Statutory Review of the System for Regulating Market Dominant Rates and Classifications, 95071-95074 [2016-31052]

Download as PDF Federal Register / Vol. 81, No. 248 / Tuesday, December 27, 2016 / Proposed Rules created 25 years or more before the date on which the records were requested. * * * * * ■ 5. Amend § 3004.13 by revising paragraph (a) to read as follows: § 3004.13 Notice and publication of public information. (a) Decisions, advisory opinions, orders, public reports, and frequently requested agency records will be made available to the public by posting on the Commission’s Web site at https:// www.prc.gov. * * * * * ■ 6. Amend § 3004.43 by revising paragraph (a) and adding paragraph (d)(4) to read as follows: § 3004.43 Response to requests. (a) Within 20 days (excluding Saturdays, Sundays and legal holidays) after receipt of a request for a Commission record, the Secretary or Assistant Secretary will notify the requester of its determination to grant or deny the request and the right to seek assistance from the Commission’s FOIA Public Liaison. * * * * * (d) * * * (4) The right to seek dispute resolution services from the Commission’s FOIA Public Liaison or the Office of Government Information Services. * * * * * ■ 7. Revise § 3004.45 to read as follows: mstockstill on DSK3G9T082PROD with PROPOSALS § 3004.45 8. Amend § 3004.52 by revising paragraph (e) and adding paragraph (f) to read as follows: ■ § 3004.52 Fees—general provisions. * * * * * (e) No requester will be charged a fee after any search or response which occurs after the applicable time limits as described in §§ 3004.43 and 3004.44, unless: (1) The Commission extends the time limit for its response due to unusual circumstances, pursuant to § 3004.45(a), and the Commission completes its response within the extension of time provided under that section; or (2) The Commission extends the time limit for its response due to unusual circumstances, pursuant to § 3004.45(a), and more than 5,000 pages are necessary to respond to the request and the Commission has discussed with the requester how they could effectively limit the scope of the request or made at least three good faith attempts to do so; or (3) A court has determined that exceptional circumstances exist and excused the Commission from responding by court order. (f) The Commission may, however, charge fees for a partial grant of a request while it reviews records that may be exempt and may be responsive to the request, if it is made within the applicable time limits. [FR Doc. 2016–30905 Filed 12–23–16; 8:45 am] BILLING CODE 7710–FW–P Extension of response time limit. (a) The Commission may extend the time limit for a response to a request or appeal for up to 10 business days due to unusual circumstances, as specified in 5 U.S.C. 552(a)(6)(B)(iii). In such a case, the Commission will notify the requester in writing of the unusual circumstance causing the extension and the date by which the Commission estimates that the request can be processed. (b) If an extension will exceed 10 business days, the Commission will: (1) Provide the requester with an opportunity to limit the scope of the request or to arrange an alternative timeframe for processing the request or a modified request. The applicable time limits are not tolled while the Commission waits for a response from the requester under this subsection; and (2) Make its FOIA Public Liaison available to the requester and apprise the requester of their right to seek dispute resolution services from the Office of Government Information Services. VerDate Sep<11>2014 20:09 Dec 23, 2016 Jkt 241001 POSTAL REGULATORY COMMISSION 39 CFR Part 3622 [Docket No. RM2017–3; Order No. 3673] Statutory Review of the System for Regulating Market Dominant Rates and Classifications Postal Regulatory Commission. Advance notice of proposed rulemaking. AGENCY: ACTION: The Commission is initiating a review to determine whether the current system of regulating rates and classes for market dominant products is achieving the objectives, taking into account the factors, established by Congress under the Postal Accountability and Enhancement Act of 2006. This advance notice informs the public of the docket’s initiation, invites public comment, and takes other administrative steps. DATES: Comments are due: March 20, 2017. SUMMARY: PO 00000 Frm 00006 Fmt 4702 Sfmt 4702 95071 Submit comments electronically via the Commission’s Filing Online system at https:// www.prc.gov. Those who cannot submit comments electronically should contact the person identified in the FOR FURTHER INFORMATION CONTACT section by telephone for advice on filing alternatives. FOR FURTHER INFORMATION CONTACT: David A. Trissell, General Counsel, at 202–789–6820. SUPPLEMENTARY INFORMATION: ADDRESSES: Table of Contents I. Introduction II. Scope of the Review III. Review Framework IV. Objectives V. Notice of Commission Action VI. Ordering Paragraphs I. Introduction On December 20, 2006, the Postal Accountability and Enhancement Act (PAEA) was signed into law.1 The PAEA required that the Commission establish a modern system of regulating rates and classes for market dominant products.2 The PAEA also mandated that the Commission review this system 10 years later to determine if it is achieving the objectives, taking into account the factors, established by Congress.3 If the Commission determines that the system is not achieving the objectives, taking into account the factors, the Commission may, by regulation, make modifications or adopt an alternative system as necessary to achieve the objectives. Id. In accordance with 39 U.S.C. 3622, this Notice and Order establishes the beginning of the Commission’s statutory review of the ratemaking system. Based on the Commission’s analysis and relevant information obtained through this proceeding, the Commission will determine if the objectives, taking into account the factors, are being achieved by the current system. If the Commission finds that the objectives, taking into account the factors, are not being achieved, the Commission may propose modifications to the system or propose to adopt an alternative system as necessary to achieve the objectives. II. Scope of the Review 4 The Commission intends to examine all aspects of the ratemaking system 1 Pub. L. 109–435, 120 Stat. 3198 (2006). U.S.C. 3622(a). 3 39 U.S.C. 3622(d)(3). 