[Federal Register Volume 59, Number 245 (Thursday, December 22, 1994)]
[Unknown Section]
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From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-31344]
[[Page Unknown]]
[Federal Register: December 22, 1994]
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POSTAL RATE COMMISSION
39 CFR Part 3001
[Docket No. RM95-1; Order No. 1038]
Express Mail Market Response Rate Requests: Rules of Practice and
Procedure
AGENCY: Postal Rate Commission.
ACTION: Notice of Proposed Rulemaking.
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SUMMARY: In response to a petition filed by the Postal Service, the
Postal Rate Commission proposes to re-enact its rules of practice
allowing expedited consideration of Express Mail market response rate
requests. These rules expired recently pursuant to a sunset provision.
Re-enactment will insure the continued existence of a flexible
ratemaking mechanism for consideration of changes in Express Mail rates
between omnibus rate cases when required by market conditions.
DATES: Comments should be filed by January 23, 1995.
ADDRESSES: Comments should be sent to Charles L. Clapp, Secretary of
the Commission, 1333 H Street NW, 20268-0001. Comments will be
available for inspection and photocopying at the Commission's Docket
Room.
FOR FURTHER INFORMATION CONTACT: Stephen Sharfman, Legal Advisor (202)
789-6820.
SUPPLEMENTARY INFORMATION: On August 15, 1994, the Postal Service filed
a petition for institution of a rulemaking to re-enact Commission rules
of practice and procedure on Postal Service requests for changes in
Express Mail rates in response to market conditions. These rules were
the outcome of Docket No. RM88-2, Express Mail Rulemaking. That
rulemaking, like this one, was instituted at the Service's request. The
rules that were finally issued differed from those initially proposed
by the Service. They are codified at 39 CFR 3001.57-3001.57c. They took
effect August 16, 1989. At that time, they were identified as
experimental rules and issued subject to a five-year sunset provision.
That period has expired.
As the Service notes in its recent petition, the original impetus
for adoption of these rules was a period of intense price competition
in the expedited (overnight) delivery market. Postal Service Petition
at 2. Prior to their adoption, rates for Express Mail service could be
set only by filing a formal request under rule 54. Rule 54 requires
detailed information on costs, revenues, elasticities of demand and
entails numerous procedural stages. See 39 CFR 3001.54. Fulfillment of
these requirements generally means that decisions on rate change
requests require the full ten months allowed by the statute. This
effectively forecloses prompt responses to frequent price changes. See
generally 54 FR 33681 (August 16, 1989). As rapid price changes were
the hallmark of expedited delivery competition in the early-to-mid
1980s, it was believed that a flexible ratemaking mechanism would allow
the Postal Service to respond more effectively to market conditions.
In support of its petition for re-enactment, the Postal Service
acknowledges that it has never invoked the market response rules.
However, it asserts several reasons for their retention. One is that
the overnight delivery market remains competitive, primarily on price.
Another is Express Mail's emergence as a low-cost alternative for
household users and small- and medium-volume businesses not eligible
for discounts from other carriers' published rates. A third is
preservation of Express Mail's contribution to institutional costs.
The Commission's initial review of the Service's petition leads it
to agree that the Express Mail market response rules should be
retained. Interested parties are invited to comment on the
appropriateness of this action. The Commission directs W. Gail
Willette, Acting Director of the Office of the Consumer Advocate, to
participate to the extent necessary to fulfill her responsibilities
under 39 CFR 3002.7 and part 3002, Appendix A.
II. Regulatory Flexibility Act
Pursuant to section 605(b) of the Regulatory Flexibility Act, the
PRC hereby certifies that this notice of proposed rulemaking is not
expected to have a significant economic impact on a substantial number
of small entities. Accordingly, a regulatory flexibility analysis is
not required.
III. List of Subjects in 39 CFR Part 3001
Administrative practice and procedure, Postal Service.
1. The authority citation for 39 CFR part 3001 continues to read as
follows:
Authority: 39 U.S.C. Sec. 404(b), 3603, 3622-3624, 3661, 3662.
2. Sections 3001.57 through 3001.57c are added to Subpart B to read
as follows:
Sec. 3001.57 Market response rate requests for Express Mail service--
purpose and duration of rules.
