System for Regulating Market Dominant Rates and Classifications, 67685-67702 [2019-26573]

Download as PDF Federal Register / Vol. 84, No. 238 / Wednesday, December 11, 2019 / Proposed Rules receive official time to the FSLMRS and the bargaining agreements between the agency and relevant labor organization. * * * * * [FR Doc. 2019–26545 Filed 12–10–19; 8:45 am] BILLING CODE P POSTAL REGULATORY COMMISSION 39 CFR Parts 3010, 3020, 3050, and 3055 [Docket No. RM2017–3; Order No. 5337] System for Regulating Market Dominant Rates and Classifications Postal Regulatory Commission. Proposed rule. AGENCY: ACTION: The Commission proposes revised rules modifying the system for regulating rates and classes for market dominant products. The revised rules incorporate feedback from comments received from the Commission’s prior proposed rulemaking. The rule revisions replace some rules in their entirety, move others, and change existing rules as necessary. DATES: Comments are due: February 3, 2020; Reply Comments are due: March 4, 2020. ADDRESSES: For additional information, Order No. 5337 can be accessed electronically through the Commission’s website at https://www.prc.gov. Submit comments electronically via the Commission’s Filing Online system at http://www.prc.gov. Those who cannot submit comments electronically should contact the person identified in the FOR FURTHER INFORMATION CONTACT section by telephone for advice on filing alternatives. SUMMARY: FOR FURTHER INFORMATION CONTACT: David A. Trissell, General Counsel, at 202–789–6820. SUPPLEMENTARY INFORMATION: Table of Contents I. Relevant Statutory Requirements II. Background III. Basis and Purpose of Revised Proposed Rules IV. Revised Proposed Rules lotter on DSKBCFDHB2PROD with PROPOSALS Section 3622 of title 39 of the United States Code established a system to regulate the rates and classes of Market Dominant Postal products. The Commission is required to conduct a review of the Market Dominant ratemaking system 10 years after the enactment of the Postal Accountability and Enhancement Act (PAEA), Public Law 109–435, 120 Stat. 3198 (2006). 39 16:13 Dec 10, 2019 Jkt 250001 II. Background Pursuant to the directives in section 3622 of the PAEA, the Commission initiated Docket No. RM2017–3 to conduct a comprehensive analysis of whether the PAEA system achieved the nine objectives, taking into account the factors, in the decade following the PAEA’s enactment. The Commission issued Order No. 4257 setting forth the findings from its review.1 In Order No. 4257, the Commission determined that the overall PAEA system ‘‘has not achieved the objectives taking into account the factors of the PAEA.’’ Order No. 4257 at 4, 275. In response to its conclusions in Order No. 4257 and as contemplated by section 3622(d)(3), the Commission issued a Notice of Proposed Rulemaking (NPR) 2 preceded by an Advance Notice of Proposed Rulemaking.3 In the NPR, the Commission proposed to amend several parts of title 39 of the Code of Federal Regulations to achieve the objectives of 39 U.S.C. 3622(b). Order No. 4258 at 3. The NPR sought public comment on the Commission’s proposed amendments. In response to the wide range of comments received and additional considerations, the Commission proposes new changes to the regulations and modifies and clarifies previous proposals. III. Basis and Purpose of Revised Proposed Rules In Order No. 4257, the Commission concluded that ‘‘while some aspects of I. Relevant Statutory Requirements VerDate Sep<11>2014 U.S.C. 3622(d)(3). The Commission’s purpose in the review is to determine whether the system is achieving the objectives appearing in subsection (b) of section 3622, taking into account the factors appearing in subsection (c) of 3622. If, upon completion of the mandatory 10-year review, including an opportunity for notice and public comment, the Commission determines that the system is not achieving the objectives (taking into account the factors), the Commission may ‘‘by regulation, make such modification or adopt such alternative system for regulating rates and classes for marketdominant products as necessary to achieve the objectives.’’ 39 U.S.C. 3622(d)(3). 1 Order on the Findings and Determination of the 39 U.S.C. 3622 Review, December 1, 2017 (Order No. 4257). 2 Notice of Proposed Rulemaking for the System for Regulating Rates and Classes for Market Dominant Products, December 1, 2017 (Order No. 4258). 3 Advance Notice of Proposed Rulemaking on the Statutory Review of the System for Regulating Rates and Classes for Market Dominant Products, December 20, 2016 (Order No. 3673). PO 00000 Frm 00005 Fmt 4702 Sfmt 4702 67685 the system of regulating rates and classes for market dominant products have worked as planned, overall, the system has not achieved the objectives of the PAEA.’’ Order No. 4257 at 5. The Commission analyzed the system by reviewing three topical areas that encompassed the nine objectives of the PAEA: (1) The structure of the ratemaking system; (2) the financial health of the Postal Service; and (3) service. Id. at 22. In its review of the structure of the ratemaking system, the Commission found that with respect to pricing, the system did not result in increased pricing efficiency. Id. at 48. It concluded that the system did not result in pricing efficiency because ‘‘workshare discounts were not set as close as practicable to their avoided costs despite the Postal Service’s ability to do so under the price cap’’ in conjunction with the fact that ‘‘seven products did not cover their attributable costs during the PAEA era.’’ Id. at 145. In its analysis of the financial health of the Postal Service, the Commission determined that ‘‘financial stability, including retained earnings, has not been maintained for the Postal Service in the medium and long-term time frames and that cost reductions and operational efficiency gains have not been maximized.’’ Id. at 148. The Commission further noted that the aggressive Retiree Health Benefits Fund prefunding and reductions in volume and revenue added to the Postal Service’s net losses, as did the impact of the Great Recession combined with emergent technological trends resulting in even greater declining volumes for First-Class Single-Piece Mail. Id. at 38– 40. Finally, in its review of service, the Commission determined that the system did not effectively encourage the maintenance of high quality service standards. Id. at 4–5, 250. Subsequently, the Commission issued the NPR setting forth proposed rules to address the shortcomings of the system of ratemaking based on the conclusions in Order No. 4257. With respect to the finding that the system did not achieve pricing efficiency, the Commission proposed rules to modify the requirements related to workshare discounts. The proposed rules phased out two practices that harm pricing efficiency: ‘‘workshare discounts set substantially below avoided costs and workshare discounts set substantially above avoided costs.’’ Order No. 4258 at 93. To address the findings related to the system’s failure to provide for the financial health of the Postal Service, the Commission made three proposals intended to address the failure to attain E:\FR\FM\11DEP1.SGM 11DEP1 lotter on DSKBCFDHB2PROD with PROPOSALS 67686 Federal Register / Vol. 84, No. 238 / Wednesday, December 11, 2019 / Proposed Rules medium-term and long-term financial stability. Id. at 26. First, the Commission proposed a mechanism to provide the Postal Service with an additional 2 percentage points of rate authority per calendar year for 5 years following the effective date of the regulations. Id. This amount was aimed at putting the Postal Service ‘‘on the path to medium-term financial stability by providing [it] the opportunity to generate additional revenue to cover its obligations.’’ Id. at 38. Second, the Commission proposed a performance-based rate authority mechanism to provide up to an additional 1 percentage point of rate authority per calendar year to address the failure to maintain financial stability in the long term. Id. at 39. This proposal was dependent on the Postal Service achieving specific performance-based requirements for operational efficiency and service standard quality and was aimed at putting the ‘‘Postal Service on the path to long-term financial stability by providing the Postal Service the opportunity to generate retained earnings.’’ Id. at 38–39. The proposed amount of performance-based rate authority was based on ‘‘several reference points related to capital investment, capital assets, and borrowing authority.’’ Id. at 39. In addition to placing the Postal Service on the path to long-term financial stability, the proposal was aimed at remedying the deficiencies of the system with respect to the failure to maximize incentives to reduce costs and increase efficiency and maintain high quality service standards. Id. at 46. Third, the Commission proposed a mechanism to improve the cost coverage of noncompensatory classes and products by including rate design requirements for non-compensatory products and authorizing an additional 2 percentage points of rate authority per calendar year for non-compensatory classes of mail. Id. at 77. The proposal was based on the Commission’s finding that noncompensatory classes and products threatened the financial integrity of the Postal Service because the revenues from these products and classes do not cover their attributable costs. Id. at 73; Order No. 4257 at 233–235. The proposal was aimed at placing the ‘‘Postal Service on the path to having fully compensatory products and classes.’’ Order No. 4258 at 73–74. Finally, the NPR proposed additional procedural improvements intended to ‘‘improve the ratemaking process relating to planned rate adjustments of general applicability.’’ Id. at 98. These proposals were ‘‘within the scope of the Commission’s general authority to VerDate Sep<11>2014 16:13 Dec 10, 2019 Jkt 250001 revise its regulations’’ and were in line with the Commission’s review in Order No. 4257 and comments received. Id. The proposed changes related to the schedule for regular and predictable rate adjustments and the timing for the notice period and related filings for rate adjustments. Id. at 98–99. After further consideration, including consideration of the comments received in response to the NPR, the Commission provides revisions to its proposed rules in its Revised NPR.4 First, the Commission modifies the proposed supplemental rate authority mechanism to address specific drivers of the Postal Service’s inability to achieve net income during the PAEA era. Order No. 5337 at 12. Instead of a singular, fixed amount of supplemental rate authority, the revised supplemental authority proposal includes two separate mechanisms intended to provide rate authority to address costs largely outside the Postal Service’s control. Id. The first mechanism provides additional rate authority based on loss of density, and the second mechanism provides additional rate authority based on amortization of retirement benefit obligations until such time as the Postal Service has sufficient revenue incorporated in the rate base to cover these payments. Id. at 12–13. Second, the Commission adjusts the performance-based authority to retain the 1 percentage point of rate authority benchmark but modifies how the specific performance-based requirements for operational efficiency and service will be measured. Id. at 13– 14. Additionally, the Postal Service must now meet both efficiency and service benchmarks to claim the performance-based rate authority. These revisions to the performance-based authority are intended to allow the Postal Service to improve its financial health and provide a mechanism for the Postal Service to achieve long-term financial stability