4 The Postal Service previously petitioned the Commission to initiate a proceeding to clarify the scope of the statutory review. See Docket No. RM2016–9, Petition of the United States Postal 2 39 E:\FR\FM\27DEP1.SGM Continued 27DEP1 95072 Federal Register / Vol. 81, No. 248 / Tuesday, December 27, 2016 / Proposed Rules provided within section 3622, including the annual limitation on the percentage changes in rates,5 the schedule for rate changes,6 the 45-day notice before the implementation of rate adjustments,7 expedited rate changes due to extraordinary or exceptional circumstances,8 class level application of the annual limitation,9 the rounding of rates and fees,10 the use of unused rate authority,11 and workshare discounts.12 III. Review Framework To assist commenters, the Commission presents preliminary definitions for the objectives as well as potential methods that may be used to evaluate whether the objectives, taking into account the factors, are being achieved. Proposed definitions and potential evaluation methods for each objective are discussed in section IV. After the Commission receives comments and conducts its analysis, the Commission will determine if the current system is achieving the objectives while taking into account the factors listed in 39 U.S.C. 3622(c). If the Commission finds the system is not achieving these objectives, taking into account the factors, it may propose rules that modify the system or adopt an alternative system to achieve the objectives. mstockstill on DSK3G9T082PROD with PROPOSALS IV. Objectives Based on research of legislative history, Commission precedent, stakeholder comments in various past dockets, and other sources, the Commission presents preliminary definitions for each objective. In addition, the Commission suggests measurable key concepts within each objective. These key concepts could be measured quantitatively and/or qualitatively to determine if each objective as a whole has been achieved. Because the statute does not require that factors be independently achieved, the Commission is not proposing Service for the Initiation of a Proceeding to Clarify the Scope of the Review of the System for Regulating Market-Dominant Rates and Classes, April 7, 2016. In Order No. 3237, the Commission found the petition premature and held the petition in abeyance pending the start of the review. See Docket No. RM2016–9, Order No. 3237, Order Holding Petition in Abeyance, April 12, 2016. The Commission defines the scope of the review at this time. 5 39 U.S.C. 3622(d)(1)(A); see also 39 U.S.C. 3622(d)(1)(D). 6 39 U.S.C. 3622(d)(1)(B). 7 39 U.S.C. 3622(d)(1)(C). 8 39 U.S.C. 3622(d)(1)(E). 9 39 U.S.C. 3622(d)(2)(A). 10 39 U.S.C. 3622(d)(2)(B). 11 39 U.S.C. 3622(d)(2)(C). 12 39 U.S.C. 3622(e). VerDate Sep<11>2014 20:09 Dec 23, 2016 Jkt 241001 definitions or measurement methods for the factors. However, over the course of the review, the factors will be taken into account for each objective, as required by the statute. A. Objective 1: To maximize incentives to reduce costs and increase efficiency.13 Preliminary definition. A system achieving Objective 1 uses available mechanisms, such as flexibility under the price cap, pricing differentials, and workshare discounts, to the fullest extent possible to incentivize the reduction of costs and increases in operational and pricing efficiency. Potential measurement. There are three measurable key concepts within this objective: (1) Maximize incentives, (2) reduce costs, and (3) increase efficiency. First, ‘‘maximize incentives’’ could be measured by determining if the maximum benefit was provided by each incentive mechanism (e.g., price cap, price differentials, and workshare discounts), taking into account associated statutory constraints. For example, a review of whether workshare discounts provided the maximum incentives possible would take into account the constraints set forth in 39 U.S.C. 3622(e). Second, measuring ‘‘reduce costs’’ could include an evaluation of the costs, including unit operating costs and controllable costs, before and after the PAEA was implemented. Third, ‘‘increase efficiency’’ could include a review of operational and pricing efficiency. Measuring operational efficiency could involve reviewing trend analyses of total factor productivity, real unit operating costs, productivity data, and workhours. To measure pricing efficiency,14 a comparison of actual prices and prices that adhere to principles of efficient component pricing could be conducted. B. Objective 2: To create predictability and stability in rates.15 Preliminary definition. A system achieving Objective 2 fosters rates, including prices for all market dominant products and promotions, that are capable of being consistently forecast with regard to timing and magnitude and that do not include sudden or extreme fluctuations. Potential measurement. There are two measurable key concepts within this U.S.C. 3622(b)(1). can promote allocative efficiency by setting prices at marginal costs or by applying second-best pricing. Pricing can also promote productive efficiency by application of the Efficient Component Pricing Rule. 15 39 U.S.C. 3622(b)(2). objective: (1) Predictability, and (2) stability. Potential approaches for measuring predictability include measuring the time between notices of market dominant price adjustments, or the amount of time between a notice of market dominant price adjustment and the effective date of those prices. The outcomes of these measurements could be compared to price adjustments prior to the passage of the PAEA, or other relevant benchmarks to measure the predictability of the current system. One potential method for measuring stability is to measure average price increases over time and compare them to objective measures, such as the Consumer Price Index for All Urban Consumers (CPI–U). Another method may be to evaluate the number of price categories that deviate significantly from percentage changes in objective measures, such as the CPI–U or the average price adjustment for the class or product. C. Objective 3: To maintain high quality service standards established under section 3691.16 Preliminary definition. A system achieving Objective 3 is designed for the Postal Service to consistently achieve, for each class of mail, stated days to delivery at a desired target rate. Potential measurement. The key measurable concept within this objective is ‘‘high quality service standards.’’ Potential approaches for the measurement of ‘‘high quality service standards’’ include measuring the Postal Service’s performance, both for discrete time periods and since the passage of the PAEA. Some of these measurements are already conducted in the Commission’s Annual Compliance Determination (ACD) Reports.17 For example, the Commission typically details the number of percentage points a class or product is above or below its service performance target.18 In addition, measurement of this objective could include analysis of changes in service standards over time, analysis of service performance results over time, and determining how satisfied mail users are with service standards. D. Objective 4: To allow the Postal Service pricing flexibility.19 Preliminary definition. A system achieving Objective 4 allows for the Postal Service to exercise its discretion 13 39 14 Pricing PO 00000 Frm 00007 Fmt 4702 Sfmt 4702 16 39 U.S.C. 3622(b)(3). e.g., Docket No. ACR2015, Annual Compliance Determination, March 28, 2016, Chapter 5 (FY 2015 ACD). 18 See, e.g., FY 2015 ACD at 123. 19 39 U.S.C. 3622(b)(4). 