Statutory Review of the System for Regulating Market Dominant Rates and Classifications, 95071-95074 [2016-31052]
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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.
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■ 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.
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■ 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.
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(d) * * *
(4) The right to seek dispute
resolution services from the
Commission’s FOIA Public Liaison or
the Office of Government Information
Services.
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■ 7. Revise § 3004.45 to read as follows:
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§ 3004.45
8. Amend § 3004.52 by revising
paragraph (e) and adding paragraph (f)
to read as follows:
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§ 3004.52
Fees—general provisions.
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(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.
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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
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:
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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
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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.
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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).
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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
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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,
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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,
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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
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26 39
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U.S.C. 3622(b)(8).
U.S.C. 3622(b)(9).
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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
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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.
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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:
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]]>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.
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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.
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\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.
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B. Objective 2: To create predictability and stability in
rates.\15\
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\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
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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
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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