and increase operational efficiency while maintaining high quality service standards. Id. at 14. Next, the Commission makes minor revisions to the rules for noncompensatory products and classes, proposing that the use of an additional 2 percentage points of rate authority for non-compensatory classes be optional and removing the requirement that determinations of a class’s compensatory status be made only in the Annual Compliance Determination proceeding. Id. These modifications are geared towards placing the Postal 4 Revised Notice of Proposed Rulemaking, December 5, 2019 (Order No. 5337). PO 00000 Frm 00006 Fmt 4702 Sfmt 4702 Service on the path to having fully compensatory products and classes as well as improving the financial integrity of the system while allowing for the continued achievement of objectives relating to pricing flexibility, pricing efficiency, and establishing and maintaining reasonable rates. Id. The Commission further proposes revised rules for worksharing discounts that dispense with the use of the 3-year grace period. Id. The proposed rules prohibit the Postal Service from: (1) Changing those workshare discounts currently set equal to avoided cost; (2) reducing workshare discounts set below avoided cost; and (3) increasing workshare discounts set above avoided cost. Id. The modifications also add a new requirement that the Postal Service provide information and analysis specific to certain workshare costs set excessively above or below avoided cost. Id. The proposed workshare rules are intended to incentivize workshare discounts to adhere as closely as possible to Efficient Component Pricing principles in order to help the ratemaking system maximize incentives to increase efficiency. Id. at 14–15. The Commission also proposes new reporting requirements for costs and cost-reduction initiatives in response to commenter concerns and in light of the revised proposals for additional rate authority. Id. at 15. The proposals set forth reporting requirements for changes in unit costs, specific cost-reduction initiatives, and Decision Analysis Reports. Id. The new cost reporting requirements are intended to provide transparency into the Postal Service’s efforts to reduce costs and increase efficiency. Id. Finally, the Commission proposes additional procedural rules related to planning rate adjustments of general applicability. Id. These revisions are intended to improve the ratemaking process. Id. IV. Revised Proposed Rules Proposed 39 CFR part 3010, subpart A describes the applicability of the rules, provides an index, sets forth relevant definitions, and modifies the schedule for regular and predictable rate adjustments. Proposed 39 CFR part 3010, subpart B modifies procedures applicable to periodic rate adjustments (including extending notice and filing periods from 45 to 90 days), setting forth specific requirements for contents of a rate adjustment filing (including mandating that the Postal Service certify that it has used the most recently accepted analytical principles in its rate adjustment filing), specifying content to E:\FR\FM\11DEP1.SGM 11DEP1 lotter on DSKBCFDHB2PROD with PROPOSALS Federal Register / Vol. 84, No. 238 / Wednesday, December 11, 2019 / Proposed Rules be included in supporting technical documentation, and describing the sequence of a proceeding applicable to a request to review a notice of rate adjustment. This section also specifies the calculation of the maximum rate adjustment authority and imposes limitations on certain rate decreases, providing an exception for certain de minimis rate increases. Proposed 39 CFR part 3010, subpart C relates to the timing of rate adjustment authority dependent on CPI–U. Proposed 39 CFR part 3010, subpart D creates additional rate authority to address the effects of decreases in mail density and sets forth the data sources and calculation of the density rate authority. Proposed 39 CFR part 3010, subpart E creates additional rate authority to provide the Postal Service with revenue for remittance towards the statutorily mandated Retirement Health Benefits Fund, Civil Service Retirement System, and Federal Employees Retirement System unfunded liabilities. This section provides definitions, procedures applicable to claiming the additional rate authority, and the data sources, calculation, and requirement that the Postal Service remit the amount of revenue collected under this authority towards the supplemental and unfunded liabilities. Proposed 39 CFR part 3010, subpart F creates an additional 1 percentage point of rate authority per class of mail based upon the Postal Service meeting or exceeding an operational efficiencybased requirement and adhering to a service standard-based requirement. This section sets forth the timing for the Postal Service to claim the additional rate authority and describes the criteria for claiming both the operational efficiency-based requirement and the service standard-based requirement. Proposed 39 CFR part 3010, subpart G describes new rate-setting criteria applicable to non-compensatory classes and products. Proposed 39 CFR part 3010, subpart H relates to the manner by which the Postal Service is required to calculate unused rate adjustment authority and, if applicable, revise the schedule of banked rate adjustment authority whenever it plans to adjust rates. Proposed 39 CFR 3010, subpart I incorporates the requirements concerning exigent rate increases. These updates are not intended to change the meaning or operation of the current rules, but the current rules have been reorganized. Proposed 39 CFR 3010, subpart J establishes rate design criteria for workshare discounts, including setting VerDate Sep<11>2014 16:13 Dec 10, 2019 Jkt 250001 forth new limited instances in which the Postal Service may set workshare discounts below avoided costs. To create global consistency between 39 CFR parts 3010 and 3020, conforming changes are proposed to §§ 3020.32, 3020.52, 3020.72, 3020.81, 3020.82, 3020.90, 3020.91, and 39 CFR 3020, subpart G. Additional conforming changes are proposed in 39 CFR part 3050 for §§ 3050.20, 3050.21, 3050.55, and 3050.60. Conforming changes are also proposed in 39 CFR part 3055 for § 3055.2. List of Subjects 39 CFR Part 3010 Administrative practice and procedure, Postal Service. 39 CFR Part 3020 Administrative practice and procedure. 39 CFR Part 3050 Administrative practice and procedure, Postal Service, Reporting and recordkeeping requirements. 39 CFR Part 3055 Administrative practice and procedure, Reporting and recordkeeping requirements. For the reasons discussed in the preamble, the Commission proposes to amend Chapter III of title 39 of the Code of Federal Regulations as follows: ■ 1. Revise part 3010 to read as follows: PART 3010—REGULATION OF RATES FOR MARKET DOMINANT PRODUCTS Subpart A—General Provisions Sec. 3010.100 Applicability. 3010.101 Definitions. 3010.102 Schedule for regular and predictable rate adjustments. Subpart B—Rate Adjustments 3010.120 General. 3010.121 Postal Service rate adjustment filing. 3010.122 Contents of a rate adjustment filing. 3010.123 Supporting technical documentation. 3010.124 Docket and notice. 3010.125 Opportunity for comments. 3010.126 Proceedings. 3010.127 Maximum rate adjustment authority. 3010.128 Calculation of percentage change in rates. 3010.129 Exceptions for de minimis rate increases. Subpart C—Consumer Price Index Rate Authority 3010.140 Applicability. PO 00000 Frm 00007 Fmt 4702 Sfmt 4702 67687 3010.141 CPI–U data source. 3010.142 CPI–U rate authority when rate adjustment filings are 12 or more months apart. 3010.143 CPI–U rate authority when rate adjustment filings are less than 12 months apart. Subpart D—Density Rate Authority 3010.160 Applicability. 3010.161 Density calculation data sources. 3010.162 Calculation of density rate authority. Subpart E—Retirement Obligation Rate Authority 3010.180 Definitions. 3010.181 Applicability. 3010.182 Retirement obligation data sources. 3010.183 Calculation of retirement obligation rate authority. 3010.184 Required minimum remittances. 3010.185 Forfeiture. Subpart F—Performance-Based Rate Authority 3010.200 Applicability. 3010.201 Operational efficiency-based requirement. 3010.202 Service quality-based requirement. Subpart G—Non-Compensatory Classes or Products 3010.220 Applicability. 3010.221 Individual product requirement. 3010.222 Class requirement and additional class rate authority. Subpart H—Accumulation of Unused and Disbursement of Banked Rate Adjustment Authority 3010.240 General. 3010.241 Schedule of banked rate adjustment authority. 3010.242 Calculation of unused rate adjustment authority for rate adjustments that involve a rate increase which are filed 12 months apart or less. 3010.243 Calculation of unused rate adjustment authority for rate adjustments that involve a rate increase which are filed more than 12 months apart. 3010.244 Calculation of unused rate adjustment authority for rate adjustments that only include rate decreases. 3010.245 Application of banked rate authority. Subpart I—Rate Adjustments Due to Extraordinary and Exceptional Circumstances 3010.260 General. 3010.261 Contents of a rate adjustment filing. 3010.262 Supplemental information. 3010.263 Docket and notice. 3010.264 Public hearing. 3010.265 Opportunity for comments. 3010.266 Deadline for Commission decision. 3010.267 Treatment of banked rate adjustment authority. Subpart J—Workshare Discounts 3010.280 Applicability. E:\FR\FM\11DEP1.SGM 11DEP1 67688 Federal Register / Vol. 84, No. 238 / Wednesday, December 11, 2019 / Proposed Rules 3010.281 Calculation of passthroughs for workshare discounts. 3010.282 Increased pricing efficiency. 3010.283 Limitations on excessive discounts. 3010.284 Limitations on discounts below avoided cost. 3010.285 Proposal to adjust a rate associated with a workshare discount. 3010.286 Application for waiver. Authority: 39 U.S.C. 503; 3622. Subpart A—General Provisions. § 3010.100 Applicability. (a) The rules in this part implement provisions in 39 U.S.C. chapter 36, subchapter I, establishing the modern system of ratemaking for regulating rates and classes for market dominant products. These rules are applicable whenever the Postal Service proposes to adjust a rate of general applicability for any market dominant product, which includes the addition of a new rate, the removal of an existing rate, or a change to an existing rate. Current rates may be found in the Mail Classification Schedule appearing on the Commission’s website at www.prc.gov. (b) Rates may be adjusted either subject to the rules appearing in subpart B of this part, which includes a limitation on rate increases, or subject to the rules appearing in subpart I of this part, which does not include a limitation on rate increases but requires either extraordinary or exceptional circumstances. The rules applicable to the calculation of the limitations on rate increases appear in subparts C through H of this part. The rules for workshare discounts, which are applicable whenever market dominant rates are adjusted, appear in subpart J of this part. lotter on DSKBCFDHB2PROD with PROPOSALS § 3010.101 Definitions. (a) The definitions in paragraphs (b) through (m) of this section apply to this part. (b) ‘‘Annual limitation’’ means the annual limitation on the percentage change in rates equal to the change in the Consumer Price Index for all Urban Consumers (CPI–U) unadjusted for seasonal variation over the most recently available 12-month period preceding the date the Postal Service files a request to review its notice of rate adjustment, as determined by the Commission. (c) ‘‘Banked rate authority’’ means unused rate adjustment authority accumulated for future use pursuant to these rules. (d) A ‘‘class’’ of mail means the FirstClass