17 See, E:\FR\FM\27DEP1.SGM 27DEP1 mstockstill on DSK3G9T082PROD with PROPOSALS Federal Register / Vol. 81, No. 248 / Tuesday, December 27, 2016 / Proposed Rules to set prices, the price structure, and the price schedule for market dominant products, subject to other requirements under the law. Potential measurement. The key measurable concept within this objective is ‘‘pricing flexibility.’’ Potential measurement methods for this term include comparisons to other systems, such as the pricing flexibility afforded to and/or exercised by foreign posts, utilities, the Postal Service prePAEA, and private carriers. Measurement of ‘‘pricing flexibility’’ could also include a review of price adjustment proceedings and Annual Compliance Report (ACR) dockets, which highlight the pricing flexibility exercised by the Postal Service. Analysis of the time it takes for the approval of a price adjustment, the number of price categories approved without material alteration, and reviewing discussions of pricing flexibility in other Commission proceedings could also be conducted to determine if this objective is being achieved. E. Objective 5: To assure adequate revenues, including retained earnings, to maintain financial stability.20 Preliminary definition. In a system achieving Objective 5, the Postal Service is financially solvent while able to respond to changes in its environment (e.g., volume erosion, legal or regulatory framework, demographic trends) and meet its statutory obligations (e.g., pricing and universal service). Potential measurement. The key measurable concept within this objective is ‘‘financial stability,’’ which incorporates adequate revenues and retained earnings. ‘‘Financial stability’’ could be measured by reviewing short-term, medium-term, and long-term financial stability of the Postal Service. Shortterm financial stability could be measured by the Postal Service’s operating profit (i.e., operational revenue—operational expenses). Medium-term financial stability could be measured by economic profit (i.e., total revenue ¥ [variable cost + fixed cost]). Long-term financial stability could be measured by solvency (i.e., total assets/total liabilities). The Commission has analyzed these concepts in its recent financial reports and could potentially use those analyses to determine if this objective is being achieved.21 For example, in Chapter 4 of its FY 2015 Financial Report, the 20 39 U.S.C. 3622(b)(5). e.g., FY 2015 Financial Analysis of United States Postal Service Financial Results and 10–K Statement, March 29, 2016 (FY 2015 Financial Report). 21 See, VerDate Sep<11>2014 20:09 Dec 23, 2016 Jkt 241001 Commission included an analysis of the Sustainability, Liquidity, Activity, and Financial Solvency of the Postal Service’s financial status.22 F. Objective 6: To reduce the administrative burden and increase the transparency of the ratemaking process.23 Preliminary definition. A system achieving Objective 6 balances the (sometimes competing) concepts of reducing the costs imposed by rate proceedings or regulatory requirements generated by those proceedings, and the availability of comprehensive understandable material relating to each rate proceeding. Potential measurement. There are two measurable key concepts within this objective: (1) Reduce the administrative burden, and (2) increase the transparency. In order to achieve this objective, the ratemaking system must balance reducing administrative burden with increasing transparency. ‘‘Reducing the administrative burden’’ of the ratemaking process could be measured by evaluating the complexity of rate adjustment filings and proceedings and/or quantifying the length, number of information requests and/or staff hours required to review the price adjustment proposal, ACRs, complaints, or dockets related to price setting. ‘‘Increasing transparency’’ could be measured in several ways. An analysis of the necessary interaction between stakeholders and the Postal Service and/ or Commission could be conducted. Another option could be to analyze the amount and type of information filed under seal compared to publicly available information. These features could also be compared to levels of transparency and administrative burden present prior to the passage of the PAEA. G. Objective 7: To enhance mail security and deter terrorism.24 Preliminary definition. A system achieving Objective 7 encourages methods of safeguarding the mail system from illegal or dangerous use, or terrorism. Potential measurement. There are two measurable key concepts within this objective: (1) Enhance mail security, and (2) deter terrorism. Possible metrics to determine if Objective 7 is being achieved include a review of available safeguards (and associated available funds) that are intended to enhance security and deter terrorism, and a review of the availability of an exigentFY 2015 Financial Report at 75–86. U.S.C. 3622(b)(6). 24 39 U.S.C. 3622(b)(7). like provision to ensure funds are available to respond to specific threats. H. Objective 8: To establish and maintain a just and reasonable schedule for rates and classifications, however the objective under this paragraph shall not be construed to prohibit the Postal Service from making changes of unequal magnitude within, between, or among classes of mail.25 Preliminary definition. A system achieving Objective 8 requires that rates and classifications are linked to distinct cost or market characteristics, and the amount charged for each service is neither excessive to the mailer nor threatens the financial integrity of the Postal Service. Potential measurement. There are two measurable key concepts within this objective: (1) Just, and (2) reasonable. These two concepts are associated with both the schedule of rates and the schedule of classifications. To determine whether the schedule of rates and classifications is ‘‘just,’’ a review of instances of excessive price increases could be conducted, including a review of classification changes. A review of price and cost relationships could also be conducted to ensure that customers are protected from misuse of the Postal Service’s monopoly power. Additionally, a review of the cost or market characteristics that define a price category, product, or service could be conducted. To determine whether the schedule of rates and classifications is ‘‘reasonable,’’ an examination of the relationship between price and cost could be conducted to ensure prices and classifications do not threaten the Postal Service’s financial integrity. Another option to measure the concept ‘‘reasonable’’ could be an examination of the total compensation provided by products/services, classes, and all market dominant classes. I. Objective 9: To allocate the total institutional costs of the Postal Service appropriately between market dominant and competitive products.26 Preliminary definition. A system achieving Objective 9 has a mechanism to appropriately divide total institutional costs between market dominant and competitive products in a manner reflecting the relevant statutory considerations. Potential measurement. The key measurable concept within this objective is ‘‘allocate the total institutional costs appropriately.’’ This objective is related to sections 3633(a)(3) and 3633(b). The measurement of 22 See 23 39 PO 00000 Frm 00008 Fmt 4702 Sfmt 4702 95073 25 39 26 39 E:\FR\FM\27DEP1.SGM U.S.C. 3622(b)(8). U.S.C. 3622(b)(9). 27DEP1 95074 Federal Register / Vol. 81, No. 248 / Tuesday, December 27, 2016 / Proposed Rules mstockstill on DSK3G9T082PROD with PROPOSALS Objective 9 could rely on a historical review of the allocation of institutional costs between market dominant and competitive products. The measurement of this objective could also include a review of any action the Commission takes to analyze the competitive products’ minimum contribution to institutional costs. V. Notice of Commission Action Using this framework of potential definitions and measurement methods, the Commission establishes Docket No. RM2017–3 to begin its review of the market dominant ratemaking system. The Commission invites comments from interested persons regarding the process and structure of the review, as well as whether the current system is achieving the objectives, taking into account the factors. In particular, the Commission invites comments in response to the following questions: 1. Is the framework proposed by the Commission appropriate for the review? a. For each objective, is the preliminary definition reasonable? If not, please suggest alternative definitions. b. For each objective, are the potential metrics for measuring the achievement of the objective reasonable? If not, please suggest alternative metrics for measuring whether the objective is being achieved. 2. If the proposed framework is not appropriate for the review, please identify the framework that should be used for the review and describe how to measure the achievement of the objectives in that alternative framework. 3. Based on the Commission’s proposed framework or an alternative framework provided in response to question 2, is the current system achieving each objective, while taking into account the factors? Please note that review of the system shall be limited to section 3622 as discussed in section II above. 4. If the system is not achieving the objectives, while taking into account the factors, what modifications to the system should be made, or what alternative system should be adopted, to achieve the objectives? Comments are due no later than March 20, 2017. No reply comments will be accepted. Commission regulations require that comments be filed online according to the process outlined at 39 CFR 3001.9(a). Additional information regarding how to submit comments online can be found at: https://www.prc.gov/how-to-participate. However, given the unique nature of this docket, the Commission will waive these requirements for filers who mail VerDate Sep<11>2014 20:09 Dec 23, 2016 Jkt 241001 their comments.27 All information and comments provided, whether filed through the Commission’s filing system or sent by mail, will be made available on the Commission’s Web site (https:// www.prc.gov). Pursuant to 39 U.S.C. 505, the Commission appoints Richard A. Oliver to represent the interests of the general public (Public Representative) in this proceeding. VI. Ordering Paragraphs It is ordered: 1. The Commission establishes Docket No. RM2017–3 to initiate the review of the market dominant ratemaking system as required by 39 U.S.C. 3622. 2. Comments regarding the process and structure of the review, as well as whether the current system is achieving the objectives, while taking into account the factors, and if not, whether and what modifications to the system or an alternative system should be adopted as necessary to achieve the objectives, are due no later than March 20, 2017. 3. Pursuant to 39 U.S.C. 505, Richard A. Oliver is appointed to serve as an officer of the Commission (Public Representative) to represent the interests of the general public in this proceeding. 4. The Secretary shall arrange for publication of this order in the Federal Register. By the Commission. Stacy L. Ruble, Secretary. [FR Doc. 2016–31052 Filed 12–23–16; 8:45 am] BILLING CODE 7710–FW–P ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 52 [EPA–R09–OAR–2016–0726; FRL–9957–12– Region 9] Approval and Limited Approval and Limited Disapproval of Air Quality Implementation Plans; California; Mendocino County Air Quality Management District; Stationary Source Permits Environmental Protection Agency (EPA). ACTION: Proposed rule. AGENCY: The Environmental Protection Agency (EPA) is proposing action on four permitting rules submitted as a SUMMARY: 27 Filers who choose to mail in their comments should be mindful of possible delays given the irradiation process for mail delivered to the Commission. PO 00000 Frm 00009 Fmt 4702 Sfmt 4702 revision to the Mendocino County Air Quality Management District (‘‘MCAQMD’’ or ‘‘the District’’) portion of the applicable state implementation plan (SIP) for the State of California pursuant to requirements under the Clean Air Act (CAA or Act). We are proposing a limited approval and limited disapproval of one rule and we are proposing to approve the remaining three permitting rules. The submitted revisions include amended rules governing the issuance of permits for stationary sources, including review and permitting of minor sources, and major sources and major modifications under part C of title I of the Act. The intended effect of these proposed actions is to update the applicable SIP with current MCAQMD permitting rules and to set the stage for remedying certain deficiencies in these rules. If finalized as proposed, the limited disapproval actions would trigger an obligation for EPA to promulgate a Federal Implementation Plan (FIP) for the specific New Source Review (NSR) program deficiencies unless California submits and we approve SIP revisions that correct the deficiencies within two years of the final action. Any comments must arrive by January 26, 2017. DATES: Submit your comments, identified by Docket ID Number EPA– R09–OAR–2016–0726 at https:// www.regulations.gov, or via email to r9airpermits@epa.gov. For comments submitted at Regulations.gov, follow the online instructions for submitting comments. Once submitted, comments cannot be edited or removed from Regulations.gov. For either manner of submission, the EPA may publish any comment received to its public docket. Do not submit electronically any information you consider to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. Multimedia submissions (audio, video, etc.) must be accompanied by a written comment. The written comment is considered the official comment and should include discussion of all points you wish to make. The EPA will generally not consider comments or comment contents located outside of the primary submission (i.e. on the web, cloud, or other file sharing system). For additional submission methods, please contact the person identified in the FOR FURTHER INFORMATION CONTACT section. For the full EPA public comment policy, information about CBI or multimedia submissions, and general guidance on making effective comments, please visit ADDRESSES: E:\FR\FM\27DEP1.SGM 27DEP1

