unused rate adjustment authority available
for each class of mail displayed by class and available amount for each
of the preceding 5 years. This information must be supported by
workpapers in which all calculations are shown;
(3) The percentage change in rates for each class of mail
calculated as required by Sec. 3010.23. This information must be
supported by workpapers in which all calculations are shown, and all
input values including current rates, new rates, and billing
determinants are listed with citations to the original sources;
(4) The amount of new unused rate adjustment authority, if any,
that will be generated by the rate adjustment calculated as required by
Sec. 3010.26. All calculations are to be shown with citations to the
original sources. If new unused rate adjustment authority will be
generated for a class of mail that is not expected to cover its
attributable costs, the Postal Service must provide the rationale
underlying this rate adjustment;
(5) A schedule of the workshare discounts included in the planned
rates, and a companion schedule listing the avoided costs that underlie
each such discount. This information must be supported by workpapers in
which all calculations are shown, and all input values are listed with
citations to the original sources;
(6) Separate justification for all proposed workshare discounts
that exceed avoided costs. Each such justification shall reference
applicable reasons identified in 39 U.S.C. 3622(e)(2) or (3). The
Postal Service shall also identify and explain discounts that are set
substantially below avoided costs and explain any relationship between
discounts that are above and those that are below avoided costs;
(7) A discussion that demonstrates how the planned rate adjustments
are designed to help achieve the objectives listed in 39 U.S.C. 3622(b)
and properly take into account the factors listed in 39 U.S.C. 3622(c);
(8) A discussion that demonstrates the planned rate adjustments are
consistent with 39 U.S.C. 3626, 3627, and 3629;
(9) A schedule identifying every change to the Mail Classification
Schedule that will be necessary to implement the planned rate
adjustments; and
(10) Such other information as the Postal Service believes will
assist the Commission to issue a timely determination of whether the
planned rate adjustments are consistent with applicable statutory
policies.
(c) Whenever the Postal Service establishes a new discount or
surcharge, it must include with its filing:
(1) A statement explaining its reasons for establishing the
discount or surcharge;
(2) All data, economic analyses, and other information relied on to
justify the discount or surcharge; and
(3) In the case of a discount, 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 discount.
(d) The notice of rate adjustment shall identify for each affected
class how much existing unused rate adjustment authority is used in the
planned rates calculated as required by Sec. 3010.27. All calculations
are to be shown, including citations to the original sources.
(e) All cost, avoided cost, volume, and revenue figures submitted
with the notice of rate adjustment shall be developed from the most
recent applicable Commission approved analytical principles.
Subpart C--Rules for Determining the Maximum Rate Adjustment
Sec. 3010.20 Calculation of maximum rate adjustment.
(a) Rate adjustments for each class of market dominant products in
any 12-month period are limited.
(b) Rates of general applicability are subject to an inflation-
based annual limitation computed using CPI-U values as detailed in
Sec. 3010.21(a) and Sec. 3010.22(a).
(c) An exception to the annual limitation allows a limited annual
recapture of unused rate adjustment authority. The amount of unused
rate adjustment authority is measured separately for each class.
(d) In any 12-month period the maximum rate adjustment applicable
to a class is:
(1) for a Type 1-A notice of rate adjustment, the annual limitation
for the class; and
(2) for a combined Type 1-A and Type 1-B notice of rate adjustment,
the annual limitation for the class plus the unused rate adjustment
authority for the class that the Postal Service elects to use, subject
to the limitation under Sec. 3010.28.
Sec. 3010.21 Calculation of annual limitation when notices of rate
adjustment are 12 or more months apart.
(a) The monthly CPI-U values needed for the calculation of the full
year limitation under this section 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.''
(b) If a notice of a Type 1-A or Type 1-B rate adjustment is filed
12 or more months after the last Type 1-A or Type 1-B notice of rate
adjustment applicable to a class, then the calculation of an annual
limitation for the class (referred to as the 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 the Postal Service files its notice of rate adjustment and
dividing the sum by 12 (Recent Average). Then, 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). Finally, 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.
(c) The formula for calculating a full year limitation for a notice
of rate adjustment filed 12 or more months after the last notice is as
follows:
Full Year Limitation = (Recent Average/Base Average) - 1.