Mail, USPS Marketing Mail, Periodicals, Package Services, or Special Services groupings of market dominant Postal Service products or services. VerDate Sep<11>2014 16:13 Dec 10, 2019 Jkt 250001 Generally, the regulations in this part are applicable to individual classes of mail. (e) ‘‘Density rate authority’’ means rate authority that is available to all classes to address the effects of decreases in density of mail. (f) ‘‘Maximum rate adjustment authority’’ means the maximum percentage change in rates available to a class for any planned increase in rates. It is the sum of: The consumer price index rate authority, and any available density rate authority, retirement obligation rate authority, banked rate authority, performance-based rate authority, and rate authority applicable to non-compensatory classes. (g) ‘‘Performance-based rate authority’’ means rate authority that is available to all classes where the Postal Service meets or exceeds operational efficiency-based requirement and adheres to service standard-based requirement as determined by the Commission. (h) ‘‘Rate authority applicable to noncompensatory classes’’ means rate authority available to classes where revenue for each product within the class was insufficient to cover that product’s attributable costs as determined by the Commission. (i) ‘‘Rate cell’’ means each and every separate rate identified as a rate of general applicability. (j) ‘‘Rate incentive’’ means a discount that is not a workshare discount and that is designed to increase or retain volume, improve the value of mail for mailers, or improve the operations of the Postal Service. (k) ‘‘Rate of general applicability’’ means a rate applicable to all mail meeting standards established by the Mail Classification Schedule, the Domestic Mail Manual, and the International Mail Manual. A rate is not a rate of general applicability if eligibility for the rate is dependent on factors other than the characteristics of the mail to which the rate applies. A rate is not a rate of general applicability if it benefits a single mailer. A rate that is only available upon the written agreement of both the Postal Service and a mailer, a group of mailers, or a foreign postal operator is not a rate of general applicability. (l) ‘‘Retirement obligation rate authority’’ means rate authority that is available to all classes to provide revenue for remittance towards the statutorily mandated amortization payments for unfunded liabilities. (m) A ‘‘seasonal or temporary rate’’ is a rate that is in effect for a limited and defined period of time. PO 00000 Frm 00008 Fmt 4702 Sfmt 4702 § 3010.102 Schedule for regular and predictable rate adjustments. (a) The Postal Service shall develop a Schedule for Regular and Predictable Rate Adjustments applicable to rate adjustments subject to this part. The Schedule for Regular and Predictable Rate Adjustments shall: (1) Schedule rate adjustments at specific regular intervals of time; (2) Provide estimated filing and implementation dates (month and year) for future rate adjustments for each class of mail expected over a minimum of the next 3 years; and (3) Provide an explanation that will allow mailers to predict with reasonable accuracy, by class, the amounts of future scheduled rate adjustments. (b) The Postal Service shall file a current Schedule for Regular and Predictable Rate Adjustments annually with the Commission at the time of filing the Postal Service’s section 3652 report. The Commission shall post the current schedule on the Commission’s website at www.prc.gov. (c) Whenever the Postal Service deems it appropriate to change the Schedule for Regular and Predictable Rate Adjustments, it shall file a revised schedule. (d) The Postal Service may vary the magnitude of rate adjustments from those estimated by the Schedule for Regular and Predictable Rate Adjustments. In such case, the Postal Service shall provide an explanation for such variation with its rate adjustment filing. Subpart B—Rate Adjustments § 3010.120 General This subpart describes the process for the periodic adjustment of rates subject to the percentage limitations specified in § 3010.127 that are applicable to each class of mail. § 3010.121 filing. Postal Service rate adjustment (a) In every instance in which the Postal Service determines to exercise its statutory authority to adjust rates for a class of mail, the Postal Service shall comply with the requirements specified in paragraphs (b) through (d) of this section. (b) The Postal Service shall take into consideration how the planned rate adjustments are in accordance with the provisions of 39 U.S.C. chapter 36. (c) The Postal Service shall provide public notice of its planned rate adjustments in a manner reasonably designed to inform the mailing community and the general public that it intends to adjust rates no later than 90 E:\FR\FM\11DEP1.SGM 11DEP1 Federal Register / Vol. 84, No. 238 / Wednesday, December 11, 2019 / Proposed Rules days prior to the planned implementation date of the rate adjustments. (d) The Postal Service shall file a request to review its notice of rate adjustment with the Commission no later than 90 days prior to the planned implementation date of the rate adjustment. § 3010.122 filing. Contents of a rate adjustment (a) A rate adjustment filing under § 3010.121 shall include the items specified in paragraphs (b) through (j) of this section. (b) A representation or evidence that public notice of the planned changes has been issued or will be issued at least 90 days before the effective date(s) for the planned rate adjustments. (c) The intended effective date(s) of the planned rate adjustments. (d) A schedule of the planned rate adjustments, including a schedule identifying every change to the Mail Classification Schedule that will be necessary to implement the planned rate adjustments. (e) The identity of a responsible Postal Service official who will be available to provide prompt responses to requests for clarification from the Commission. (f) The supporting technical documentation as described in § 3010.123. (g) A demonstration that the planned rate adjustments are consistent with 39 U.S.C. 3626, 3627, and 3629. (h) A certification that all cost, avoided cost, volume, and revenue figures submitted with the rate adjustment filing are developed from the most recent applicable Commission accepted analytical principles. (i) For a rate adjustment that only includes a decrease in rates, a statement of whether the Postal Service elects to generate unused rate adjustment authority. (j) Such other information as the Postal Service believes will assist the Commission in issuing a timely determination of whether the planned rate adjustments are consistent with applicable statutory policies. lotter on DSKBCFDHB2PROD with PROPOSALS § 3010.123 Supporting technical documentation. (a) Supporting technical documentation shall include the items specified in paragraphs (b) through (k) of this section, as applicable to the specific rate adjustment filing. This information must be supported by workpapers in which all calculations are shown and all relevant values (e.g., rates, CPI–U values, billing determinants) are identified with VerDate Sep<11>2014 16:13 Dec 10, 2019 Jkt 250001 citations to original sources. The information must be submitted in machine-readable, electronic format. Spreadsheet cells must be linked to underlying data sources or calculations (not hard-coded), as appropriate. (b) The maximum rate adjustment authority, by class, as summarized by § 3010.127 and calculated separately for each of subparts C through H of this part, as appropriate. (c) A schedule showing the banked rate adjustment authority available, by class, and the available amount for each of the preceding 5 years calculated as required by subpart H of this part. (d) The calculation of the percentage change in rates, by class, calculated as required by § 3010.128. (e) The planned usage of rate adjustment authority, by class, and calculated separately for each of subparts C through H of this part, as appropriate. (f) The amount of new unused rate adjustment authority, by class, if any, that will be generated by the rate adjustment calculated as required by subpart H of this part, as applicable. (g) A schedule of the workshare discounts included with the planned rate adjustments, and a companion schedule listing the avoided costs that underlie each such discount. (h) Whenever the Postal Service establishes a new workshare discount rate, it must include with its filing: (1) A statement explaining its reasons for establishing the workshare discount; (2) All data, economic analyses, and other information relied on to justify the workshare discount; and (3) A certification based on comprehensive, competent analyses that the discount will not adversely affect either the rates or the service levels of users of postal services who do not take advantage of the workshare discount. (i) Whenever the Postal Service establishes a new discount or surcharge rate it does not view as creating a workshare discount, it must include with its filing: (1) An explanation of the basis for its view that the discount or surcharge rate is not a workshare discount; and (2) A certification that the Postal Service applied accepted analytical principles to the discount or surcharge rate. (j) Whenever the Postal Service includes a rate incentive with its planned rate adjustment, it must include with its filing: (1) If the rate incentive is a rate of general applicability, sufficient information to demonstrate that the rate incentive is a rate of general applicability; and PO 00000 Frm 00009 Fmt 4702 Sfmt 4702 67689 (2) A statement of whether the Postal Service has excluded the rate incentive from the calculation of the percentage change in rates under § 3010.128. (k) For each class or product where the attributable cost for that class or product exceeded the revenue from that class or product as determined by the Commission, a demonstration that the planned rate adjustments comply with the requirements in subpart G of this part. § 3010.124 Docket and notice. (a) The Commission will establish a docket for each rate adjustment filed by the Postal Service under § 3010.121, promptly publish notice of the filing in the Federal Register, and post the filing on its website. The notice shall include the items specified in paragraphs (b) through (g) of this section. (b) The general nature of the proceeding. (c) A reference to legal authority under which the proceeding is to be conducted. (d) A concise description of the planned changes in rates, fees, and the Mail Classification Schedule. (e) The identification of an officer of the Commission to represent the interests of the general public in the docket. (f) A period of 30 days from the date of the filing for public comment. (g) Such other information as the Commission deems appropriate. § 3010.125 Opportunity for comments. Public comments should focus on whether planned rate adjustments comport with applicable statutory and regulatory requirements. § 3010.126 Proceedings. (a) If the Commission determines that the rate adjustment filing does not substantially comply with the requirements of §§ 3010.122 and 3010.123, the Commission may: (1) Inform the Postal Service of the deficiencies and provide an opportunity for the Postal Service to take corrective action; (2) Toll or otherwise modify the procedural schedule until such time the Postal Service takes corrective action; (3) Dismiss the rate adjustment filing without prejudice; or (4) Take other action as deemed appropriate by the Commission. (b) Within 21 days of the conclusion of the public comment period the Commission will determine whether the planned rate adjustments are consistent with applicable