Agencies

[Federal Register Volume 81, Number 248 (Tuesday, December 27, 2016)]
[Proposed Rules]
[Pages 95071-95074]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-31052]


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POSTAL REGULATORY COMMISSION

39 CFR Part 3622

[Docket No. RM2017-3; Order No. 3673]


Statutory Review of the System for Regulating Market Dominant 
Rates and Classifications

AGENCY: Postal Regulatory Commission.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: The Commission is initiating a review to determine whether the 
current system of regulating rates and classes for market dominant 
products is achieving the objectives, taking into account the factors, 
established by Congress under the Postal Accountability and Enhancement 
Act of 2006. This advance notice informs the public of the docket's 
initiation, invites public comment, and takes other administrative 
steps.

DATES:  Comments are due: March 20, 2017.

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

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

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Introduction
II. Scope of the Review
III. Review Framework
IV. Objectives
V. Notice of Commission Action
VI. Ordering Paragraphs

I. Introduction

    On December 20, 2006, the Postal Accountability and Enhancement Act 
(PAEA) was signed into law.\1\ The PAEA required that the Commission 
establish a modern system of regulating rates and classes for market 
dominant products.\2\ The PAEA also mandated that the Commission review 
this system 10 years later to determine if it is achieving the 
objectives, taking into account the factors, established by 
Congress.\3\ If the Commission determines that the system is not 
achieving the objectives, taking into account the factors, the 
Commission may, by regulation, make modifications or adopt an 
alternative system as necessary to achieve the objectives. Id.
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    \1\ Pub. L. 109-435, 120 Stat. 3198 (2006).
    \2\ 39 U.S.C. 3622(a).
    \3\ 39 U.S.C. 3622(d)(3).
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    In accordance with 39 U.S.C. 3622, this Notice and Order 
establishes the beginning of the Commission's statutory review of the 
ratemaking system. Based on the Commission's analysis and relevant 
information obtained through this proceeding, the Commission will 
determine if the objectives, taking into account the factors, are being 
achieved by the current system. If the Commission finds that the 
objectives, taking into account the factors, are not being achieved, 
the Commission may propose modifications to the system or propose to 
adopt an alternative system as necessary to achieve the objectives.

