Price Cap Rules for Market Dominant Price Adjustments, 5355-5363 [2014-01669]

Agencies

• POSTAL REGULATORY COMMISSION

[Federal Register Volume 79, Number 21 (Friday, January 31, 2014)]
[Proposed Rules]
[Pages 5355-5363]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-01669]


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POSTAL REGULATORY COMMISSION

39 CFR Part 3010

[Docket No. RM2014-3; Order No. 1879]


Price Cap Rules for Market Dominant Price Adjustments

AGENCY: Postal Regulatory Commission.

ACTION: Proposed rulemaking.

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SUMMARY: The Commission is proposing rules addressing the price cap for 
market dominant price adjustments as part of an ongoing review. This 
stage of the review concerns rate reductions, rate incentives, and de 
minimis rate increases. The Commission invites public comment on the 
proposals.

DATES: Comments are due: March 17, 2014. Reply comments are due: April 
16, 2014.

FOR FURTHER INFORMATION CONTACT: Brian Corcoran, Acting General 
Counsel, 202-789-6820.

SUPPLEMENTARY INFORMATION: 

Regulatory History

72 FR 5230, February 5, 2007
72 FR 29284, May 25, 2007
72 FR 33261, June 15, 2007
72 FR 63622, November 9, 2007
74 FR 49326, September 28, 2009
78 FR 22490, April 16, 2013
78 FR 52694, August 26, 2013
78 FR 67951, November 8, 2013

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 
continuing a review of its rules in 39 CFR part 3010 and requesting 
comments and suggestions regarding the treatment of rate reductions, 
rate incentives, and de minimis rate increases under part 3010.
    The purposes of this rulemaking are to clarify and standardize the 
Commission's previous treatment of rate reductions and rate incentives, 
to establish a type of de minimis rate adjustment that would allow the 
Postal Service to make extremely minor increases to rates without 
requiring the Postal Service to calculate the annual limitation or 
generate unused rate adjustment authority, 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

    In Docket No. RM2013-2, the Commission began the process of 
reviewing its rules in 39 CFR part 3010, with the intent of clarifying 
and improving those rules.\1\ The Commission adopted final rules in 
that docket that, among other minor changes, reorganized part 3010; 
added definitions; clarified the information required to be submitted 
with proposed workshare discounts; clarified that the rules require 
that a 12-month period be used to calculate the annual limitation when 
notices of rate adjustment are more than 12 months apart; clarified 
that the Postal Service may not rely on anticipated changes in mailer 
behavior to make adjustments to billing determinants; and revised the 
rule establishing the maximum size of unused rate adjustment authority 
for rate changes to align with statutory language.\2\
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    \1\ Docket No. RM2013-2, Notice of Proposed Rulemaking 
Requesting Comments on Proposed Commission Rules for Determining and 
Applying the Maximum Amount of Rate Adjustments, March 22, 2013, at 
1-2 (Order No. 1678).
    \2\ Docket No. RM2013-2, Order Adopting Final Rules for 
Determining and Applying the Maximum Amount of Rate Adjustments, 
July 23, 2013 (Order No. 1786).
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    Order No. 1786 noted that the Commission's proposed treatment of 
promotional rates and incentive programs generated significant 
disagreement among commenters. Id. at 28. The Commission stated its 
intent to establish a separate docket for the consideration of this 
issue. Id. at 29, 33.

III. Proposed Rules

    The proposed rules included in this Notice of Proposed Rulemaking 
contain: (1) A separate process for rate adjustments that consist 
solely of rate decreases, designated as a ``Type 1-C rate adjustment''; 
(2) revisions to the rules for the treatment of rate incentives for 
rates of general applicability (Type 1-A and Type 1-B rate 
adjustments); (3) revisions to clarify the treatment of rate incentives 
that are not rates of general applicability; (4) revisions to clarify 
the treatment of deleted rate cells; and (5) a separate process for de 
minimis rate increases.

A. Type 1-C Rate Adjustments

    The Commission proposes allowing the Postal Service to request 
certain rate reductions without the calculation of the annual 
limitation and allowing the Postal Service to recoup associated unused 
rate adjustment authority by using it in future rate adjustments. These 
proposed rules apply to notices that only contain rate decreases. If 
the Postal Service proposes a rate increase in a notice of rate 
adjustment, the adjustment must still be filed as a Type 1-A or Type 1-
B rate adjustment. Proposed Sec. Sec.  3010.3(b)(2), 3010.6, 
3010.20(e), 3010.23(b)(2), and 3010.27 are designed to facilitate mid-
year rate reductions by allowing the Postal Service to recoup unused 
rate adjustment authority from those rate reductions.
    Under the Commission's existing rules, even for a rate decrease, 
the Postal Service must file a Type 1-A rate adjustment to create 
unused rate authority.\3\ In the past, when the Postal Service has 
filed rate reductions that are not part of an omnibus rate adjustment, 
the Postal Service has elected to not utilize the existing rules to 
generate unused rate adjustment authority.
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    \3\ For example, if the annual limitation was 2 percent, and the 
Postal Service requested a rate reduction that resulted in a 0.5 
percent rate decrease, unused rate adjustment authority after that 
adjustment would equal 2.5 percent (2%-(-0.5%)).
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    However, recently, the Postal Service has sought to use rate 
reductions that are not part of an omnibus rate adjustment to generate 
unused rate adjustment authority. In its Full-Service Intelligent Mail 
Barcode Technology Credit Promotion (Technology Credit Promotion) 
request, the Postal Service proposed to create unused rate adjustment 
authority that it could use in its next omnibus notice of rate 
adjustment.\4\ Specifically, the Postal Service proposed to use the 
unused rate adjustment authority generated as a result of the 
Technology Credit Promotion before it used any of the unused rate 
adjustment authority generated during the previous 5 years. Technology 
Credit Notice at 5. The Commission rejected this proposal, on the basis 
that it violated the first-in, first-out rule established under 39 
U.S.C. 3622(d)(2)(C)(iii)(III). Order No. 1743 at 12. The proposed 
rules would