law and issue an order announcing its findings. Applicable law means only the applicable requirements E:\FR\FM\11DEP1.SGM 11DEP1 Federal Register / Vol. 84, No. 238 / Wednesday, December 11, 2019 / Proposed Rules of this part, Commission directives and orders, and 39 U.S.C. 3626, 3627, and 3629. (c) If the planned rate adjustments are found consistent with applicable law, they may take effect. (d) If the planned rate adjustments are found inconsistent with applicable law, the Commission will notify and require the Postal Service to respond to any issues of noncompliance. (e) Following the Commission’s notice of noncompliance, the Postal Service may submit an amended rate adjustment filing that describes the modifications to its planned rate adjustments that will bring its rate adjustments into compliance. An amended rate adjustment filing shall be accompanied by sufficient explanatory information to show that all deficiencies identified by the Commission have been corrected. (f) The Commission will allow a period of 10 days from the date of the amended rate adjustment filing for public comment. (g) The Commission will review the amended rate adjustment filing together with any comments filed for compliance and issue an order announcing its findings within 21 days after the comment period ends. (h) If the planned rate adjustments as amended are found to be consistent with applicable law, they may take effect. However, no amended rate shall take effect until 45 days after the Postal Service transmits its rate adjustment filing specifying that rate. (i) If the planned rate adjustments in an amended rate adjustment filing are found to be inconsistent with applicable law, the Commission shall explain the basis for its determination and suggest an appropriate remedy. Noncompliant rates may not go into effect. (j) A Commission finding that a planned rate adjustment is in compliance with the applicable requirements of this part, Commission directives and orders, and 39 U.S.C. 3626, 3627, and 3629 is decided on the merits. A Commission finding that a planned rate adjustment does not contravene other policies of 39 U.S.C. chapter 36, subchapter I is provisional and subject to subsequent review. lotter on DSKBCFDHB2PROD with PROPOSALS § 3010.127 authority. Maximum rate adjustment (a) The maximum rate adjustment authority available to the Postal Service for each class of market dominant mail is limited to the sum of the percentage points developed in: (1) Subpart C—Consumer Price Index Rate Authority; (2) Subpart D—Density Rate Authority; (3) Subpart E—Retirement Obligation Rate Authority; (4) Subpart F—Performance-based Rate Authority; (4) Subpart G—Non-compensatory Classes or Products; and (5) Subpart H—Accumulation of Unused and Disbursement of Banked Rate Adjustment Authority. (b) For any product where the attributable cost for that product exceeded the revenue from that product as determined by the Commission, rates may not be reduced. § 3010.128 Calculation of percentage change in rates. (a) For the purpose of calculating the percentage change in rates, the current rate is the rate in effect at the time of the rate adjustment filing under § 3010.121 with the following exceptions. (1) A seasonal or temporary rate shall be identified and treated as a rate cell separate and distinct from the corresponding non-seasonal or permanent rate. When used with respect to a seasonal or temporary rate, the current rate is the most recent rate in effect for the rate cell, regardless of whether the seasonal or temporary rate is available at the time of the rate adjustment filing. (2) When used with respect to a rate cell that corresponds to a rate incentive that was previously excluded from the calculation of the percentage change in rates, the current rate is the full undiscounted rate in effect for the rate cell at the time of the rate adjustment filing, not the discounted rate in effect for the rate cell at such time. (b) For the purpose of calculating the percentage change in rates, the volume for each rate cell shall be obtained from the most recently available 12 months of Postal Service billing determinants with the following permissible adjustments. (1) The Postal Service shall make reasonable adjustments to the billing determinants to account for the effects of classification changes such as the introduction, deletion, or redefinition of rate cells. The Postal Service shall (t, VerDate Sep<11>2014 16:13 Dec 10, 2019 Jkt 250001 PO 00000 (R,,n)(V;) Frm 00010 It, Fmt 4702 (R,,c)(V;) Sfmt 4725 identify and explain all adjustments. All information and calculations relied upon to develop the adjustments shall be provided together with an explanation of why the adjustments are appropriate. (2) Whenever possible, adjustments shall be based on known mail characteristics or historical volume data, as opposed to forecasts of mailer behavior. (3) For an adjustment accounting for the effects of the deletion of a rate cell when an alternate rate cell is not available, the Postal Service should adjust the billing determinants associated with the rate cell to 0. If the Postal Service does not adjust the billing determinants for the rate cell to 0, the Postal Service shall include a rationale for its treatment of the rate cell with the information required under paragraph (b)(1) of this section. (c) For a rate adjustment that involves a rate increase, for each class of mail and product within the class, the percentage change in rates is calculated in three steps. First, the volume of each rate cell in the class is multiplied by the planned rate for the respective cell and the resulting products are summed. Second, the same set of rate cell volumes is multiplied by the corresponding current rate for each cell and the resulting products are summed. Third, the percentage change in rates is calculated by dividing the results of the first step by the results of the second step and subtracting 1 from the quotient. The result is expressed as a percentage. (d) For rate adjustments that only involve a rate decrease, for each class of mail and product within the class, the percentage change in rates is calculated by amending the workpapers attached to the Commission’s order relating to the most recent rate adjustment filing that involved a rate increase to replace the planned rates under the most recent rate adjustment filing that involves a rate increase with the corresponding planned rates applicable to the class from the rate adjustment filing involving only a rate decrease. (e) The formula for calculating the percentage change in rates for a class, described in paragraphs (c) and (d) of this section, is as follows: Percentage change in rates = )-1 E:\FR\FM\11DEP1.SGM 11DEP1 EP11DE19.002</GPH> 67690 Federal Register / Vol. 84, No. 238 / Wednesday, December 11, 2019 / Proposed Rules lotter on DSKBCFDHB2PROD with PROPOSALS Where, N = number of rate cells in the class i = denotes a rate cell (i = 1, 2, . . . , N) Ri,n = planned rate of rate cell i Ri,c = current rate of rate cell i (for rate adjustment involving a rate increase) or rate from most recent rate adjustment involving a rate increase for rate cell i (for a rate adjustment only involving a rate decrease) Vi = volume of rate cell i (f) Treatment of rate incentives. (1) Rate incentives may be excluded from a percentage change in rates calculation. If the Postal Service elects to exclude a rate incentive from a percentage change in rates calculation, the rate incentive shall be treated in the same manner as a rate under a negotiated service agreement (as described in § 3010.128(g)). (2) A rate incentive may be included in a percentage change in rates calculation if it meets the following criteria: (i) The rate incentive is in the form of a discount or can be easily translated into a discount; (ii) Sufficient billing determinants are available for the rate incentive to be included in the percentage change in rate calculation for the class, which may be adjusted based on known mail characteristics or historical volume data (as opposed to forecasts of mailer behavior); and (iii) The rate incentive is a rate of general applicability. (g) Treatment of volume associated with negotiated service agreements and rate incentives that are not rates of general applicability. (1) Mail volumes sent at rates under a negotiated service agreement or a rate incentive that is not a rate of general applicability are to be included in the calculation of the percentage change in rates under this section as though they paid the appropriate rates of general applicability. Where it is impractical to identify the rates of general applicability (e.g., because unique rate categories are created for a mailer), the volumes associated with the mail sent under the terms of the negotiated service agreement or the rate incentive that is not a rate of general applicability shall be excluded from the calculation of the percentage change in rates. (2) The Postal Service shall identify and explain all assumptions it makes with respect to the treatment of negotiated service agreements and rate incentives that are not rates of general applicability in the calculation of the percentage change in rates and provide the rationale for its assumptions. VerDate Sep<11>2014 16:13 Dec 10, 2019 Jkt 250001 § 3010.129 Exceptions for de minimis rate increases. (a) The Postal Service may request that the Commission review a de minimis rate increase without immediately calculating the maximum rate adjustment authority or banking unused rate adjustment authority. For this exception to apply, requests to review de minimis rate adjustments must be filed separately from any other request to review a rate adjustment filing. (b) Rate adjustments resulting in rate increases are de minimis if: (1) For each affected class, the rate increases do not result in the percentage change in rates for the class equaling or exceeding 0.001 percent; and (2) For each affected class, the sum of all rate increases included in de minimis rate increases since the most recent rate adjustment resulting in a rate increase, or the most recent rate adjustment due to extraordinary and exceptional circumstances, that was not a de minimis rate increase does not result in the percentage change in rates for the class equaling or exceeding 0.001 percent. (c) If the rate adjustments are de minimis, no unused rate adjustment authority will be added to the schedule of banked rate adjustment authority maintained under subpart G of this part as a result of the de minimis rate increase. (d) If the rate adjustments are de minimis, no rate decreases may be taken into account when determining whether rate increases comply with paragraphs (b)(1) and (2) of this section. (e) In the next rate adjustment filing proposing to increase rates for a class that is not a de minimis rate increase: (1) The maximum rate adjustment authority shall be calculated as if the de minimis rate increase had not been filed; and (2) For purposes of calculating the percentage change in rates, the current rate shall be the current rate from the de minimis rate increase. (f) The Postal Service shall file supporting workpapers with each request to review a de minimis rate increase that demonstrate that the sum of all rate increases included in de minimis rate increases since the most recent rate adjustment resulting in a rate increase that was not de minimis, or the most recent rate adjustment due to extraordinary and exceptional circumstances, does not result in a percentage change in rates for the class equaling or exceeding 0.001 percent. (g) For any product where the attributable cost for that product exceeded the revenue from that product PO 00000 Frm 00011 Fmt 4702 Sfmt 4702 67691 as determined by the Commission, rates may not be reduced. Subpart C—Consumer Price Index Rate Authority § 3010.140 Applicability. The Postal Service may adjust rates based upon changes in the Consumer Price Index for all Urban Consumers (CPI–U) identified in § 3010.141. If rate adjustment filings involving rate increases are filed 12 or more months apart, rate adjustments are subject to a full year limitation calculated pursuant to § 3010.142. If rate adjustment filings involving rate increases are filed less than 12 months apart, rate adjustments are subject to a partial year limitation calculated pursuant to § 3010.143. § 3010.141 CPI–U data source. The monthly CPI–U values needed for the calculation of rate adjustment limitations under this section shall be obtained from the Bureau of Labor Statistics (BLS) Consumer Price Index— All Urban Consumers, U.S. All Items, Not Seasonally Adjusted, Base Period 1982–84 = 100. The current Series ID for the index is ‘‘CUUR0000SA0.’’ § 3010.142 CPI–U rate authority when rate adjustment filings are 12 or more months apart. (a) If a rate adjustment filing involving a rate increase is filed 12 or more months after the most recent rate adjustment filing involving a rate increase, then the calculation of an annual limitation for the class (full year limitation) involves three steps. First, a simple average CPI–U index is calculated by summing the most recently available 12 monthly CPI–U values from the date of the rate adjustment filing and dividing the sum by 12 (Recent Average). Second, a second simple average CPI–U index is similarly calculated by summing the 12 monthly CPI–U values immediately preceding the Recent Average and dividing the sum by 12 (Base Average). Third, the full year limitation is calculated by dividing the Recent Average by the Base Average and subtracting 1 from the quotient. The result is expressed as a percentage, rounded to three decimal places. (b) The formula for calculating a full year limitation for a rate adjustment filing filed 12 or more months after the last rate adjustment filing is as follows: Full Year Limitation = (Recent Average/ Base Average)¥1. E:\FR\FM\11DEP1.SGM 11DEP1 Federal Register / Vol. 84, No. 238 / Wednesday, December 11, 2019 / Proposed Rules § 3010.143 CPI–U rate authority when rate adjustment filings are less than 12 months apart. Subpart D—Density Rate Authority § 3010.161 sources. § 3010.160 (a) If a rate adjustment filing involving a rate increase is filed less than 12 months after the most recent rate adjustment filing involving a rate increase, then the annual limitation for the class (partial year limitation) will recognize the rate increases that have occurred during the preceding 12 months. When the effects of those increases are removed, the remaining partial year limitation is the applicable restriction on rate increases. (b) The applicable partial year limitation is calculated in two steps. First, a simple average CPI–U index is calculated by summing the 12 most recently available monthly CPI–U values from the date of the rate adjustment filing and dividing the sum by 12 (Recent Average). Second, the partial year limitation is then calculated by dividing the Recent Average by the Recent Average from the most recent previous rate adjustment filing (Previous Recent Average) applicable to each affected class of mail and subtracting 1 from the quotient. The result is expressed as a percentage, rounded to three decimal places. (c) The formula for calculating the partial year limitation for a rate adjustment filing filed less than 12 months after the last rate adjustment filing is as follows: Partial Year Limitation = (Recent Average/Previous Recent Average)¥1. (a) This subpart allocates rate authority to address the effects of decreases in the density of mail as measured by the sources identified in § 3010.161. The calculation of the additional rate authority corresponding to the change in density is described in § 3010.162. (b) The Postal Service shall file a notice with the Commission by December 31 of each year that calculates the amount of density rate authority that is eligible to be authorized under this subpart. (c) The Commission shall review the Postal Service’s notice and determine how much, if any, rate authority will be authorized under this subpart. Any rate authority allocated under this subpart: (1) Shall be made available to the Postal Service as of the date of the Commission’s determination; (2) Must be included in the calculation of the maximum rate adjustment authority in the first generally applicable rate adjustment filed after the Commission’s determination; (3) Shall lapse if unused, within 12 months of the Commission’s determination; and (4) May not be used to generate unused rate authority, nor shall it affect existing banked rate authority. (a) The data needed for the calculation of the density rate authority in § 3010.162 shall be obtained from the values reported by the Postal Service as specified in paragraphs (b) through (d) of this section. When both originally filed and annually revised data are available, the originally filed data shall be used. When the originally filed data are corrected through a refiling or in the Commission’s Annual Compliance Determination report, the corrected version of the originally filed data shall be used. (b) Market dominant volume and total volume from the Revenue, Pieces, and Weight report, filed by the Postal Service under § 3050.25 of this chapter; (c) Institutional costs and total costs from the Cost and Revenue Analysis report, filed with the Postal Service’s section 3652 report; and (d) The number of delivery points, from the input data used to produce the Total Factor Productivity estimates, filed with the Postal Service’s section 3652 report. Where, T = most recently completed fiscal year T–1 = fiscal year prior to fiscal year T ICT = institutional cost in fiscal year T TCT = total cost in fiscal year T %DD[T–1,T] = Percentage change in density from fiscal year T–1 to fiscal year T (b) Calculation—(1) The amount of density rate authority available under VerDate Sep<11>2014 16:13 Dec 10, 2019 Jkt 250001 § 3010.162 authority. Calculation of density rate (a) Formulas—(1) The formula for calculating the amount of density rate authority, in conformance with paragraph (c)(1) of this section, is as follows: Density rate authority = the greater of 0 and (2) The formula for calculating the percentage change in density, in conformance with paragraph (b)(2) of this section, is as follows: Percentage change in density from prior fiscal year = this section shall be calculated in three steps. First, the percentage change in density during the most recently completed fiscal year shall be calculated using the formula in paragraph (a)(2) of this section as described in paragraph (b)(2) of this section. Second, this percentage change shall be multiplied by the institutional cost ratio, which is calculated as institutional costs for the most recently completed fiscal year divided by total costs for that fiscal year. Finally, this product shall be multiplied by negative 1 so that declines in density correspond to a positive increase in rates. If the result of this calculation is less than 0, the amount of additional rate authority shall be 0. PO 00000 Frm 00012 Fmt 4702 Sfmt 4702 E:\FR\FM\11DEP1.SGM 11DEP1 EP11DE19.004</GPH> Where, T = most recently completed fiscal year T–1 = fiscal year prior to fiscal year T VT = volume in fiscal year T (either market dominant volume or total volume as discussed in paragraph (b)(2) of this section) DPT = delivery points in fiscal year T Applicability. Density calculation data EP11DE19.003</GPH> lotter on DSKBCFDHB2PROD with PROPOSALS 67692 Federal Register / Vol. 84, No. 238 / Wednesday, December 11, 2019 / Proposed Rules § 3010.180 Definitions. (a) The definitions in paragraphs (b) through (e) of this section apply to this subpart. (b) ‘‘Amortization payments’’ mean the amounts that the Postal Service is invoiced by the U.S. Office of Personnel Management to provide for the liquidation of the specific and supplemental unfunded liabilities by statutorily predetermined dates, as described in § 3010.182(a). (c) ‘‘Phase-in period’’ means the period of time spanning the fiscal years of issuance of the first five determinations following the effective date of this subpart, as specified by the timing provisions in § 3010.181. (d) ‘‘Required minimum remittance’’ means the minimum amount the Postal Service is required to remit during a particular fiscal year, as calculated under § 3010.184. (e) ‘‘Revenue collected under this subpart’’ means the amount of revenue collected during a fiscal year as a result of all previous rate increases authorized under this subpart, as calculated under § 3010.184. lotter on DSKBCFDHB2PROD with PROPOSALS § 3010.181 Applicability. (a) This subpart allocates additional rate authority to provide the Postal Service with revenue for remittance towards the statutorily mandated amortization payments for supplemental and unfunded liabilities identified in § 3010.182. As described in § 3010.184, for retirement obligation rate authority to be made available, the Postal Service must annually remit towards these amortization payments all revenue collected under this subpart previously. The full retirement obligation rate VerDate Sep<11>2014 16:13 Dec 10, 2019 Jkt 250001 § 3010.182 sources. Retirement obligation data (a) The amounts of the amortization payments needed for the calculation of retirement obligation rate adjustment authority in § 3010.183 shall be obtained from notifications to the Postal Service by the Office of Personnel Management of annual determinations of the funding amounts specific to payments at the end of each fiscal year for Retiree Health Benefits as computed under 5 U.S.C. 8909a(d)(2)(B) and (d)(3)(B)(ii); the Civil Service Retirement System as computed under 5 U.S.C. 8348(h)(2)(B); and the Federal Employees Retirement System as computed under 5 U.S.C. 8423(b)(1)(B), (b)(2) and (b)(3)(B), filed with the Postal Service’s section 3652 report. (b) The values for market dominant revenue, total revenue and market dominant volumes needed for the calculation of retirement obligation rate PO 00000 Frm 00013 Fmt 4702 Sfmt 4702 authority in § 3010.183 shall be obtained from values reported in the Revenue, Pieces, and Weight report, filed by the Postal Service under § 3050.25 of this chapter. (c) The values for additional rate authority previously provided under this subpart, if any, needed for the calculation of retirement obligation rate authority in § 3010.182 and the calculation of required minimum remittances under § 3010.183 shall be obtained from the Commission’s prior determinations. § 3010.183 Calculation of retirement obligation rate authority. (a) Formulas—(1) The formula for calculating the amount of retirement obligation rate authority available under this subpart, described in paragraph (b)(1) of this section, is as follows: Additional rate authority in fiscal year T+1 = Where, T = most recently completed fiscal year APT = total amortization payment for fiscal year T TRT = total revenue in fiscal year T PARAT = previously authorized retirement obligation rate authority, compounded through fiscal year T, expressed as a proportion of the market dominant rate base and calculated using the formula in paragraph (a)(2) of this section as described in paragraph (b)(2) of this section N = number of previously issued determinations in which retirement obligation rate authority was made available under this subpart (2) The formula for calculating the amount of previously authorized retirement obligation rate authority through fiscal year T, described in paragraph (b)(2) of this section, is as follows: Previously authorized retirement