II. Scope of the Review 4
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    \4\ The Postal Service previously petitioned the Commission to 
initiate a proceeding to clarify the scope of the statutory review. 
See Docket No. RM2016-9, Petition of the United States Postal 
Service for the Initiation of a Proceeding to Clarify the Scope of 
the Review of the System for Regulating Market-Dominant Rates and 
Classes, April 7, 2016. In Order No. 3237, the Commission found the 
petition premature and held the petition in abeyance pending the 
start of the review. See Docket No. RM2016-9, Order No. 3237, Order 
Holding Petition in Abeyance, April 12, 2016. The Commission defines 
the scope of the review at this time.
---------------------------------------------------------------------------

    The Commission intends to examine all aspects of the ratemaking 
system

[[Page 95072]]

provided within section 3622, including the annual limitation on the 
percentage changes in rates,\5\ the schedule for rate changes,\6\ the 
45-day notice before the implementation of rate adjustments,\7\ 
expedited rate changes due to extraordinary or exceptional 
circumstances,\8\ class level application of the annual limitation,\9\ 
the rounding of rates and fees,\10\ the use of unused rate 
authority,\11\ and workshare discounts.\12\
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    \5\ 39 U.S.C. 3622(d)(1)(A); see also 39 U.S.C. 3622(d)(1)(D).
    \6\ 39 U.S.C. 3622(d)(1)(B).
    \7\ 39 U.S.C. 3622(d)(1)(C).
    \8\ 39 U.S.C. 3622(d)(1)(E).
    \9\ 39 U.S.C. 3622(d)(2)(A).
    \10\ 39 U.S.C. 3622(d)(2)(B).
    \11\ 39 U.S.C. 3622(d)(2)(C).
    \12\ 39 U.S.C. 3622(e).
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III. Review Framework

    To assist commenters, the Commission presents preliminary 
definitions for the objectives as well as potential methods that may be 
used to evaluate whether the objectives, taking into account the 
factors, are being achieved. Proposed definitions and potential 
evaluation methods for each objective are discussed in section IV. 
After the Commission receives comments and conducts its analysis, the 
Commission will determine if the current system is achieving the 
objectives while taking into account the factors listed in 39 U.S.C. 
3622(c). If the Commission finds the system is not achieving these 
objectives, taking into account the factors, it may propose rules that 
modify the system or adopt an alternative system to achieve the 
objectives.

IV. Objectives

    Based on research of legislative history, Commission precedent, 
stakeholder comments in various past dockets, and other sources, the 
Commission presents preliminary definitions for each objective. In 
addition, the Commission suggests measurable key concepts within each 
objective. These key concepts could be measured quantitatively and/or 
qualitatively to determine if each objective as a whole has been 
achieved. Because the statute does not require that factors be 
independently achieved, the Commission is not proposing definitions or 
measurement methods for the factors. However, over the course of the 
review, the factors will be taken into account for each objective, as 
required by the statute.
    A. Objective 1: To maximize incentives to reduce costs and increase 
efficiency.\13\
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    \13\ 39 U.S.C. 3622(b)(1).
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    Preliminary definition. A system achieving Objective 1 uses 
available mechanisms, such as flexibility under the price cap, pricing 
differentials, and workshare discounts, to the fullest extent possible 
to incentivize the reduction of costs and increases in operational and 
pricing efficiency.
    Potential measurement. There are three measurable key concepts 
within this objective: (1) Maximize incentives, (2) reduce costs, and 
(3) increase efficiency.
    First, ``maximize incentives'' could be measured by determining if 
the maximum benefit was provided by each incentive mechanism (e.g., 
price cap, price differentials, and workshare discounts), taking into 
account associated statutory constraints. For example, a review of 
whether workshare discounts provided the maximum incentives possible 
would take into account the constraints set forth in 39 U.S.C. 3622(e).
    Second, measuring ``reduce costs'' could include an evaluation of 
the costs, including unit operating costs and controllable costs, 
before and after the PAEA was implemented.
    Third, ``increase efficiency'' could include a review of 
operational and pricing efficiency. Measuring operational efficiency 
could involve reviewing trend analyses of total factor productivity, 
real unit operating costs, productivity data, and workhours. To measure 
pricing efficiency,\14\ a comparison of actual prices and prices that 
adhere to principles of efficient component pricing could be conducted.
---------------------------------------------------------------------------

    \14\ Pricing can promote allocative efficiency by setting prices 
at marginal costs or by applying second-best pricing. Pricing can 
also promote productive efficiency by application of the Efficient 
Component Pricing Rule.
---------------------------------------------------------------------------

    B. Objective 2: To create predictability and stability in 
rates.\15\
---------------------------------------------------------------------------

    \15\ 39 U.S.C. 3622(b)(2).
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    Preliminary definition. A system achieving Objective 2 fosters 
rates, including prices for all market dominant products and 
promotions, that are capable of being consistently forecast with regard 
to timing and magnitude and that do not include sudden or extreme 
fluctuations.
    Potential measurement. There are two measurable key concepts within 
this objective: (1) Predictability, and (2) stability.
    Potential approaches for measuring predictability include measuring 
the time between notices of market dominant price adjustments, or the 
amount of time between a notice of market dominant price adjustment and 
the effective date of those prices. The outcomes of these measurements 
could be compared to price adjustments prior to the passage of the 
PAEA, or other relevant benchmarks to measure the predictability of the 
current system.
    One potential method for measuring stability is to measure average 
price increases over time and compare them to objective measures, such 
as the Consumer Price Index for All Urban Consumers (CPI-U). Another 
method may be to evaluate the number of price categories that deviate 
significantly from percentage changes in objective measures, such as 
the CPI-U or the average price adjustment for the class or product.
    C. Objective 3: To maintain high quality service standards 
established under section 3691.\16\
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    \16\ 39 U.S.C. 3622(b)(3).
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    Preliminary definition. A system achieving Objective 3 is designed 
for the Postal Service to consistently achieve, for each class of mail, 
stated days to delivery at a desired target rate.
    Potential measurement. The key measurable concept within this 
objective is ``high quality service standards.''
    Potential approaches for the measurement of ``high quality service 
standards'' include measuring the Postal Service's performance, both 
for discrete time periods and since the passage of the PAEA. Some of 
these measurements are already conducted in the Commission's Annual 
Compliance Determination (ACD) Reports.\17\ For example, the Commission 
typically details the number of percentage points a class or product is 
above or below its service performance target.\18\ In addition, 
measurement of this objective could include analysis of changes in 
service standards over time, analysis of service performance results 
over time, and determining how satisfied mail users are with service 
standards.
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    \17\ See, e.g., Docket No. ACR2015, Annual Compliance 
Determination, March 28, 2016, Chapter 5 (FY 2015 ACD).
    \18\ See, e.g., FY 2015 ACD at 123.
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    D. Objective 4: To allow the Postal Service pricing 
flexibility.\19\
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    \19\ 39 U.S.C. 3622(b)(4).
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    Preliminary definition. A system achieving Objective 4 allows for 
the Postal Service to exercise its discretion