[[Page 5356]]

allow the Postal Service to create unused rate adjustment authority in 
a manner consistent with 39 U.S.C. 3622(d). Under the proposed rules, 
the Postal Service will have the option to either forgo unused rate 
adjustment authority resulting from rate decreases, as it has chosen to 
do in the past, or create additional unused rate adjustment authority 
pursuant to proposed Sec.  3010.23(b)(2).\5\
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    \4\ Docket No. R2013-6, United States Postal Service Notice of 
Market-Dominant Price Adjustment (Technology Credit Promotion), 
April 16, 2013 (Technology Credit Notice); Docket No. R2013-6, Order 
Approving Technology Credit Promotion, June 10, 2013 (Order No. 
1743).
    \5\ See, e.g., Docket Nos. R2011-1 (Reply Rides Free and 
Saturation Volume Discount); R2011-5 (Mobile Barcode Promotion); and 
R2012-9 (Mobile Barcode Promotion).
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    Rate reductions that occur outside annual omnibus rate adjustments 
can provide additional pricing flexibility for the Postal Service and 
lower rates for mailers. The Commission does not wish to unnecessarily 
limit that flexibility. In order to facilitate rate reductions that 
occur outside annual omnibus rate adjustments, the Commission believes 
the simplest path is to allow the Postal Service to amend its most 
recent omnibus rate adjustment to incorporate the effects of the rate 
reduction. This will allow the Postal Service to recoup unused rate 
adjustment authority without calculating the annual limitation or 
violating 39 U.S.C. 3622(d)(2)(C).
    Proposed new rule 3010.27 promotes simplicity. It takes into 
consideration the fact that a proposed rate reduction would be in 
effect during the same period as the rates proposed in the most recent 
omnibus annual Type 1-A or Type 1-B rate adjustment. Instead of 
requiring new billing determinants, the Commission believes it is 
reasonable to require the Postal Service to amend the most recent 
percentage change in rates calculations to include the proposed rate 
reductions. However, if necessary, the Postal Service may still 
reasonably adjust its billing determinants pursuant to proposed 
Sec. Sec.  3010.23(d) or (e), as applicable.
    If the Postal Service chooses to file a Type 1-C rate adjustment 
and to generate unused rate adjustment authority as a result of that 
adjustment, it may add any associated unused rate adjustment authority 
to the unused rate adjustment authority for the most recent Type 1-A or 
1-B rate adjustment. Below is an example.
    Example:

              Docket No. R201X-1: Type 1--A Rate Adjustment
Date of Notice of Rate Adjustment....  January 1, 201X.
Annual Limitation....................  3.000 percent.
Percentage Change in Rates for the     2.500 percent.
 Class.
Generated Unused Rate Adjustment       0.500 percent.
 Authority.
               Docket No. R201X-2 Type 1-C Rate Adjustment
Date of Notice of Rate Adjustment....  July 1, 201X.
Annual Limitation....................  N/A.
Additional Generated Unused Rate       2.250 percent.
 Adjustment Authority.
Amended Percentage Change in Rates     0.250 percent.
 for the Class.
Amended Unused Rate Adjustment         0.750 percent.
 Authority Generated in Docket No.
 R201X-1.
 

    In this example, the Postal Service files Docket No. R201X-2 6 
months after a Type 1-A rate adjustment (Docket No. R201X-1). The Type 
1-C rate adjustment only includes rate decreases, and results in a 
percentage change in rates for the class that is 0.250 percent lower 
than the preceding Type 1-A rate adjustment. This translates into an 
increase of the unused rate adjustment authority generated in R201X-1 
from 0.500 percent to 0.750 percent.
    Proposed Sec.  3010.23(b)(2) establishes the procedures for 
calculating the percentage change in rates for Type 1-C rate 
adjustments. The procedures require the Postal Service to amend the 
most recent percentage change in rates calculations for a class by 
including the proposed rate reductions in those workpapers. For 
example, if in July 2013, the Postal Service were to request a decrease 
in the rate for Certified Mail from $3.10 to $3.00, the Docket No. 
R2013-1 Special Services rate cap calculations contained in PRC-LR-
R2013-1/5 would be updated to reflect the ``new price'' of $3.00 for 
Certified Mail. When this change is made, it changes the overall 
percentage change in rates for all of Special Services as well as the 
unused rate adjustment authority generated.
    In order to isolate the additional unused rate adjustment authority 
generated from the Type 1-C rate adjustment, proposed Sec.  3010.27(a) 
requires two steps. First, the difference between the most recent Type 
1-A or Type 1-B annual limitation and the percentage change in rates 
calculated pursuant to Sec.  3010.23(b)(2) is calculated. Second, the 
unused rate adjustment authority generated in the most recent Type 1-A 
or Type 1-B rate adjustment is subtracted from that result.\6\
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    \6\ If the most recent rate adjustment was a Type 1-B rate 
adjustment, or no unused rate adjustment authority was generated in 
the Type 1-A rate adjustment, the unused rate adjustment authority 
for purposes of these calculations is zero.
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    The unused rate adjustment authority generated pursuant to proposed 
Sec.  3010.27(a) is then added to the unused rate adjustment authority 
generated in the most recent Type 1-A or Type 1-B rate adjustment as 
described in proposed Sec.  3010.27(c). Proposed Sec.  3010.27(b) and 
3010.27(d) ensure that unused rate adjustment authority generated under 
Type 1-C procedures remains consistent with 39 U.S.C. 3622(d)(2)(C).

B. Treatment of Rate Incentives That Are Rates of General Applicability

    In Docket No. RM2012-3, the Commission proposed rules regarding 
treatment of rate incentives in its percentage change in rates 
calculations. Order No. 1678, Attachment at 9, Sec.  3010.23(e) and 
(f). Many interested parties filed comments expressing concern with the 
proposal as presented, and urged the exclusion of rate incentives from 
the calculation of percentage change in rates for rate adjustments.\7\ 
Ultimately, the Commission chose to not include rules regarding rate 
incentives in its final rules. Order No. 1786 at 29, 33. The Commission 
now proposes to include the language proposed in Order No. 1678 for 
treatment of certain types of rate incentives in percentage change in 
rates calculations, and to specify the types of rate incentives that 
can be included and the types of rate incentives that must be excluded.
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    \7\ See Docket No. RM2013-2, Comments of the Association for 
Postal Commerce, May 16, 2013, at 2-4; Docket No. RM2013-2, Comments 
of the National Association of Presort Mailers, May 16, 2013, at 4; 
Docket No. RM2013-2, Valpak Direct Marketing Systems, Inc. and 
Valpak Dealers' Association, Inc. Reply Comments on Notice of 
Proposed Rulemaking, May 31, 2013, at 2-3; Docket No. RM2013-2, 
Reply Comments of the National Postal Policy Council, May 31, 2013, 
at 6.
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    Proposed Sec.  3010.23(a)(3) defines a ``rate incentive'' as a 
discount that is not a workshare discount and that is designed to 
increase or retain volume, improve the value of mail for mailers, or 
improve the operations of the Postal Service. Proposed Sec.  3010.23(e) 
establishes the procedures associated with rate incentives of general 
applicability.\8\ The proposed procedures first give the Postal Service 
the option to include rate incentives that satisfy certain criteria in 
its percentage change in rates calculations. If the Postal Service 
chooses not to include the rate incentives in its percentage change in 
rates calculations, it will not receive unused rate adjustment 
authority that it