(a) This section and Secs. 3001.57a through 3001.57c only apply in
cases in which the Postal Service requests an expedited recommended
decision pursuant to section 3622 of the Postal Reorganization Act on
changes in rates and fees for Express Mail service, where the proposed
changes are intended to respond to a change in the market for expedited
delivery services for the purpose of minimizing the loss of Express
Mail contribution to institutional costs recommended in the most recent
omnibus rate case. These rules set forth the requirements for filing
data in support of such rate proposals and for providing notice of such
requests, and establish an expedited procedural schedule for evaluating
Market Response Rate Requests. These rules may not be used when the
Postal Service is requesting changes in Express Mail rates as part of
an omnibus rate case. Further explanation concerning these rules can be
found at 54 FR 11394-413 (March 20, 1989), 54 FR 251342-42 (June 13,
1989) and PRC Order No. 836.
(b) This section and Secs. 3001.57a through 3001.57c are initially
to be effective for the limited period of five years from the date of
their adoption by the Commission. During that period the Commission
will continue to analyze the need for these rules to enable the Postal
Service to respond to changes in the market for expedited delivery
services, and the impact of these procedures on Postal Service
proposals. These rules will cease to be effective at the end of this
period unless they have been reissued by the Commission following a
Notice of Proposed Rulemaking published in the Federal Register which
provides an appropriate opportunity for public comments.
Sec. 3001.57a Market Response Rate Requests--data filing requirements.
(a) Each formal request made under the provisions of Secs. 3001.57
through 3001.57c shall be accompanied by such information and data as
are necessary to inform the Commission and the parties of the nature
and expected impact of the change in rates proposed. Except for good
cause shown, the information specified in paragraphs (c) through (i) of
this section shall also be provided with each request.
(b) Except as otherwise expressly provided in this section, the
information required by Sec. 3001.54 (b) through (r) must be filed only
for those subclasses and services for which the Postal Service requests
a change in rates or fees. Test period volume, cost, and revenue
estimates presented in satisfaction of rule 57a shall be for four
postal quarters beginning after the filing date of the request. The
cost roll-forward may be developed by extending the cost forecasting
model used in the last omnibus rate case (utilizing available actual
data). Volume and revenue estimates required by these rules shall
utilize, to the extent practicable, the factors identified in rule 54
(j)(6), and must be fully explained, with all available supporting
documentation supplied, but they need not be econometrically derived.
(c) Every formal request made under the provisions of Secs. 3001.57
through 3001.57c shall contain an explanation of why the change
proposed by the Postal Service is a reasonable response to the change
in the market for expedited delivery services to which it is intended
to respond.
(d) Every formal request made under the provisions of Secs. 3001.57
through 3001.57c shall be accompanied by the then effective Domestic
Mail Classification Schedule sections which would have to be altered in
order to implement the changes proposed by the Postal Service, and,
arranged in a legislative format, the text of the replacement Domestic
Mail Classification Schedule sections the Postal Service proposes.
(e) In addition to the required test period cost estimates, every
formal request made under the provisions of Secs. 3001.57 through
3001.57c shall be accompanied by a statement of the attributable costs
by segment and component for Express Mail service determined in
accordance with the attributable cost methodology adopted by the
Commission in the most recent omnibus rate case, for the base year used
in that case, and for each fiscal year thereafter for which cost data
is available. If the Postal Service believes that an adjustment to that
methodology is warranted it may also provide costs using alternative
methodologies as long as a full rationale for the proposed changes is
provided.
(f) Each formal request made under the provisions of Secs. 3001.57
through 3001.57c shall include a description of all operational
changes, occurring since the most recent omnibus rate case, having an
important impact on the attributable cost of Express Mail. Postal
Service shall include an analysis and estimate of the cost impact of
each such operational change.
(g) Every formal request made under the provisions of Secs. 3001.57
through 3001.57c shall be accompanied by a statement of the actual
Express Mail revenues of the Postal Service from the then effective
Express Mail rates and fees for the most recent four quarters for which
information is available.
(h) Each formal request made under the provisions of Secs. 3001.57
through 3001.57c shall be accompanied by a complete description of the
change in the market for expedited delivery services to which the
Postal Service proposal is in response, a statement of when that change
took place, the Postal Service's analysis of the anticipated impact of
that change on the market, and a description of characteristics and
needs of customers and market segments affected by this change which
the proposed Express Mail rates are designed to satisfy.