[[Page 95073]]

to set prices, the price structure, and the price schedule for market 
dominant products, subject to other requirements under the law.
    Potential measurement. The key measurable concept within this 
objective is ``pricing flexibility.''
    Potential measurement methods for this term include comparisons to 
other systems, such as the pricing flexibility afforded to and/or 
exercised by foreign posts, utilities, the Postal Service pre-PAEA, and 
private carriers. Measurement of ``pricing flexibility'' could also 
include a review of price adjustment proceedings and Annual Compliance 
Report (ACR) dockets, which highlight the pricing flexibility exercised 
by the Postal Service. Analysis of the time it takes for the approval 
of a price adjustment, the number of price categories approved without 
material alteration, and reviewing discussions of pricing flexibility 
in other Commission proceedings could also be conducted to determine if 
this objective is being achieved.
    E. Objective 5: To assure adequate revenues, including retained 
earnings, to maintain financial stability.\20\
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    \20\ 39 U.S.C. 3622(b)(5).
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    Preliminary definition. In a system achieving Objective 5, the 
Postal Service is financially solvent while able to respond to changes 
in its environment (e.g., volume erosion, legal or regulatory 
framework, demographic trends) and meet its statutory obligations 
(e.g., pricing and universal service).
    Potential measurement. The key measurable concept within this 
objective is ``financial stability,'' which incorporates adequate 
revenues and retained earnings.
    ``Financial stability'' could be measured by reviewing short-term, 
medium-term, and long-term financial stability of the Postal Service. 
Short-term financial stability could be measured by the Postal 
Service's operating profit (i.e., operational revenue--operational 
expenses). Medium-term financial stability could be measured by 
economic profit (i.e., total revenue - [variable cost + fixed cost]). 
Long-term financial stability could be measured by solvency (i.e., 
total assets/total liabilities).
    The Commission has analyzed these concepts in its recent financial 
reports and could potentially use those analyses to determine if this 
objective is being achieved.\21\ For example, in Chapter 4 of its FY 
2015 Financial Report, the Commission included an analysis of the 
Sustainability, Liquidity, Activity, and Financial Solvency of the 
Postal Service's financial status.\22\
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    \21\ See, e.g., FY 2015 Financial Analysis of United States 
Postal Service Financial Results and 10-K Statement, March 29, 2016 
(FY 2015 Financial Report).
    \22\ See FY 2015 Financial Report at 75-86.
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    F. Objective 6: To reduce the administrative burden and increase 
the transparency of the ratemaking process.\23\
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    \23\ 39 U.S.C. 3622(b)(6).
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    Preliminary definition. A system achieving Objective 6 balances the 
(sometimes competing) concepts of reducing the costs imposed by rate 
proceedings or regulatory requirements generated by those proceedings, 
and the availability of comprehensive understandable material relating 
to each rate proceeding.
    Potential measurement. There are two measurable key concepts within 
this objective: (1) Reduce the administrative burden, and (2) increase 
the transparency. In order to achieve this objective, the ratemaking 
system must balance reducing administrative burden with increasing 
transparency.
    ``Reducing the administrative burden'' of the ratemaking process 
could be measured by evaluating the complexity of rate adjustment 
filings and proceedings and/or quantifying the length, number of 
information requests and/or staff hours required to review the price 
adjustment proposal, ACRs, complaints, or dockets related to price 
setting.
    ``Increasing transparency'' could be measured in several ways. An 
analysis of the necessary interaction between stakeholders and the 
Postal Service and/or Commission could be conducted. Another option 
could be to analyze the amount and type of information filed under seal 
compared to publicly available information. These features could also 
be compared to levels of transparency and administrative burden present 
prior to the passage of the PAEA.
    G. Objective 7: To enhance mail security and deter terrorism.\24\
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    \24\ 39 U.S.C. 3622(b)(7).
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    Preliminary definition. A system achieving Objective 7 encourages 
methods of safeguarding the mail system from illegal or dangerous use, 
or terrorism.
    Potential measurement. There are two measurable key concepts within 
this objective: (1) Enhance mail security, and (2) deter terrorism. 
Possible metrics to determine if Objective 7 is being achieved include 
a review of available safeguards (and associated available funds) that 
are intended to enhance security and deter terrorism, and a review of 
the availability of an exigent-like provision to ensure funds are 
available to respond to specific threats.
    H. Objective 8: To establish and maintain a just and reasonable 
schedule for rates and classifications, however the objective under 
this paragraph shall not be construed to prohibit the Postal Service 
from making changes of unequal magnitude within, between, or among 
classes of mail.\25\
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    \25\ 39 U.S.C. 3622(b)(8).
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    Preliminary definition. A system achieving Objective 8 requires 
that rates and classifications are linked to distinct cost or market 
characteristics, and the amount charged for each service is neither 
excessive to the mailer nor threatens the financial integrity of the 
Postal Service.
    Potential measurement. There are two measurable key concepts within 
this objective: (1) Just, and (2) reasonable. These two concepts are 
associated with both the schedule of rates and the schedule of 
classifications.
    To determine whether the schedule of rates and classifications is 
``just,'' a review of instances of excessive price increases could be 
conducted, including a review of classification changes. A review of 
price and cost relationships could also be conducted to ensure that 
customers are protected from misuse of the Postal Service's monopoly 
power. Additionally, a review of the cost or market characteristics 
that define a price category, product, or service could be conducted.
    To determine whether the schedule of rates and classifications is 
``reasonable,'' an examination of the relationship between price and 
cost could be conducted to ensure prices and classifications do not 
threaten the Postal Service's financial integrity. Another option to 
measure the concept ``reasonable'' could be an examination of the total 
compensation provided by products/services, classes, and all market 
dominant classes.
    I. Objective 9: To allocate the total institutional costs of the 
Postal Service appropriately between market dominant and competitive 
products.\26\
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    \26\ 39 U.S.C. 3622(b)(9).
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    Preliminary definition. A system achieving Objective 9 has a 
mechanism to appropriately divide total institutional costs between 
market dominant and competitive products in a manner reflecting the 
relevant statutory considerations.
    Potential measurement. The key measurable concept within this 
objective is ``allocate the total institutional costs appropriately.'' 
This objective is related to sections 3633(a)(3) and 3633(b). The 
measurement of