[[Page 5357]]

can use to increase other rates within the class.
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    \8\ The incentives discussed in this paragraph apply to 
discounts or rate reductions. If the Postal Service creates an 
incentive in the form of a surcharge, this would be a rate increase 
and thus be subject to the rules governing rate increases.
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    The Postal Service also may choose not to receive unused rate 
adjustment authority for a rate incentive of general applicability when 
it is first offered, but rather to receive rate adjustment authority in 
a subsequent rate adjustment proceeding pursuant to proposed Sec.  
3010.23(a)(1)(iii). The proposed rule allows the Postal Service to 
recover rate adjustment authority from the previously excluded rate 
incentive over the most recent 12-month period.\9\ This is accomplished 
by assuming the current rate \10\ of the rate incentive is the 
undiscounted rate rather than the discounted rate in effect at the time 
of the Postal Service's notice of rate adjustment. For example, if a 
rate incentive provided a 5-cent discount on a rate that was normally 
25 cents and the Postal Service elected to exclude the rate incentive 
from the calculation of the percentage change in rates in the most 
recent rate case, the Postal Service may choose in a subsequent rate 
case to begin including the discounted rate in its calculation of the 
percentage change in rates by using 25 cents (the full undiscounted 
rate) as the current rate and 20 cents (or the proposed discounted 
rate) as the planned rate.
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    \9\ The proposed rule does not allow the Postal Service to 
recover rate adjustment authority from the rate incentive over 
multiple 12-month periods. For example, in Year 1, the Postal 
Service begins offering a rate incentive and chooses to exclude the 
rate incentive from its percentage change in rates calculations. In 
Year 3 of the rate incentive, the Postal Service decides to begin 
including the rate incentive in its percentage change in rates 
calculations. In the Year 3 percentage change in rates calculations 
the Postal Service may only use the billing determinants from the 
most recent 12-month period, not billing determinants spanning the 
previous 3 years. See rule 3010.23(d). In addition, if the rate 
incentive in Year 1 was a $0.10 discount and in Year 3 the rate 
incentive was a $0.05 discount, the Postal Service can only recover 
rate adjustment authority from the current rate incentive ($0.05) in 
the Year 3 percentage change in rates calculations. See proposed 
Sec.  3010.23(a)(1).
    \10\ In Order No. 43, there was confusion regarding the 
``current rate'' for seasonal and temporary rates. See Order No. 43, 
Docket No. RM2007-1, Order Establishing Ratemaking Regulations for 
Market Dominant and Competitive Products, October 29, 2007, at 51. 
The proposed definition of current rate specifies that current rates 
are the rates in effect at the time of the Postal Service's notice 
of rate adjustment. For seasonal and temporary rates, the current 
rate for seasonal or temporary rates is the most recently available 
rate for the temporary or seasonal rate. This ensures that the 
seasonal or temporary rates are properly accounted for in the 
percentage change in rates calculations. The second exception is for 
rate incentives that were previously excluded from the percentage 
change in rates calculations.
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    Proposed Sec.  3010.23(e)(2) provides criteria that must be met in 
order for rate incentives to be included in its percentage change in 
rates calculations. The first two criteria require that a rate 
incentive must be in the form of a discount or be easily translated 
into a discount and sufficient billing determinants \11\ must be 
available. These criteria ensure that rate incentives can be 
incorporated into the percentage change in rates calculations.\12\
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    \11\ The proposed rule requires that ``sufficient billing 
determinants'' be available, which requires that adequate volume 
data are available for each rate cell of the rate incentive so the 
rate incentive can be accurately included in the percentage change 
in rates calculations for the class.
    \12\ Adjustments may be made to billing determinants if the 
adjustments are based on known mail characteristics or historical 
volume data (as opposed to forecasts of mailer behavior).
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    The third criterion requires that a rate incentive must be a rate 
of general applicability. The Commission proposes defining a ``rate of 
general applicability'' as ``a rate applicable to all mail meeting 
standards established by the Mail Classification Schedule and the 
Domestic Mail Manual.'' Proposed Sec.  3010.1(g) goes on to explain 
that eligibility for a rate of general applicability cannot be 
dependent on factors other than the characteristics of the mail to 
which the rate applies and that a rate of general applicability cannot 
be available upon written agreement to only one mailer or a group of 
mailers. Limiting the inclusion of rate incentives to those that are 
rates of general applicability ensures that non-participating mailers 
are not harmed either by being excluded from the discount or by above-
average rate increases levied to fund discounts for other mailers.
    This proposed treatment of rate incentives is consistent with the 
treatment of rate incentives in Docket No. R2013-1. In Docket No. 
R2013-1, the Postal Service proposed including rate incentives in its 
percentage change in rate calculations. Those rate incentives were 
rates of general applicability.\13\ Specifically, Mobile Coupon/Click-
to-Call, Emerging Technologies, Mobile Buy-it-Now, and Earned Value 
Reply Mail Promotions were included in the percentage change in rates 
calculations for First-Class Mail and Standard Mail. These rate 
incentives were all in the form of discounts, used historical billing 
determinants, and met the proposed definition of rates of general 
applicability.
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    \13\ See Docket No. R2013-1, United States Postal Service Notice 
of Market-Dominant Price Adjustment, October 11, 2012, at 9.
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    The current price cap rules accord the Postal Service the 
flexibility to apply rate changes in varying degrees to rates of 
general applicability. If a rate incentive is a rate of general 
applicability, then it follows that the Postal Service's pricing 
flexibility should extend to these rates.