(i) Each formal request made under the provisions of Secs. 3001.57
through 3001.57c shall include estimates, on a quarterly basis, of test
period volumes, revenues, and attributable costs determined in
accordance with the attributable cost methodology adopted by the
Commission in the most recent omnibus rate case for each Express Mail
service for which rate changes are proposed assuming:
(1) Rates remain at their existing levels, and
(2) Rates are changed after 90 days to the levels suggested in the
request.
(j)(1) Each formal request made under the provisions of
Secs. 3001.57 through 3001.57c shall be accompanied by the following
information, for each quarter following the base year in the most
recent omnibus rate case:
(i) Estimated volume by rate cell, for each Express Mail service;
(ii) Total postage pounds of Express Mail rated at:
(A) Up to \1/2\ pound,
(B) \1/2\ pound up to 2 pounds,
(C) 2 pounds up to 5 pounds; and
(iii) Total pounds of Express Mail and of each other subclass of
mail carried on hub contracts.
(2) In each instance when rates change based on a proceeding under
the provisions of Secs. 3001.57 through 3001.57c the Postal Service
shall provide, one year after the conclusion of the test period, the
data described in Sec. 3001.57a(j)(1)(i-iii), for each of the four
quarters of the test period.
(k) Each formal request made under the provisions of Secs. 3001.57
through 3001.57c shall include analyses to demonstrate:
(1) That the proposed rates are consistent with the factors listed
in 39 U.S.C. 3622 (b),
(2) That the proposed rate changes are in the public interest and
in accordance with the policies and applicable criteria of the Act, and
(3) That the proposed rates will preserve, or minimize erosion of,
the Express Mail contribution to institutional costs recommended in the
most recent omnibus rate case.
(l) Each formal request made under the provisions of Secs. 3001.57
through 3001.57c shall be accompanied by a certificate that service of
the filing in accordance with Sec. 3001.57b (c) has been made.
Sec. 3001.57b Market Response Rate Requests--expedition of public
notice and procedural schedule.
(a) The purpose of this section is to provide a schedule for
expediting proceedings when a trial-type hearing is required in a
proceeding in which the Postal Service proposes to adjust rates for
Express Mail service in order to respond to a change in the market for
expedited delivery services.
(b) The Postal Service shall not propose for consideration under
the provisions of Secs. 3001.57 through 3001.57c rates lower than:
(1) The average per piece attributable cost for Express Mail
service determined in the most recent omnibus rate case, or
(2) The average per piece attributable cost for Express Mail
service as determined by the Postal Service in accordance with
Sec. 3001.57a (e) for the most recent fiscal year for which information
is available, whichever is higher. Neither shall the Postal Service
propose a rate for any rate cell which is lower than the estimated test
period attributable cost of providing that rate cell with service.
(c) (1) Persons who are interested in participating in Express Mail
Market Response Rate Request cases may register at any time with the
Secretary of the Postal Rate Commission, who shall maintain a publicly
available list of the names and business addresses of all such Express
Mail Market Response Registrants. Persons whose names appear on this
list will automatically become parties to each Express Mail Market
Response rate proceeding. Other interested persons may intervene
pursuant to Sec. 3001.20 within 28 days of the filing of a formal
request made under the provisions of Secs. 3001.57 through 3001.57c.
Parties may withdraw from the register or a case by filing a notice
with the Commission.
(2) When the Postal Service files a request under the provisions of
Secs. 3001.57 through 3001.57c it shall on that same day effect service
by hand delivery of the complete filing to each Express Mail Market
Response Registrant who maintains an address for service within the
Washington metropolitan area and serve the complete filing by Express
Mail service on all other Registrants. Each Registrant is responsible
for insuring that his or her address remains current.
(3) When the Postal Service files a request under the provisions of
Secs. 3001.57 through 3001.57c, it shall on that same day send by
Express Mail service to all participants in the most recent omnibus
rate case a notice which briefly describes its proposal. Such notice
shall indicate on its first page that it is a notice of an Express Mail
Market Response Rate Request to be considered under Secs. 3001.57
through 3001.57c, and identify the last day for filing a notice of
intervention with the Commission.