obligation rate authority through fiscal year T = Where, T = most recently completed fiscal year rt = retirement obligation rate authority authorized in fiscal year t N = number of previously issued determinations in which retirement obligation rate authority was made available under this subpart (c) Calculations—(1) The amount of retirement obligation rate authority available for a fiscal year shall be E:\FR\FM\11DEP1.SGM 11DEP1 EP11DE19.006</GPH> Subpart E—Retirement Obligation Rate Authority authority, calculated as described in § 3010.183, shall be phased in over 5 fiscal years, taking into account changes in volume during the phase-in period. If combined with an equal rate increase on Competitive products, the compounded rate increase resulting from retirement obligation rate authority is calculated to generate sufficient additional revenue at the end of the phase-in period to permit the Postal Service to remit the entire invoiced amount of its amortization payments. (b) The Postal Service shall file a notice with the Commission by December 31 of each year, until the conclusion of the phase-in period, that calculates the amount of retirement obligation rate authority that is eligible to be authorized under this subpart. (c) The Commission shall review the Postal Service’s notice and determine how much, if any, rate authority will be authorized under this subpart. Any rate authority allocated under this subpart: (1) Shall be made available to the Postal Service as of the date of the Commission’s determination; (2) Must be included in the calculation of the maximum rate adjustment authority in the first generally applicable rate adjustment filed after the Commission’s determination; (3) Shall lapse if not used in the first generally applicable rate adjustment filed after the Commission’s determination; (4) Shall lapse if unused, within 12 months of the Commission’s determination; and (5) May not be used to generate unused rate authority, nor shall it affect existing banked rate authority. EP11DE19.005</GPH> (2) The percentage change in density from the prior fiscal year shall be calculated as the ratio of volume to delivery points for the most recently completed fiscal year, divided by the same ratio for the prior fiscal year, and subtracting 1 from the quotient. The result is expressed as a percentage, rounded to three decimal places. To ensure that decreases in competitive product volume will not result in the Postal Service receiving greater additional rate adjustment authority under this subpart, the percentage change in density shall be calculated two ways: Using market dominant volume and using total volume. The greater of the two results (not using absolute value) shall be used as the percentage change in density from the prior fiscal year. 67693 Federal Register / Vol. 84, No. 238 / Wednesday, December 11, 2019 / Proposed Rules calculated in four steps. First, the ratio of the total amortization payment for the fiscal year under review to the total revenue in the fiscal year under review shall be added to 1. This sum represents the factor by which an equal increase in market dominant and competitive rates in the fiscal year under review would generate sufficient additional revenue to make the full amortization payment. It does not account, however, for any previous rate authority authorized under this subpart. The second step is therefore to subtract the proportion of the market dominant rate base resulting from previously authorized retirement obligation rate authority. That proportion is calculated using the formula in § 3010.184(a)(2) as described in § 3010.183(b)(2) Third, to amortize the resulting amount of retirement obligation rate authority over the remainder of the phase-in period, the difference shall be raised to the power of the inverse of the number of determinations remaining in the phasein period, including the current determination. Finally, 1 shall be subtracted from the result to convert from a proportional change in rates to a percentage of rate adjustment authority. (2) The amount of previously authorized retirement obligation rate authority shall be calculated in two steps. First, the sums of 1 and the amount of retirement obligation rate authority authorized in each of the previous fiscal years shall be multiplied together. This product represents the compounded amount of such rate authority, expressed as a net rate increase. To express this product as a proportion of the market dominant rate base, the second step is to subtract the inverse of this product from 1. § 3010.184 Required minimum remittances. Where, T = most recently completed fiscal year MDRT = market dominant revenue in fiscal year T N = number of previously issued determinations in which retirement obligation rate authority was made available under this subpart rt = retirement obligation rate authority authorized in fiscal year t pt = prorated fraction of rt that was in effect during fiscal year T, calculated using the formula in paragraph (a)(2) of this section, as described in paragraph (b)(2) of this section (2) The formula for calculating the prorated fraction of retirement obligation rate authority authorized in a particular fiscal year t that was in effect during the most recently completed fiscal year, described in paragraph (c)(2) of this section, is as follows: Prorated fraction = if rt was not in effect during fiscal year T if rt was in effect for all of fiscal year T 1, lotter on DSKBCFDHB2PROD with PROPOSALS (;~) ( QMDVQ) + L{=Q+1 QMDVi ------------, MDVr (c) Calculations—(1) The amount of revenue collected under this subpart VerDate Sep<11>2014 16:13 Dec 10, 2019 Jkt 250001 if rt came into effect during fiscal year T during a fiscal year, as calculated by the formula in paragraph (a)(1) of this section, shall be calculated in three steps. First, the sums of 1 and the amount of retirement obligation rate authority made available under this subpart during each previous fiscal year—prorated to account for mid-year price increases as described in paragraph (b)(2) of this section—shall by multiplied together. This product represents the proportion by which prices were higher during the most recently completed during the fiscal year as a result of retirement obligation rate authority. Second, to express this net price increase as a proportion of market dominant revenue, the inverse of PO 00000 Frm 00014 Fmt 4702 Sfmt 4702 this product shall be subtracted from 1. Finally, the result shall be multiplied by market dominant revenue for the fiscal year to change the proportion into a dollar amount. (2) The prorated fraction of retirement obligation rate authority authorized in a particular fiscal year that was in effect during the most recently completed fiscal year, as calculated by the formula in paragraph (b)(2) of this section, shall be a piecewise function of three parts. First, if the retirement obligation rate authority authorized in a particular year was not in effect during the most recently completed fiscal year, the prorated fraction shall be 0. Second, if the retirement obligation rate authority E:\FR\FM\11DEP1.SGM 11DEP1 EP11DE19.008</GPH> 0, Where, T = most recently completed fiscal year rt = retirement obligation rate authority authorized under this subpart in fiscal year t Q = the number of the quarter during the fiscal year of the effective date of the price increase including retirement obligation rate authority made available under this subpart EQ = number of days in quarter Q subsequent to and including the effective date of the price increase DQ = total number of days in quarter Q QMDVQ = market dominant volume in quarter Q MDVT = market dominant volume in fiscal year T (a) Minimum remittances. During each fiscal year subsequent to the year of the effective date of this subpart, the Postal Service shall remit towards the liabilities identified in § 3010.182 an amount equal to or greater than the amount of revenue collected as a result of all previous rate increases under this subpart during the previous fiscal year, as calculated using the formulas in paragraph (b) of this section, as described in paragraph (c) of this section. (b) Formulas—(1) The formula for calculating the amount of revenue collected under this subpart during a fiscal year, described in paragraph (c)(1) of this section, is as follows: Amount of revenue = EP11DE19.007</GPH> 67694 Federal Register / Vol. 84, No. 238 / Wednesday, December 11, 2019 / Proposed Rules authorized in a particular year was in effect during the entirety of the most recently completed fiscal year, the prorated fraction shall be 1. Finally, if the retirement obligation rate authority authorized in a particular fiscal year was used to raise prices during the most recently completed fiscal year, the prorated fraction shall be the proportion of volume sent during the fiscal year after that rate increase went into effect. (c) This proportion shall be calculated in four steps. First, the number of days of the fiscal quarter after and including the effective date of the price adjustment including the retirement obligation rate authority shall be divided by the total number of days in that fiscal quarter. This quotient determines the proportion of days in that quarter in which the higher rates were in effect. Second, that quotient shall be multiplied by the market dominant volume from that fiscal quarter to determine the amount of volume during the quarter receiving the higher rates. Third, that product shall be added to the market dominant volume from any subsequent quarters of the fiscal year because the volume in those quarters was also sent under the higher rates. Finally, this sum shall be divided by the total market dominant volume from the fiscal year to determine the proportion of annual volume sent after the rate increase went into effect. lotter on DSKBCFDHB2PROD with PROPOSALS § 3010.185 Forfeiture. (a) If any of the circumstances described in paragraphs (b) through (d) of this section occur, the Postal Service shall not be eligible for future retirement obligation rate authority under this subpart, and the Commission may commence additional proceedings as appropriate. (b) If, subsequent to 45 calendar days after the effective date of this subpart and prior to the end of the phase-in period, the Postal Service fails to timely file the notice required under § 3010.181(b); (c) In any fiscal year in which retirement obligation rate authority was determined to be available under this subpart, the Postal Service fails to timely file under § 3010.122 for a rate increase including the full amount of retirement obligation rate authority authorized under this subpart during that fiscal year, to take effect prior to the end of that fiscal year; or (d) In any fiscal year including or subsequent to the first fiscal year in which rate authority under this subpart was used to adjust market dominant rates, the Postal Service’s total payments towards the supplemental and unfunded liabilities identified in VerDate Sep<11>2014 16:13 Dec 10, 2019 Jkt 250001 § 3010.182 are not equal to or greater than the minimum remittance required for that fiscal year under § 3010.184(a). Subpart F—Performance-Based Rate Authority § 3010.200 Applicability. (a) This subpart allocates performance-based rate authority of 1 percentage point for each class of mail, which is available upon meeting or exceeding both an operational efficiency-based requirement and adhering to a service standard-based requirement. This rate authority is allocated based on both meeting the operational efficiency-based requirement appearing in § 3010.201 and meeting the service standard-based requirement appearing in § 3010.202. (b) The Postal Service shall file a notice with the Commission by December 31 of each