[74 FR 49327, Sept. 28, 2009]
Sec. 3010.22 Calculation of annual limitation when notices of rate
adjustment are less than 12 months apart.
(a) The monthly CPI-U values needed for the calculation of the
partial year
[[Page 22498]]
limitation under this section 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.''
(b) If a notice of a Type 1-A or Type 1-B rate adjustment is filed
less than 12 months after the last Type 1-A or Type 1-B notice of rate
adjustment applicable to a class, then the annual limitation for the
class (referred to as the 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.
(c) 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 the
Postal Service files its notice of rate adjustment and dividing the sum
by 12 (Recent Average). The partial year limitation is then calculated
by dividing the Recent Average by the Recent Average from the most
recent previous notice of rate adjustment (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.
(d) The formula for calculating the partial year limitation for a
notice of rate adjustment filed less than 12 months after the last
notice is as follows:
Partial Year Limitation = (Recent Average/Previous Recent Average) -1.
Sec. 3010.23 Calculation of percentage change in rates.
(a) In this section, the term rate cell means each and every
separate rate identified in any applicable notice of rate adjustment
for rates of general applicability. A seasonal or temporary rate shall
be identified and treated as a rate cell separate and distinct from the
corresponding non-seasonal or permanent rate.
(b) 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. Then,
the same set of rate cell volumes are multiplied by the corresponding
current rate, as defined in paragraph (f) of this section, for each
cell and the resulting products are summed. Finally, 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.
(c) The formula for calculating the percentage change in rates for
a class described in paragraph (b) of this section is as follows:
Percentage change in rates =
[GRAPHIC] [TIFF OMITTED] TP16AP13.002
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
Vi = volume of rate cell i
(d) The volumes for each rate cell shall be obtained from the most
recent available 12 months of Postal Service billing determinants. 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. Whenever
possible, adjustments shall be based on known mail characteristics.
Adjustments to billing determinants may not be based on anticipated
changes in mailer behavior. 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.
(e) Temporary promotional rates and incentive programs. The Postal
Service may exclude temporary promotional rates and incentive programs
from its percentage change in rates calculations if the temporary
promotional rates and incentive programs result in overall rate
decreases.
(f) Current rate. For purposes of this section, the current rate
for a rate cell is the rate that corresponds to the billing
determinants described in paragraph (d) for the rate cell. For rate
cells that include a temporary promotional rate or incentive program
that was previously excluded under paragraph (e), the current rate is
the generally applicable rate for the rate cell at the time of the
filing of the notice of rate adjustment, not the temporary promotional
rate or incentive program rate in effect for the rate cell at such
time.
Sec. 3010.24 Treatment of volume associated with negotiated service
agreements.
(a) Mail volumes sent at rates under negotiated service agreements
are to be included in the calculation of percentage change in rates
under Sec. 3010.23 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 shall be excluded from the
calculation of percentage change in rates.
(b) The Postal Service shall identify and explain all assumptions
it makes with respect to the treatment of negotiated service agreements
in the calculation of the percentage change in rates and provide the
rationale for its assumptions.
Sec. 3010.25 Limitation on application of unused rate adjustment
authority.
Unused rate adjustment authority may only be applied after applying
the annual limitation calculated pursuant to Sec. 3010.21 or Sec.
3010.22.
Sec. 3010.26 Calculation of unused rate adjustment authority.
(a) Unused rate adjustment authority accrues during the entire
period between notices of Type 1-A and Type 1-B rate adjustments. When
notices of Type 1-A or Type 1-B rate adjustments are filed 12 months
apart or less, the unused rate adjustment authority is the annual
unused rate adjustment authority calculated under paragraph (b). When
notices of Type 1-A or Type 1-B rate adjustments are filed more than 12
months apart, unused rate adjustment authority is the sum of the annual
unused rate adjustment calculated under paragraph (b) plus the interim
unused rate adjustment authority calculated under paragraph (c)(2),
less any interim unused rate adjustment authority used in accordance
with paragraph (d).
(b) When notices of Type 1-A or Type 1-B rate adjustments are filed
12 months apart or less, annual unused rate adjustment authority will
be calculated. Annual unused rate adjustment authority for a class is
equal to the difference between the annual limitation calculated
pursuant to Sec. 3010.21 or Sec. 3010.22 and the actual percentage
change in rates for the class.