C. Treatment of Rate Incentives That Are Not Rates of General 
Applicability

    The Postal Service has, in the past, proposed rate incentives that 
would not be considered rates of general applicability under the 
proposed rules.\14\ Notable among these is the Postal Service's 
proposed Technology Credit Promotion, which was the subject of several 
comments in Docket No. RM2013-2.\15\
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    \14\ See Docket No. R2011-5, Order Approving Market Dominant 
Price Adjustment, May 17, 2011 (Order No. 731); Docket No. R2012-6, 
Order Approving Market Dominant Price Adjustment, March 26, 2012 
(Order No. 1296); Docket No. R2009-4, Order Approving Price 
Adjustment for Standard Mail High Density Flats, July 1, 2009, at 6-
9 (Order No. 236); Order No. 1743 at 16-17.
    \15\ See, e.g., Valpak Direct Marketing Systems, Inc. and Valpak 
Dealers' Association, Inc. Comments on Notice of Proposed 
Rulemaking, May 16, 2013, at 5; Comments of the Association for 
Postal Commerce, May 16, 2013, at 2; Comments of the National 
Association of Presort Mailers, May 16, 2013, at 4 n.1.
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    Previously, when the Postal Service has proposed rate incentives 
that are not rates of general applicability, the Commission has 
provided the Postal Service with the option to treat the rate 
incentives like negotiated service agreements, pursuant to the 
procedures described in 39 CFR 3010.24.\16\ In Docket No. RM2013-2, the 
Public Representative argued that certain rate incentives, like summer 
sales, were similar to negotiated service agreements in that they are 
designed to generate volume.\17\ For that reason, the Public 
Representative argued that some rate incentives should be excluded from 
the calculation of the percentage change in rates under Sec.  3010.23. 
Id. Other commenters in that docket focused on the effects of rate 
incentives like the Technology Credit Promotion on non-participating 
mailers, arguing that it would be inequitable or unjust to require non-
participating mailers to pay higher rates to recover revenue lost to 
temporary promotional rates.\18\
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    \16\ See Order No. 731; Order No. 1296; Order No. 236; and Order 
No. 1743. See also Order No. 1807, Docket No. C2009-1R, Order on 
Reconsideration and Clarification, August 13, 2013, at 9-10.
    \17\ Docket No. RM2013-2, Public Representative Reply Comments, 
May 31, 2013, at 4.
    \18\ Docket No. RM2013-2, Valpak Direct Marketing Systems, Inc. 
and Valpak Dealers' Association, Inc. Comments on Notice of Proposed 
Rulemaking, May 16, 2013, at 5; Docket No. RM2013-2, Comments of 
Pitney Bowes Inc., May 16, 2013, at 3; Docket No. RM2013-2, Reply 
Comments of the National Postal Policy Council, May 31, 2013, at 5.
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    Proposed Sec.  3010.24 would formalize the Commission's past 
treatment of rate incentives that are not rates of general 
applicability by requiring that they be

[[Page 5358]]

treated like negotiated service agreements for purposes of calculating 
the percentage change in rates. Under the proposed rules, a rate 
incentive would not be considered a rate of general applicability if it 
did not fall within the definition of ``rate of general applicability'' 
in proposed Sec.  3010.1(g). For example, a rate incentive that was 
only available to a single mailer would not be considered a rate of 
general applicability. Nor would a rate incentive that is dependent on 
a factor other than the characteristics of the mail to which the rate 
applies be considered a rate of general applicability.
    Under the proposed rules, if the Postal Service files a notice of 
rate adjustment that contains rate incentives that are not rates of 
general applicability, the rate incentives that are not rates of 
general applicability will be subject to proposed Sec.  3010.24. 
Volumes sent at the rate incentive rate will be included in the 
calculation of percentage change in rates as if those volumes had paid 
the rate of general applicability. This treatment will protect mailers 
who are ineligible to participate in the rate incentive from funding 
reduced rates which only benefit eligible mailers.
    The proposed rules concerning rate incentives that are not rates of 
general applicability address many of the concerns about the Technology 
Credit Promotion raised in Docket No. RM2013-2. The Technology Credit 
Promotion would have been available to mailers from June 1, 2013 to May 
31, 2014, but eligibility for the credit would have been based on the 
mailer's volume from the already concluded fiscal year 2012.\19\ 
Proposed Sec.  3010.1(g) provides that a ``rate is not a rate of 
general applicability if eligibility for the rate is dependent on 
factors other than the characteristics of the mail to which the rate 
applies.'' The volume of mail sent by a mailer in a previous year is 
not a characteristic of the mail that would be eligible for the 
Technology Credit Promotion. Therefore, the Technology Credit Promotion 
would not have qualified as a rate incentive that is a rate of general 
applicability. Under proposed Sec.  3010.24, the Technology Credit 
Promotion would be treated in the same manner as a negotiated service 
agreement. As a result, the volumes sent under the Technology Credit 
Promotion would be included in the calculation of percentage change in 
rates as if they were sent at the undiscounted rate.
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    \19\ Docket No. R2013-6, United States Postal Service Notice of 
Market-Dominant Price Adjustment (Technology Credit Promotion), 
April 16, 2013, at 1.
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D. Adjustment for Deletion of Rate Cell

    Proposed Sec.  3010.23(d)(4) specifies the procedure for the 
deletion of rate cells. The proposed rule specifies that when the 
Postal Service deletes a rate cell, and there is not a reasonable 
substitute available, the Postal Service should adjust the billing 
determinants for that rate cell to zero. The proposed rule ensures that 
mailers within a class are not harmed by large increases when the 
Postal Service deletes a rate cell.
    Docket No. R2013-1 was the first rate adjustment after the 
Commission approved the transfer of Parcel Post to the competitive 
product list.\20\ In the Package Services workpapers, the Postal 
Service correctly removed the billing determinants associated with the 
transferred pieces. The Commission proposes to codify that treatment 
for future rate adjustments.
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    \20\ Docket No. R2013-1, United States Postal Service Notice of 
Market-Dominant Price Adjustment, October 11, 2012, at 29.
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E. De Minimis Rate Increases