(d) In the absence of a compelling showing of good cause, the
Postal Service and parties shall calculate Express Mail costs in
accordance with the methodologies used by the Commission in the most
recent omnibus rate case. In the analysis of customers' reactions to
the change in the market for expedited delivery services which prompts
the request, the Postal Service and parties may estimate the demand for
segments of the expedited delivery market and for types of customers
which were not separately considered when estimating volumes in the
most recent omnibus rate case.
(e) (1) In the event that a party wishes to dispute as an issue of
fact whether the Postal Service properly has calculated Express Mail
costs or volumes (either before or after its proposed changes), or
wishes to dispute whether the change in the market for expedited
delivery services cited by the Postal Service has actually occurred, or
wishes to dispute whether the rates proposed by the Postal Service are
a reasonable response to the change in the market for expedited
delivery services or are consistent with the policies of the Postal
Reorganization Act, that party shall file with the Commission a request
for a hearing within 28 days of the date that the Postal Service files
its request. The request for hearing shall state with specificity the
fact or facts set forth in the Postal Service's filing that the party
disputes, and when possible, what the party believes to be the true
fact or facts and the evidence it intends to provide in support of its
position.
(2) The Commission will not hold hearings on a request made
pursuant to Secs. 3001.57 through 3001.57c unless it determines that
there is a genuine issue of material fact to be resolved, and that a
hearing is needed to resolve this issue.
(3) Whether or not a hearing is held, the Commission may request
briefs and/or argument on an expedited schedule, but in any
circumstance it will issue its recommended decision as promptly as is
consistent with its statutory responsibilities.
(4) In order to assist in the rapid development of an adequate
evidentiary record, all participants may file appropriate discovery
requests on other participants as soon as an Express Mail Market
Response Rate Request is filed. Answers to such discovery requests will
be due within 10 days. Objections to such discovery requests must be
made within 10 days in the form of a Motion to Excuse from Answering,
with service on the questioning participant made by hand, facsimile, or
expedited delivery. Responses to Motions to Excuse from Answering must
be submitted within seven days, and should such a motion be denied, the
answers to the discovery in question are due within seven days of the
denial thereof. It is the Commission's intention that parties resolve
discovery disputes informally between themselves whenever possible. The
Commission, therefore, encourages the party receiving discovery
requests considered to be unclear or objectionable to contact counsel
for the party filing the discovery requests whenever further
explanation is needed, or a potential discovery dispute might be
resolved by means of such communication.
(5) If, either on its own motion, or after having received a
request for a hearing, the Commission concludes that there exist one or
more genuine issues of material fact and that a hearing is needed, the
Commission shall expedite the conduct of such record evidentiary
hearings to meet both the need to respond promptly to changed
circumstances in the market and the standards of 5 U.S.C. Sec. 556 and
557. The procedural schedule, subject to change as described in
paragraph (e) (6) of this section, is as follows: Hearings on the
Postal Service case will begin 35 days after the filing of an Express
Mail Market Response Rate Request; parties may file evidence either in
support of or in opposition to the Postal Service proposal 49 days
after the filing; hearings on the parties' evidence will begin 56 days
after the filing; briefs will be due 70 days after the filing; and
reply briefs will be due 77 days after the filing.
(6) The Presiding Officer may adjust any of the schedule dates
prescribed in paragraph (e)(5) of this section in the interests of
fairness, or to assist in the development of an adequate evidentiary
record. Requests for the opportunity to present evidence to rebut a
submission by a participant other than the Postal Service should be
filed within three working days of the receipt of that material into
the evidentiary record, and should include a description of the
evidence to be offered and the amount of time needed to prepare and
present it. Requests for additional time will be reviewed with
consideration as to whether the requesting participant has exercised
due diligence, and whether the requesting participant has been
unreasonably delayed from fully understanding the proposal.
Sec. 3001.57c Express Mail Market Response--``rule for decision.
The Commission will issue a recommended decision in accordance with
the policies of 39 U.S.C., and which it determines would be a
reasonable response to the change in the market for expedited delivery
services. The purpose of Secs. 3001.57 through 3001.57c is to allow for
consideration of Express Mail Market Response Rate Requests within 90
days, consistent with the procedural due process rights of interested
persons.
Issued by the Commission on December 14, 1994.
Charles L. Clapp,
Secretary
[FR Doc. 94-31344 Filed 12-21-94; 8:45 am]
BILLING CODE 7710-FW-P