(c)(1) When notices of Type 1-A or Type 1-B rate adjustments are
filed more than 12 months apart, annual unused rate adjustment
authority will be calculated for the 12-month period ending on the date
on which the second notice is filed and interim unused rate adjustment
authority will be calculated for the period beginning on the date the
first notice is filed and ending on the
[[Page 22499]]
day before the date that is 12 months before the second notice is
filed.
(2) Interim unused rate adjustment authority is equal to the Base
Average applicable to the second notice of rate adjustment (as
developed pursuant to Sec. 3010.21(a)) divided by the Recent Average
utilized in the first notice of rate adjustment (as developed pursuant
to Sec. 3010.21(a)) and subtracting 1 from the quotient. The result is
expressed as a percentage.
(d) Interim unused rate adjustment authority may be used to make a
rate adjustment pursuant to the second of two notices of rate
adjustment filed more than 12 months apart.
(e) Unused rate adjustment authority lapses 5 years after the date
of filing of the notice of rate adjustment leading to its calculation.
(f) Upon the establishment of unused rate adjustment authority in
any class, the Postal Service shall devise and maintain a schedule that
tracks the establishment and subsequent use of unused rate adjustment
authority for that class.
Sec. 3010.27 Application of unused rate adjustment authority.
When the percentage change in rates for a class is greater than the
applicable annual limitation, then the difference between the
percentage change in rates for the class and the annual limitation
shall be subtracted from the existing unused rate adjustment authority
for the class, using a first-in, first-out (FIFO) method, beginning 5
years before the instant notice.
Sec. 3010.28 Maximum size of unused rate adjustment authority rate
adjustments.
Unused rate adjustment authority used to make a Type 1-B rate
adjustment for any class in any 12-month period may not exceed 2
percentage points.
Subpart D--Rules for Rate Adjustments for Negotiated Service
Agreements (Type 2 Rate Adjustments)
Sec. 3010.40 Negotiated service agreements.
(a) In administering this subpart, it shall be the objective of the
Commission to allow implementation of negotiated service agreements
that satisfy the statutory requirements of 39 U.S.C. 3622(c)(10).
Negotiated service agreements must either:
(1) Improve the net financial position of the Postal Service (39
U.S.C. 3622(c)(10)(A)(i)); or
(2) Enhance the performance of operational functions (39 U.S.C.
3622(c)(10)(A)(ii)).
(b) Negotiated service agreements may not cause unreasonable harm
to the marketplace (39 U.S.C. 3622(c)(10)(B)).
(c) Negotiated service agreements must be available on public and
reasonable terms to similarly situated mailers.
Sec. 3010.41 Procedures.
The Postal Service, in every instance in which it determines to
exercise its statutory authority to make a Type 2 rate adjustment for a
market dominant postal product shall provide public notice in a manner
reasonably designed to inform the mailing community and the general
public that it intends to change rates not later than 45 days prior to
the intended implementation date; and transmit a notice of agreement to
the Commission no later than 45 days prior to the intended
implementation date.
Sec. 3010.42 Contents of notice of agreement in support of a Type 2
rate adjustment.
Whenever the Postal Service proposes to establish or change rates,
fees, or the Mail Classification Schedule based on a negotiated service
agreement, the Postal Service shall file with the Commission a notice
of agreement that shall include at a minimum:
(a) A copy of the negotiated service agreement;
(b) The planned effective date(s) of the planned rates;
(c) A representation or evidence that public notice of the planned
rate adjustments has been issued or will be issued at least 45 days
before the effective date(s) for the planned rates; and
(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. The projection
of 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; and
(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.
(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.
(i) Such other information as the Postal Service believes will
assist the Commission to issue a timely determination of whether the
requested changes are consistent with applicable statutory policies.
Sec. 3010.43 Data collection plan and report.
(a) The Postal Service shall include with any notice of 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:
(A) The actual mailer-specific costs, volumes, and revenues of the
Postal Service;
(B) An analysis of the effects of the negotiated service agreement
on the net overall contribution to the institutional costs of the
Postal Service; and
(C) 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
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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.
Sec. 3010.44 Proceedings for Type 2 rate adjustments.