    In 2009, the Commission amended Sec. Sec.  3010.21(a) and 
3010.22(b) to provide that the annual limitation would be ``rounded to 
three decimal places.'' \21\ Before that change, the Commission's 
calculations were limited by available data to one decimal place. Order 
No. 303 at 1; Order No. 246 at 2. The change to three decimal places 
was motivated by two considerations. First, the Commission expressed a 
desire to allow the Postal Service to exercise a greater degree of 
flexibility by making more precise rate adjustments. Order No. 246 at 
2. Second, the Bureau of Labor Statistics began reporting the CPI-U 
index to three digits in 2007, allowing the Commission to calculate the 
percentage change in rates with a greater degree of precision. Id.
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    \21\ Docket No. RM2009-8, Order Amending the Cap Calculation in 
the System of Ratemaking, September 22, 2009 (Order No. 303); Postal 
Rates, 74 FR 49326, September 28, 2009. See also Docket No. RM2009-
8, Notice of Proposed Rulemaking to Amend the Cap Calculation in the 
System of Ratemaking, July 10, 2009 (Order No. 246); Postal Rates, 
74 FR 36132, July 22, 2009.
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    In Docket No. R2011-1, the Postal Service proposed a change to the 
Move Update Assessment threshold.\22\ This change resulted in a 
percentage change in rates for First-Class Mail and Standard Mail of 
0.0004 percent. Id. The Commission found that under its rules at that 
time, the Postal Service would have been required to calculate an 
annual limitation and generate unused rate adjustment authority. Id.
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    \22\ Docket No. R2011-1, Order Approving Market Dominant 
Classification and Price Changes, and Applying Price Cap Rules, 
December 10, 2010, at 9 (Order No. 606).
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    Upon re-evaluation, the Commission has found no sound basis for 
requiring the Postal Service to immediately calculate the annual 
limitation and bank unused rate adjustment authority when it makes a 
rate adjustment that results in a percentage increase in rates that is 
less than 0.001 percent. As the Commission recognized in Order No. 246, 
the Postal Service is entitled to exercise its pricing flexibility with 
a high degree of precision. See Order No. 246 at 2. Requiring the 
Postal Service to recalculate the annual limitation as a result of a 
rate increase that is so small that it would not impact the percentage 
change in rates for a class limits the Postal Service's ability to make 
minor, reasonable adjustments to its rates.
    Allowing the Postal Service to exercise pricing flexibility is 
consistent with 39 U.S.C. 3622(b)(4). However, this flexibility should 
not become a means to circumvent the annual limitation. The proposed 
Sec.  3010.30 would allow the Postal Service to make very small rate 
increases without immediately calculating the annual limitation and 
banking unused rate adjustment authority.\23\ Under the proposed rules, 
if the Postal Service elects not to immediately bank unused rate 
adjustment authority as a result of a small rate increase, the effect 
of the rate increase will have to be accounted for in the next Type 1-A 
or Type 1-B notice of rate adjustment. Thus, the Postal Service will 
continue to be bound by the annual limitation on rate adjustments. 
Additionally, the proposed rules would prevent the Postal Service from 
filing a series of notices of de minimis rate increases if the sum of 
all rate increases resulting from those de minimis rate adjustments 
equals or exceeds 0.001 percent. This requirement would allow the 
Commission to ensure that the cumulative effect of small rate increases 
is less than 0.001 percent.
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    \23\ De minimis rate adjustments are designed to only account 
for the effect of rate increases. Rate decreases must be filed as 
Type 1-A, Type 1-B, or Type 1-C rate adjustments. For the de minimis 
exemption to apply, the Postal Service may not offset rate increases 
with rate decreases.
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    In order to ensure that the cumulative impact of de minimis rate 
increases does not exceed 0.001 percent, proposed Sec.  3010.30(e) 
requires that the Postal Service file workpapers for the class that 
demonstrate that the total effect of every de minimis rate increase 
since the last Type 1-A or Type 1-B rate adjustment does not equal or 
exceed 0.001 percent. These workpapers should only include de minimis 
rate increases and should be updated versions of the workpapers for

[[Page 5359]]

the class from the most recent Type 1-A or Type 1-B rate adjustment.

IV. Comments Requested

    Interested persons are invited to provide written comments 
concerning the proposed rules. Comments may include specific language 
amending the proposed rules.
    Comments are due no later than 45 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, https://www.prc.gov. Interested persons are further invited to 
review the submissions and provide follow-up comments and suggestions 
within 30 additional days (that is, within 75 days of the publication 
of this notice in the Federal Register).
    Kenneth E. Richardson is designated the Public Representative to 
represent the interests of the general public in this docket.

V. Explanation of Proposed Rules

    Following is a section-by-section analysis of the proposed rules.
    Proposed Sec.  3010.1 adds a definition of the term ``rate of 
general applicability.'' It also includes definitions and amendments to 
existing definitions relating to Type 1-C rate adjustments and de 
minimis rate adjustments. Finally, it specifies that the definitions 
apply to the entire part, not just subpart A.
    Proposed Sec.  3010.3(a) specifies that Type 1-C rate adjustments 
are consistent with 39 U.S.C. 3622.
    Proposed Sec.  3010.3(b)(2) specifies that a Type 1-C rate 
adjustment may not be combined with any other type of rate adjustment.
    Proposed Sec.  3010.4(a) eliminates a superfluous word.
    Proposed Sec.  3010.5 specifies that a Type 1-B rate adjustment is 
based on both the annual limitation and unused rate adjustment 
authority.
    Proposed Sec.  3010.6 contains a general description of a Type 1-C 
rate adjustment.
    Proposed Sec.  3010.10(a) includes a conforming change.
    Proposed Sec.  3010.11 contains conforming changes in the heading 
and in paragraphs (a) and (k).
    Proposed Sec.  3010.12(a) contains a conforming change.
    Proposed Sec.  3010.12(b) specifies the contents of notices that 
include rate incentives and of Type 1-C notices of rate adjustments.
    Proposed Sec.  3010.20(e) specifies that there is no limit on the 
amount of a rate decrease under a Type 1-C rate adjustment.
    Proposed Sec.  3010.21 contains conforming changes in the heading 
and in paragraph (b).
    Proposed Sec.  3010.22 contains conforming changes in the heading 
and in paragraph (b).
    Proposed Sec.  3010.23(a) includes definitions of the terms 
``current rate,'' ``rate cell,'' and ``rate incentive.''
    Proposed Sec.  3010.23(b)(2) provides for the calculation of the 
percentage changes in rates for Type 1-C rate adjustments.
    Proposed Sec.  3010.23(c) contains conforming changes.
    Proposed Sec.  3010.23(d) changes the format, but not the content, 
of existing section 3010.23(d) and adds a provision specifying the 
treatment of deleted rate cells.
    Proposed Sec.  3010.23(e) provides for the treatment of rate 
incentives.
    Proposed Sec.  3010.24 specifies that rate incentives that are not 
rates of general applicability will be treated in the same manner as 
negotiated service agreements.
    Proposed Sec.  3010.26 contains conforming changes.
    Proposed Sec.  3010.27 describes how unused rate adjustment 
authority is calculated for Type 1-C rate adjustments.
    Proposed Sec.  3010.30 contains the requirements for de minimis 
rate increases.