year that demonstrates whether or not performance-based rate authority is eligible to be authorized under this subpart. (c) The Commission shall review the Postal Service’s notice and any challenges filed pursuant to § 3010.202(b) and announce how much, if any, rate authority will be authorized under this subpart. Any rate authority allocated under this subpart: (1) Shall be made available to the Postal Service as of the date of the Commission’s announcement; (2) Must be included in the calculation of the maximum rate adjustment authority in the first generally applicable rate adjustment filed after the Commission’s announcement; (3) Shall lapse if unused, 12 months after the Commission’s announcement; and (4) May not be used to generate unused rate authority, nor shall it affect existing banked rate authority. § 3010.201 Operational efficiency-based requirement. The operational efficiency-based requirement is met if the Postal Service’s Total Factor Productivity for the measured fiscal year exceeds the previous fiscal year as determined by the Commission. § 3010.202 Service standard-based requirement. (a) The service standard-related criteria is met if all of the Postal Service’s service standards (including applicable business rules) for that class during the applicable fiscal year meet or exceed the service standards in place for the prior fiscal year on a nationwide or PO 00000 Frm 00015 Fmt 4702 Sfmt 4702 67695 substantially nationwide basis as determined by the Commission. (b) Any interested person may file a challenge to the notice provided by the Postal Service under § 3010.200(b) by March 15 of each year. The scope of such a challenge shall be limited to whether or not the Postal Service’s service standards (including applicable business rules) during the applicable fiscal year met or exceeded the service standards in place for the prior fiscal year on a nationwide or substantially nationwide basis. The Commission shall issue an order which rules on any challenge as soon as practicable. Subpart G—Non-Compensatory Classes or Products § 3010.220 Applicability. This subpart is applicable to a class or product where the attributable cost for that class or product exceeded the revenue from that class or product as determined by the Commission. Section 3010.221 is applicable where the attributable cost for a product within a class exceeded the revenue from that particular product. Section 3010.222 is applicable where the attributable cost for an entire class exceeded the revenue from that class. § 3010.221 Individual product requirement. Whenever the Postal Service files a rate adjustment filing affecting a class of mail which includes a product where the attributable cost for that product exceeded the revenue from that product, as determined by the Commission, the Postal Service shall increase the rates for each non-compensatory product by a minimum of 2 percentage points above the percentage increase for that class. This section does not create additional rate authority applicable to any class of mail. § 3010.222 Class requirement and additional class rate authority. (a) This section provides 2 percentage points of additional rate authority for any class of mail where the attributable cost for that class exceeded the revenue from that class as determined by the Commission. This additional rate authority is optional and may be used at the Postal Service’s discretion. (b) The Commission shall announce how much, if any, rate authority will be authorized under this subpart. Any rate authority allocated under this subpart: (1) Shall be made available to the Postal Service as of the date of the Commission’s announcement; (2) Must be included in the calculation of the maximum rate adjustment authority change in rates in the first generally applicable rate E:\FR\FM\11DEP1.SGM 11DEP1 67696 Federal Register / Vol. 84, No. 238 / Wednesday, December 11, 2019 / Proposed Rules adjustment filed after the Commission’s announcement; (3) Shall lapse if unused, within 12 months of the Commission’s announcement; and (4) May not be used to generate unused rate authority, nor shall it affect existing banked rate authority. Subpart H—Accumulation of Unused and Disbursement of Banked Rate Adjustment Authority § 3010.240 General. Unless a specific exception applies, unused rate adjustment authority, on a class-by-class basis, shall be calculated for each rate adjustment filing. Unused rate adjustment authority shall be added to the schedule of banked rate authority in each instance, and be available for application to rate adjustments pursuant to the requirements of this subpart. § 3010.241 Schedule of banked rate adjustment authority. Upon the establishment of unused rate adjustment authority, the Postal Service shall devise and maintain a schedule that tracks the establishment and subsequent use of banked rate authority on a class-by-class basis. At a minimum, the schedule must track the amount of banked rate authority available immediately prior to the rate adjustment filing and the amount of banked rate authority available upon acceptance of the rates included in the rate adjustment filing. It shall also track all changes to the schedule, including the docket numbers of Commission decisions affecting the schedule, the dates and amounts that any rate authority was generated or subsequently expended, and the expiration dates of all rate adjustment authority. The schedule shall be included with any rate adjustment filing purporting to modify the amount of banked rate adjustment authority. lotter on DSKBCFDHB2PROD with PROPOSALS § 3010.242 Calculation of unused rate adjustment authority for rate adjustments that involve a rate increase which are filed 12 months apart or less. (a) When rate adjustment filings that involve a rate increase are filed 12 months apart or less, unused rate adjustment authority for a class is equal to the difference between the maximum rate adjustment authority as summarized by § 3010.127 and calculated pursuant to subparts C through H of this part, as appropriate, and the percentage change in rates for the class calculated pursuant to § 3010.128, subject to the limitations described in paragraphs (b) and (c) of this section. VerDate Sep<11>2014 16:13 Dec 10, 2019 Jkt 250001 (b) Unused rate adjustment authority cannot be generated and is assumed to be 0 percent for classes subject to § 3010.222, Class requirement and additional class rate authority. (c) For rate adjustment filings that involve a rate increase, unused rate adjustment authority cannot exceed the unused portion of rate authority calculated pursuant to subpart C of this part. § 3010.243 Calculation of unused rate adjustment authority for rate adjustments that involve a rate increase which are filed more than 12 months apart. (a) When rate adjustment filings that involve a rate increase are filed more than 12 months apart, any interim rate adjustment authority must first be added to the schedule of banked rate authority before the unused rate adjustment authority is calculated. (b) Interim rate adjustment authority for a class is equal to the Base Average applicable to the second rate adjustment filing (as developed pursuant to § 3010.142) divided by the Recent Average utilized in the first rate adjustment filing (as developed pursuant to § 3010.142) and subtracting 1 from the quotient. The result is expressed as a percentage and immediately added to the schedule of banked rate authority as of the date the rate adjustment filing is filed. (c) Unused rate adjustment authority for a class is equal to the difference between the maximum rate adjustment authority as summarized by § 3010.127 and calculated pursuant to subparts C through H of this part, as appropriate, and the percentage change in rates for the class calculated pursuant to § 3010.128, subject to the limitations described in paragraphs (d) and (e) of this section. (d) Unused rate adjustment authority cannot be generated and is assumed to be 0 percent for classes subject to § 3010.222, Class requirement and additional class rate authority. (e) For rate adjustment filings that involve a rate increase, unused rate adjustment authority cannot exceed the unused portion of rate authority calculated pursuant to subpart C of this part. § 3010.244 Calculation of unused rate adjustment authority for rate adjustments that only include rate decreases. (a) For rate adjustment filings that only include rate decreases, unused rate adjustment authority for a class is calculated in two steps. First, the difference between the maximum rate adjustment authority as summarized by § 3010.127 and calculated pursuant to subparts C through H of this part, as PO 00000 Frm 00016 Fmt 4702 Sfmt 4702 appropriate, for the most recent rate adjustment that involves a rate increase and the percentage change in rates for the class calculated pursuant to § 3010.128(d) is calculated. Second, the unused rate adjustment authority generated in the most recent rate adjustment that involves a rate increase is subtracted from that result. (b) Unused rate adjustment authority generated under paragraph (a) of this section for a class shall be added to the unused rate adjustment authority generated in the most recent rate adjustment that involves a rate increase on the schedule maintained under § 3010.241. For purposes of § 3010.244, the unused rate adjustment authority generated under paragraph (a) of this section for a class shall be deemed to have been added to the schedule maintained under § 3010.241 on the same date as the most recent rate adjustment filing that involves a rate increase. (c) For rate adjustment filings that only include rate decreases, the sum of unused rate adjustment authority generated under paragraph (a) of this section and the unused rate adjustment authority generated in the most recent rate adjustment that involves a rate increase cannot exceed the unused portion of rate adjustment authority calculated pursuant to subpart C of this part in the most recent rate adjustment that involves a rate increase. (d) Unused rate adjustment authority generated under paragraph (a) of this section shall be subject to the limitation under § 3010.245, regardless of whether it is used alone or in combination with other existing unused rate adjustment authority. (e) For rate adjustment filings that only include rate decreases, unused rate adjustment authority generated under this section lapses 5 years from the date of filing of the most recent rate adjustment filing that involves a rate increase. (f) A rate adjustment filing that only includes rate decreases that is filed immediately after a rate adjustment due to extraordinary or exceptional circumstances (i.e., without an intervening rate adjustment involving a rate increase) may not generate unused rate adjustment authority. § 3010.245 authority. Application of banked rate (a) Banked rate authority may be applied to any planned rate adjustment subject to the limitations appearing in paragraphs (b) through (f) of this section. (b) Banked rate authority may only be applied to a proposal to adjust rates E:\FR\FM\11DEP1.SGM 11DEP1 Federal Register / Vol. 84, No. 238 / Wednesday, December 11, 2019 / Proposed Rules after applying rate authority as described in subparts C through F of this part and in § 3010.222, Class requirement and additional class rate authority. (c) A maximum of 2 percentage points of banked rate authority may be applied to a rate adjustment for any class in any 12-month period. If banked rate authority is used, it shall be subtracted from the schedule of banked rate adjustment authority as of the date of the final order accepting the rates. (d) Subject to paragraphs (b) and (c) of this section, interim rate adjustment authority may be used to make a rate