(a) The Commission will establish a docket for each notice of Type
2 rate adjustment filed, promptly publish notice of the filing in the
Federal Register, and post the filing on its Web site. The notice shall
include:
(1) The general nature of the proceeding;
(2) A reference to legal authority under which the proceeding is to
be conducted;
(3) A concise description of the planned changes in rates, fees,
and the Mail Classification Schedule;
(4) The identification of an officer of the Commission to represent
the interests of the general public in the docket;
(5) A period of 10 days from the date of the filing for public
comment; and
(6) Such other information as the Commission deems appropriate.
(b) The Commission shall review the planned Type 2 rate adjustments
and the comments thereon, and issue an order announcing its findings.
So long as such adjustments are not inconsistent with 39 U.S.C. 3622,
they may take effect pursuant to appropriate action by the Governors.
However, no rate shall take effect until 45 days after the Postal
Service files a notice of rate adjustment specifying that rate.
(c) Commission findings that a planned Type 2 rate adjustment is
not inconsistent with 39 U.S.C. 3622 are provisional and subject to
subsequent review.
Subpart E--Rules for Rate Adjustments in Extraordinary and
Exceptional Circumstances (Type 3 Rate Adjustments)
Sec. 3010.60 Applicability.
The Postal Service may request to adjust rates for market dominant
products in excess of the maximum rate adjustment due to extraordinary
or exceptional circumstances. In this subpart, such requests are
referred to as exigent requests.
Sec. 3010.61 Contents of exigent requests.
(a) Each exigent request shall include the following:
(1) A schedule of the proposed rates;
(2) Calculations quantifying the increase for each affected product
and class;
(3) 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;
(4) 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;
(5) A full discussion of why the requested rate adjustments are
reasonable and equitable as among types of users of market dominant
products;
(6) 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;
(7) 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; and
(8) Such other information as the Postal Service believes will
assist the Commission to issue a timely determination of whether the
requested rate adjustments are consistent with applicable statutory
policies.
(b) The Postal Service shall identify one or more knowledgeable
Postal Service official(s) who will be available to provide prompt
responses to Commission requests for clarification related to each
topic specified in Sec. 3010.61(a).
Sec. 3010.62 Supplemental information.
The Commission may require the Postal Service to provide
clarification of its request or to provide information in addition to
that called for by Sec. 3010.61 in order to gain a better
understanding of the circumstances leading to the request or the
justification for the specific rate increases requested.
Sec. 3010.63 Treatment of unused rate adjustment authority.
(a) Each exigent request will identify the unused 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) Pursuant to an exigent request, rate adjustments may use
existing unused rate adjustment authority in amounts greater than the
limitation described in Sec. 3010.28.
(c) Exigent increases will exhaust all unused 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.
Sec. 3010.64 Expeditious treatment of exigent requests.
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.
Sec. 3010.65 Special procedures applicable to exigent requests.
(a) The Commission will establish a docket for each exigent
request, promptly publish notice of the request in the Federal
Register, and post the filing on its Web site. The notice shall
include:
(1) The general nature of the proceeding;
(2) A reference to legal authority to which the proceeding is to be
conducted;
(3) A concise description of the proposals for changes in rates,
fees, and the Mail Classification Schedule;
(4) The identification of an officer of the Commission to represent
the interests of the general public in the docket;
(5) A specified period for public comment; and
(6) Such other information as the Commission deems appropriate.
(b) The Commission will hold a public hearing on the Postal Service
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 the supporting information
provided in response to the topics specified in Sec. 3010.61(a).
(c) 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. 3001.9, and will become part of the
administrative record of the proceeding.
(d) 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.
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(e) If the Postal Service is unable to provide adequate
explanations during the public hearing, supplementary written or oral
responses may be required.
(f) 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
increase;
(2) The adequacy of the justification for increases in the amounts
requested by the Postal Service; and
(3) Whether the specific rate adjustments requested are reasonable
and equitable.
(g) An opportunity to submit written reply comments will be given
to the Postal Service and other interested persons.
Sec. 3010.66 Deadline for Commission decision.
The Commission will act expeditiously on the Postal Service
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.
[FR Doc. 2013-08805 Filed 4-15-13; 8:45 am]
BILLING CODE 7710-FW-P