VI. Ordering Paragraphs

    It is ordered:
    1. Docket No. RM2014-3 is established for the purpose of receiving 
comments with respect to the proposed rules attached to this order.
    2. Interested persons may submit comments no later than 45 days 
after the date of publication of this notice in the Federal Register.
    3. Reply comments may be filed no later than 75 days after the date 
of publication of this notice in the Federal Register.
    4. Kenneth E. Richardson is designated the Public Representative to 
represent the interests of the general public in this docket.
    5. The Secretary shall arrange for publication of this order in the 
Federal Register in conformance with official publication requirements.

List of Subjects in 39 CFR Part 3010

    Administrative practice and procedure; Postal Service.

    By the Commission.
Ruth Ann Abrams,
Acting Secretary.

    For the reasons stated above, the Postal Regulatory Commission 
proposes to amend 39 CFR part 3010 to read as follows:

PART 3010--REGULATON OF RATES FOR MARKET DOMINANT PRODUCTS

0
1. The authority citation for 39 CFR part 3010 continues to read as 
follows:

    Authority:  39 U.S.C. 503; 3622.
0
2. Revise Sec.  3010.1 to read as follows:


Sec.  3010.1  Definitions.

    (a) The definitions in paragraphs (b) through (m) of this section 
apply in this part.
    (b) 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;
    (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; and
    (3) In the case of a notice of a Type 1-C rate adjustment, the 
annual limitation calculated pursuant to Sec.  3010.21 or Sec.  
3010.22, as applicable, for the most recent notice of a Type 1-A or 
Type 1-B rate adjustment.
    (c) Class means a class of market dominant postal products.
    (d) De minimis rate increase means a rate adjustment described in 
Sec.  3010.30.
    (e) Maximum rate adjustment means the maximum rate adjustment that 
the Postal Service may make for a class pursuant to a notice of Type1-A 
or Type 1-B rate adjustment. The maximum rate adjustment is calculated 
in accordance with Sec.  3010.20.
    (f) Most recent Type 1-A or Type 1-B notice of rate adjustment, 
when used in reference to a notice of rate adjustment for a class, 
means the most recent Type 1-A or Type 1-B notice of rate adjustment 
for that class.
    (g) Rate of general applicability means a rate applicable to all 
mail meeting standards established by the Mail Classification Schedule 
and the Domestic Mail Manual. A rate is not a rate of general 
applicability if eligibility for the rate is dependent on factors other 
than the characteristics of the mail to which the rate applies. A rate 
is not a rate of general applicability if it benefits a single mailer. 
A rate that is only available upon the written agreement of both the 
Postal Service and a mailer or group of mailers is not a rate of 
general applicability.
    (h) Type 1-A rate adjustment means a rate adjustment described in 
Sec.  3010.4.

[[Page 5360]]

    (i) Type 1-B rate adjustment means a rate adjustment described in 
Sec.  3010.5.
    (j) Type 1-C rate adjustment means a rate adjustment described in 
Sec.  3010.6.
    (k) Type 2 rate adjustment means a rate adjustment described in 
Sec.  3010.7.
    (l) Type 3 rate adjustment means a rate adjustment described in 
Sec.  3010.8.
    (m) Unused rate adjustment authority means:
    (1) In the case of a Type 1-A or Type 1-B rate adjustment, the 
percentage calculated pursuant to Sec.  3010.26; and
    (2) In the case of a Type 1-C rate adjustment, the percentage 
calculated pursuant to Sec.  3010.27.
0
3. In Sec.  3010.2, revise the first sentence to read as follows:


Sec.  3010.2  Applicability.

    The rules in this part implement provisions in 39 U.S.C. chapter 
36, subchapter I, establishing rate setting policies and procedures for 
market dominant products. * * *
0
4. Revise Sec.  3010.3 to read as follows:


Sec.  3010.3  Types of rate adjustments for market dominant products.

    (a) There are five 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 1-C rate adjustment is authorized under 39 U.S.C. 
3622. 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)(1) The Postal Service may combine Type 1-A, Type 1-B, and Type 
2 rate adjustments for purposes of filing with the Commission.
    (2) The Postal Service may not combine a Type 1-C rate adjustment 
with any other type of rate adjustment. The Postal Service may file a 
Type 1-C rate adjustment and a de minimis rate increase 
contemporaneously, but the Type 1-C rate adjustment and the de minimis 
rate increase must be contained in separate notices of rate adjustment.
0
5. In Sec.  3010.4, revise paragraph (a) to read as follows:


Sec.  3010.4  Type 1-A rate adjustment--in general.

    (a) A Type 1-A rate adjustment is an adjustment based on the annual 
limitation.
* * * * *
0
6. Revise Sec.  3010.5 to reads as follows:


Sec.  3010.5  Type 1-B rate adjustment--in general.

    A Type 1-B rate adjustment is an adjustment that is based on the 
annual limitation and that uses unused rate adjustment authority in 
whole or in part.


Sec.  3010.6, 3010.7 and 3010.8  [Redesignated as Sec. Sec.  3010.7, 
3010.8 and 3010.9]

0
7. Redesignate Sec. Sec.  3010.6, 3010.7 and 3010.8 as Sec. Sec.  
3010.7, 3010.8 and 3010.9, respectively.
0
8. Add new Sec.  3010.6 to read as follows:


Sec.  3010.6  Type 1-C rate adjustment--in general.

    (a) A Type 1-C rate adjustment is an adjustment to a rate of 
general applicability that contains only a decrease. A rate adjustment 
that includes both an increase and a decrease in rates of general 
applicability is a Type 1-A or Type 1-B rate adjustment; it is not a 
Type 1-C rate adjustment.
    (b) A Type 1-C rate adjustment may generate unused rate adjustment 
authority, as described in Sec.  3010.27. However, the Postal Service 
may elect not to generate unused rate adjustment authority in a Type 1-
C rate adjustment.
0
9. In Sec.  3010.10, revise paragraph (a) to read as follows:


Sec.  3010.10  Notice.

    (a) The Postal Service, in every instance in which it determines to 
exercise its statutory authority to make a Type 1-A, Type 1-B, or Type 
1-C 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.
* * * * *
0
10. In Amend Sec.  3010.11 revise the heading, the introductory text of 
paragraph (a), paragraph (b)(2), paragraph (d), and paragraph (k) to 
read as follows:


Sec.  3010.11  Proceedings for Type 1-A, Type 1-B, and Type 1-C rate 
adjustment filings.