[[Page 95074]]

Objective 9 could rely on a historical review of the allocation of 
institutional costs between market dominant and competitive products. 
The measurement of this objective could also include a review of any 
action the Commission takes to analyze the competitive products' 
minimum contribution to institutional costs.

V. Notice of Commission Action

    Using this framework of potential definitions and measurement 
methods, the Commission establishes Docket No. RM2017-3 to begin its 
review of the market dominant ratemaking system. The Commission invites 
comments from interested persons regarding the process and structure of 
the review, as well as whether the current system is achieving the 
objectives, taking into account the factors. In particular, the 
Commission invites comments in response to the following questions:
    1. Is the framework proposed by the Commission appropriate for the 
review?
    a. For each objective, is the preliminary definition reasonable? If 
not, please suggest alternative definitions.
    b. For each objective, are the potential metrics for measuring the 
achievement of the objective reasonable? If not, please suggest 
alternative metrics for measuring whether the objective is being 
achieved.
    2. If the proposed framework is not appropriate for the review, 
please identify the framework that should be used for the review and 
describe how to measure the achievement of the objectives in that 
alternative framework.
    3. Based on the Commission's proposed framework or an alternative 
framework provided in response to question 2, is the current system 
achieving each objective, while taking into account the factors? Please 
note that review of the system shall be limited to section 3622 as 
discussed in section II above.
    4. If the system is not achieving the objectives, while taking into 
account the factors, what modifications to the system should be made, 
or what alternative system should be adopted, to achieve the 
objectives?
    Comments are due no later than March 20, 2017. No reply comments 
will be accepted. Commission regulations require that comments be filed 
online according to the process outlined at 39 CFR 3001.9(a). 
Additional information regarding how to submit comments online can be 
found at: https://www.prc.gov/how-to-participate. However, given the 
unique nature of this docket, the Commission will waive these 
requirements for filers who mail their comments.\27\ All information 
and comments provided, whether filed through the Commission's filing 
system or sent by mail, will be made available on the Commission's Web 
site (https://www.prc.gov).
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    \27\ Filers who choose to mail in their comments should be 
mindful of possible delays given the irradiation process for mail 
delivered to the Commission.
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    Pursuant to 39 U.S.C. 505, the Commission appoints Richard A. 
Oliver to represent the interests of the general public (Public 
Representative) in this proceeding.

VI. Ordering Paragraphs

    It is ordered:
    1. The Commission establishes Docket No. RM2017-3 to initiate the 
review of the market dominant ratemaking system as required by 39 
U.S.C. 3622.
    2. Comments regarding the process and structure of the review, as 
well as whether the current system is achieving the objectives, while 
taking into account the factors, and if not, whether and what 
modifications to the system or an alternative system should be adopted 
as necessary to achieve the objectives, are due no later than March 20, 
2017.
    3. Pursuant to 39 U.S.C. 505, Richard A. Oliver is appointed to 
serve as an officer of the Commission (Public Representative) to 
represent the interests of the general public in this proceeding.
    4. The Secretary shall arrange for publication of this order in the 
Federal Register.

    By the Commission.
Stacy L. Ruble,
Secretary.
[FR Doc. 2016-31052 Filed 12-23-16; 8:45 am]
 BILLING CODE 7710-FW-P