    (a) The Commission will establish a docket for each notice of Type 
1-A, Type 1-B, or Type 1-C 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:
* * * * *
    (b) * * *
    (2) Whether the planned rate adjustments measured using the formula 
established in Sec.  3010.23(c) are at or below the limitation 
established in Sec.  3010.29.
* * * * *
    (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, the limitation set forth 
in Sec.  3010.29, and 39 U.S.C. 3626, 3627, and 3629 and issue an order 
announcing its findings.
* * * * *
    (k) A Commission finding that a planned Type 1-A, Type 1-B, or Type 
1-C rate adjustment is in compliance with the annual limitation 
calculated under Sec.  3010.21 or Sec.  3010.22, as applicable; the 
limitation set forth in Sec.  3010.29; and 39 U.S.C. 3626, 3627, and 
3629 is decided on the merits. A Commission finding that a planned Type 
1-A, Type 1-B, or Type 1-C rate adjustment does not contravene other 
policies of 39 U.S.C. chapter 36, subchapter I is provisional and 
subject to subsequent review.
0
11. In Sec.  3010.12, revise the introductory text of paragraph (a), 
paragraph (b)(4) and paragraph (e), redesignate existing paragraphs 
(b)(9) and (b)(10) as (b)(11) and (b)(12), respectively, and add new 
paragraphs (b)(9) and (b)(10) to read as follows:


Sec.  3010.12  Contents of notice of rate adjustment.

    (a) A Type 1-A, Type 1-B, or Type 1-C notice of rate adjustment 
must include the following information:
* * * * *
    (b) * * *
    (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 or Sec.  3010.27, as applicable. 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.
* * * * *
    (9) For a notice that includes a rate incentive:
    (i) If the rate incentive is a rate of general applicability, 
sufficient information to demonstrate that the rate incentive is a rate 
of general applicability; and
    (ii) Whether the Postal Service has excluded the rate incentive 
from the calculation of the percentage change in rates under Sec.  
3010.23(e) or Sec.  3010.24.

[[Page 5361]]

    (10) For a Type 1-C rate adjustment, whether the Postal Service 
elects to generate unused rate adjustment authority.
* * * * *
    (e) 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.  3010.28. All calculations 
are to be shown, including citations to the original sources.
* * * * *
0
12. In Sec.  3010.20, revise paragraphs (b) and (d) and add paragraph 
(e) to read as follows:


Sec.  3010.20  Calculation of maximum rate adjustment.

* * * * *
    (b) Type 1-A and Type 1-B rate adjustments are subject to an 
inflation-based annual limitation computed using CPI-U values as 
detailed in Sec. Sec.  3010.21(a) and 3010.22(a).
* * * * *
    (d) In any 12-month period the maximum rate adjustment applicable 
to a class is:
    (1) For a Type1-A notice of rate adjustment, the annual limitation 
for the class; and
    (2) For a 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.  3010.29.
    (e) There is no limitation on the amount of a rate decrease 
contained in a notice of Type 1-C rate adjustment.
0
13. In Sec.  3010.21, revise the heading and paragraph (b) to read as 
follows:


Sec.  3010.21  Calculation of annual limitation when Type 1-A or Type 
1-B notices of rate adjustment are 12 or more months apart.

* * * * *
    (b) If a notice of a Type 1-A or Type 1-B rate adjustment is filed 
12 or more months after the most recent Type 1-A or Type 1-B notice of 
rate adjustment, 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.
* * * * *
0
14. In Sec.  3010.22, revise the heading and paragraphs (a) and (b) to 
read as follows:


Sec.  3010.22  Calculation of annual limitation when Type 1-A or Type 
1-B notices of rate adjustment are less than 12 months apart.

    (a) The monthly CPI-U values needed for the calculation of the 
partial 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 
less than 12 months after the most recent Type 1-A or Type 1-B notice 
of rate adjustment, 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.
* * * * *
0
15. Revise Sec.  3010.23 to read as follows:


Sec.  3010.23  Calculation of percentage change in rates.

    (a) Definitions. In this section:
    (1) Current rate.
    (i) In general. Except as provided in paragraphs (a)(1)(ii) and 
(a)(1)(iii) of this section, the term current rate means the rate in 
effect when the Postal Service files the notice of rate adjustment.
    (ii) Seasonal and temporary rates. When used with respect to a 
seasonal or temporary rate, as described in paragraph (a)(2) of this 
section, the term current rate means the most recent rate in effect for 
the rate cell, regardless of whether the seasonal or temporary rate is 
available at the time the Postal Service files the notice of rate 
adjustment.
    (iii) Exception. When used with respect to a rate cell that 
corresponds to a rate incentive that was previously excluded from the 
calculation of the percentage change in rates under paragraph (e)(1) of 
this section, the term current rate means the full undiscounted rate in 
effect for the rate cell at the time of the filing of the notice of 
rate adjustment, not the discounted rate in effect for the rate cell at 
such time. For example, if a rate incentive provides a 5-cent discount 
on a 25-cent rate and the Postal Service previously elected to exclude 
the rate incentive from the calculation of the percentage change in 
rates, the Postal Service may choose to begin including the discounted 
rate in its calculation of the percentage change in rates. If the 
Postal Service makes that choice, the current rate for the discounted 
rate cell will be 25 cents (the full undiscounted rate).
    (2) Rate cell. 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.
    (3) Rate incentive means a discount that is not a workshare 
discount and that is designed to increase or retain volume, improve the 
value of mail for mailers, or improve the operations of the Postal 
Service.
    (b) Calculation.
    (1) Type 1-A and Type 1-B rate adjustments. For a Type 1-A or Type 
1-B rate adjustment, 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 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.
    (2) Type 1-C rate adjustments. For a Type 1-C rate adjustment, for 
each class of mail and product within the class, the percentage change 
in rates is calculated by amending the workpapers attached to the 
Commission's order relating to the most recent Type 1-A or Type 1-B 
notice of rate adjustment to replace the planned rates under the most 
recent Type 1-A or Type 1-B notice of rate adjustment with the 
corresponding planned rates applicable to the class from the Type 1-C 
notice of rate adjustment.
    (c) Formula. 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 =

[[Page 5362]]

[GRAPHIC] [TIFF OMITTED] TP31JA14.002


    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 (for a Type 1-A or Type 1-B rate 
adjustment) or rate from most recent Type 1-A rate adjustment for 
rate cell i (for a Type 1-C rate adjustment)
Vi = volume of rate cell i

    (d) Volumes.
    (1) Obtaining Volumes from billing determinants. The volumes for 
each rate cell shall be obtained from the most recent available 12 
months of Postal Service billing determinants.
    (2) Permissible adjustments. The Postal Service shall make 
reasonable adjustments to the billing determinants to account for the 
effects of classification changes such as the introduction, deletion, 
or redefinition of rate cells. The Postal Service shall identify and 
explain all adjustments. All information and calculations relied upon 
to develop the adjustments shall be provided together with an 
explanation of why the adjustments are appropriate.
    (3) Basis for adjustments. Whenever possible, adjustments shall be 
based on known mail characteristics or historical volume data, as 
opposed to forecasts of mailer behavior.
    (4) Adjustment for deletion of rate cell. For an adjustment 
accounting for the effects of the deletion of a rate cell when an 
alternate rate cell is not available, the Postal Service should adjust 
the billing determinants associated with the rate cell to zero. If the 
Postal Service does not adjust the billing determinants for the rate 
cell to zero, the Postal Service shall include a rationale for its 
treatment of the rate cell with the information required under 
paragraph (d)(2) of this section.
    (e) Treatment of rate incentives.
    (1) Rate incentives may be excluded from a percentage change in 
rates calculation. If the Postal Service elects to exclude a rate 
incentive from a percentage change in rates calculation, the rate 
incentive shall be treated in the same manner as a rate under a 
negotiated service agreement (as described in Sec.  3010.24).
    (2) A rate incentive may be included in a percentage change in 
rates calculation if it meets the following criteria:
    (i) The rate incentive is in the form of a discount or can be 
easily translated into a discount;
    (ii) Sufficient billing determinants are available for the rate 
incentive to be included in the percentage change in rate calculation 
for the class, which may be adjusted based on known mail 
characteristics or historical volume data (as opposed to forecasts of 
mailer behavior); and
    (iii) The rate incentive is a rate of general applicability.
0
16. Revise Sec.  3010.24 to read as follows:


Sec.  3010.24  Treatment of volume associated with negotiated service 
agreements and rate incentives that are not rates of general 
applicability.

    (a) Mail volumes sent at rates under a negotiated service agreement 
or a rate incentive that is not a rate of general applicability are to 
be included in the calculation of 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 or the rate incentive that is not a 
rate of general applicability 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 
and rate incentives that are not rates of general applicability in the 
calculation of the percentage change in rates and provide the rationale 
for its assumptions.
0
17. In section 3010.26, revise the heading and paragraphs (b) and (e) 
to read as follows:


Sec.  3010.26  Calculation of unused rate adjustment authority for Type 
1-A and Type 1-B rate adjustments.

* * * * *
    (b) When notices of Type 1-A or Type1-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 percentage change in 
rates for the class calculated pursuant to Sec.  3010.23(b)(1).
* * * * *
    (e) Unused rate adjustment authority generated under this section 
lapses 5 years after the date of filing of the notice of rate 
adjustment leading to its calculation.
* * * * *


Sec.  3010.28  [Redesignated as Sec.  3010.29 and amended.]

0
18. Redesignate Sec.  3010.28 as Sec.  3010.29 and revise the heading 
to read as follows:


Sec.  3010.29  Maximum size of Type 1-B rate adjustments.

* * * * *


Sec.  3010.27  [Redesignated as Sec.  3010.28.]

0
19. Redesignate Sec.  3010.27 as Sec.  3010.28.
0
20. Add new Sec.  3010.27 to read as follows:


Sec.  3010.27  Calculation of unused rate adjustment authority for Type 
1-C rate adjustments.

    (a) For a notice of Type 1-C rate adjustment, unused rate 
adjustment authority for a class is calculated in two steps. First, the 
difference between the annual limitation calculated pursuant to Sec.  
3010.21 or Sec.  3010.22 for the most recent notice of Type 1-A or Type 
1-B rate adjustment and the percentage change in rates for the class 
calculated pursuant to Sec.  3010.23(b)(2) is calculated. Second, the 
unused rate adjustment authority generated in the most recent Type 1-A 
or Type 1-B rate adjustment is subtracted from that result.
    (b) Unused rate adjustment authority generated under paragraph (a) 
of this section lapses 5 years after the date of filing of the most 
recent notice of Type 1-A or Type 1-B rate adjustment.
    (c) Unused rate adjustment authority generated under paragraph (a) 
of this section for a class shall be added to the unused rate 
adjustment authority generated in the most recent notice of Type 1-A 
rate adjustment on the schedule maintained under Sec.  3010.26(f). For 
purposes of Sec.  3010.28, the unused rate adjustment authority 
generated under paragraph (a) of this section for a class shall be 
deemed to have been added to the schedule maintained under Sec.  
3010.26(f) on the same date as the

[[Page 5363]]

most recent notice of Type 1-A or Type 1-B rate adjustment.
    (d) Unused rate adjustment authority generated under paragraph (a) 
of this section shall be subject to the limitation under Sec.  3010.29, 
regardless of whether it is used alone or in combination with other 
existing unused rate adjustment authority.
0
21. Add new Sec.  3010.30 to read as follows:


Sec.  3010.30  De minimis rate increases.

    (a) The Postal Service may elect to file a Type 1-A notice of rate 
adjustment as a de minimis rate increase if:
    (1) For each affected class, the rate increases contained within 
the notice of a Type 1-A rate adjustment do not result in the 
percentage change in rates for the class equaling or exceeding 0.001 
percent; and
    (2) For each affected class, the sum of all rate increases included 
in de minimis rate increases since the most recent Type 1-A or Type 1-B 
rate adjustment that was not a de minimis rate increase does not result 
in the percentage change in rates for the class equaling or exceeding 
0.001 percent.
    (b) No unused rate adjustment authority will be added to the 
schedule of unused rate adjustment authority maintained under Sec.  
3010.26(f) as a result of a de minimis rate increase.
    (c) No rate decreases may be taken into account when determining 
whether rate increases comply with paragraphs (a)(1) and (a)(2) of this 
section.
    (d) In the next notice of a Type 1-A or Type 1-B rate adjustment 
for a class that is not a de minimis rate increase:
    (1) The annual limitation shall be calculated as if the de minimis 
rate increase had not been filed; and
    (2) For purposes of calculating the percentage change in rates, the 
current rate shall be the current rate from the de minimis rate 
increase.
    (e) The Postal Service shall file supporting workpapers with each 
notice of de minimis rate increase that demonstrate that the sum of all 
rate increases included in de minimis rate increases since the most 
recent Type 1-A or Type 1-B notice of rate adjustment that was not de 
minimis does not result in a percentage change in rates for the class 
equaling or exceeding 0.001 percent.
[FR Doc. 2014-01669 Filed 1-30-14; 8:45 am]
BILLING CODE 7710-FW-P