adjustment pursuant to the rate adjustment filing that led to its calculation. If interim rate adjustment authority is used to make such a rate adjustment, the interim rate adjustment authority generated pursuant to the rate adjustment filing shall first be added to the schedule of banked rate adjustment authority pursuant to § 3010.241 as the most recent entry. Then, any interim rate adjustment authority used in accordance with this paragraph shall be subtracted from the existing banked rate adjustment authority using a first-in, first-out (FIFO) method, beginning 5 years before the instant rate adjustment filing. (e) Banked rate authority for a class must be applied, using a first-in, firstout (FIFO) method, beginning 5 years before the instant rate adjustment filing. (f) Banked rate adjustment authority calculated under this section shall lapse 5 years from the date of the rate adjustment filing leading to its calculation. Subpart I—Rate Adjustments Due to Extraordinary and Exceptional Circumstances § 3010.260 General. lotter on DSKBCFDHB2PROD with PROPOSALS The Postal Service may request to adjust rates for market dominant products due to extraordinary or exceptional circumstances pursuant to 39 U.S.C. 3622(d)(1)(E). The rate adjustments are not subject to rate adjustment limitations or the restrictions on the use of unused rate adjustment authority. The rate adjustment request may not include material classification changes. The request is subject to public participation and Commission review within 90 days. § 3010.261 Contents of a request. (a) Each exigent request shall include the items specified in paragraphs (b) through (i) of this section. (b) A schedule of the planned rates. (c) Calculations quantifying the increase for each affected product and class. VerDate Sep<11>2014 16:13 Dec 10, 2019 Jkt 250001 (d) A full discussion of the extraordinary or exceptional circumstances giving rise to the request, and a complete explanation of how both the requested overall increase and the specific rate adjustments requested relate to those circumstances. (e) A full discussion of why the requested rate adjustments are necessary to enable the Postal Service, under best practices of honest, efficient, and economical management, to maintain and continue the development of postal services of the kind and quality adapted to the needs of the United States. (f) A full discussion of why the requested rate adjustments are reasonable and equitable as among types of users of market dominant products. (g) An explanation of when, or under what circumstances, the Postal Service expects to be able to rescind the exigent rate adjustments in whole or in part. (h) An analysis of the circumstances giving rise to the exigent request, which should, if applicable, include a discussion of whether the circumstances were foreseeable or could have been avoided by reasonable prior action. (i) Such other information as the Postal Service believes will assist the Commission in issuing a timely determination of whether the requested rate adjustments are consistent with applicable statutory policies. § 3010.262 Supplemental information. The Commission may require the Postal Service to provide clarification of its request or to provide additional information in order to gain a better understanding of the circumstances leading to the request or the justification for the specific rate adjustments requested. The Postal Service shall include within its request the identification of one or more knowledgeable Postal Service official(s) who will be available to provide prompt responses to Commission requests for clarification or additional information. § 3010.263 Docket and notice. (a) The Commission will establish a docket for each request to adjust rates due to extraordinary or exceptional circumstances, publish notice of the request in the Federal Register, and post the filing on its website. The notice shall include the items specified in paragraphs (b) through (g) of this section. (b) The general nature of the proceeding. (c) A reference to legal authority under which the proceeding is to be conducted. PO 00000 Frm 00017 Fmt 4702 Sfmt 4702 67697 (d) A concise description of the proposals for changes in rates, fees, and the Mail Classification Schedule. (e) The identification of an officer of the Commission to represent the interests of the general public in the docket. (f) A specified period for public comment. (g) Such other information as the Commission deems appropriate. § 3010.264 Public hearing. (a) The Commission will hold a public hearing on the Postal Service’s request. During the public hearing, responsible Postal Service officials will appear and respond under oath to questions from the Commissioners or their designees addressing previously identified aspects of the Postal Service’s request and supporting information. (b) Interested persons will be given an opportunity to submit to the Commission suggested relevant questions that might be posed during the public hearing. Such questions, and any explanatory materials submitted to clarify the purpose of the questions, should be filed in accordance with § 3001.9 of this chapter, and will become part of the administrative record of the proceeding. (c) The timing and length of the public hearing will depend on the nature of the circumstances giving rise to the request and the clarity and completeness of the supporting materials provided with the request. (d) If the Postal Service is unable to provide adequate explanations during the public hearing, supplementary written or oral responses may be required. § 3010.265 Opportunity for comments. (a) Following the conclusion of the public hearings and submission of any supplementary materials, interested persons will be given the opportunity to submit written comments on: (1) The sufficiency of the justification for an exigent rate adjustment; (2) The adequacy of the justification for adjustments in the amounts requested by the Postal Service; and (3) Whether the specific rate adjustments requested are reasonable and equitable. (b) An opportunity to submit written reply comments will be given to the Postal Service and other interested persons. § 3010.266 decision. Deadline for Commission Requests under this subpart seek rate relief required by extraordinary or exceptional circumstances and will be E:\FR\FM\11DEP1.SGM 11DEP1 67698 Federal Register / Vol. 84, No. 238 / Wednesday, December 11, 2019 / Proposed Rules treated with expedition at every stage. It is Commission policy to provide appropriate relief as quickly as possible consistent with statutory requirements and procedural fairness. The Commission will act expeditiously on the Postal Service’s request, taking into account all written comments. In every instance, a Commission decision will be issued within 90 days of the filing of an exigent request. § 3010.267 Treatment of banked rate adjustment authority. (a) Each request will identify the banked rate adjustment authority available as of the date of the request for each class of mail and the available amount for each of the preceding 5 years. (b) Rate adjustments may use existing banked rate adjustment authority in amounts greater than the limitations described in § 3010.245. (c) Increases will exhaust all banked rate adjustment authority for each class of mail before imposing additional rate adjustments in excess of the maximum rate adjustment for any class of mail. Subpart J—Workshare Discounts § 3010.280 Applicability. This subpart is applicable whenever the Postal Service proposes to adjust a rate associated with a workshare discount. For the purpose of this subpart, the cost avoided by the Postal Service for not providing the applicable service refers to the amount identified in the most recently applicable Annual Compliance Determination, unless the Commission otherwise provides. § 3010.281 Calculation of passthroughs for workshare discounts. For the purpose of this subpart, the percentage passthrough for any workshare discount shall be calculated by dividing the workshare discount by the cost avoided by the Postal Service for not providing the applicable service and expressing the result as a percentage. lotter on DSKBCFDHB2PROD with PROPOSALS § 3010.282 Increased pricing efficiency. (a) For a workshare discount that is equal to the cost avoided by the Postal Service for not providing the applicable service, no proposal to adjust a rate associated with that workshare discount may change the size of the discount. (b) For a workshare discount that exceeds the cost avoided by the Postal Service for not providing the applicable service, no proposal to adjust a rate associated with that workshare discount may increase the size of the discount. (c) For a workshare discount that is less than the cost avoided by the Postal VerDate Sep<11>2014 16:13 Dec 10, 2019 Jkt 250001 Service for not providing the applicable service, no proposal to adjust a rate associated with that workshare discount may decrease the size of the discount. § 3010.283 Limitations on excessive discounts. (a) No proposal to adjust a rate may set a workshare discount that would exceed the cost avoided by the Postal Service for not providing the applicable service, unless at least one of the following reasons provided in paragraphs (b) through (e) of this section applies. (b) The proposed workshare discount is associated with a new postal service, a change to an existing postal service, or a new workshare initiative. (c) The proposed workshare discount is a minimum of 20 percent less than the existing workshare discount. (d) The proposed workshare discount is set in accordance with a Commission order issued pursuant to § 3010.286. (e) The proposed workshare discount is provided in connection with a subclass of mail, consisting exclusively of mail matter of educational, cultural, scientific, or informational value (39 U.S.C. 3622(e)(2)(C)) and is in compliance with § 3010.285(c). § 3010.284 Limitations on discounts below avoided cost. (a) No proposal to adjust a rate may set a workshare discount that would be below the cost avoided by the Postal Service for not providing the applicable service, unless at least one of the following reasons provided in paragraphs (b) through (e) of this section applies. (b) The proposed workshare discount is associated with a new postal service, a change to an existing postal service, or a new workshare initiative. (c) The proposed workshare discount is a minimum of 20 percent more than the existing workshare discount. (d) The proposed workshare discount is set in accordance with a Commission order issued pursuant to § 3010.286. (e) The percentage passthrough for the proposed workshare discount is at least 85 percent. § 3010.285 Proposal to adjust a rate associated with a workshare discount. (a) Each proposal to adjust a rate associated with a workshare discount shall be supported by substantial evidence and demonstrate that each proposed workshare discount has been set in compliance with 39 U.S.C. 3622(e) and this subpart. Substantial evidence means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. PO 00000 Frm 00018 Fmt 4702 Sfmt 4702 (b) For each proposed workshare discount that would exceed the cost avoided by the Postal Service for not providing the applicable service, the rate adjustment filing shall indicate the applicable paragraph of § 3010.283 under which the Postal Service is justifying the excessive discount and include any relevant analysis supporting the claim. (c) For each proposed workshare discount that is provided in connection with a subclass of mail, consisting exclusively of mail matter of educational, cultural, scientific, or informational value (39 U.S.C. 3622(e)(2)(C)), would exceed the cost avoided by the Postal Service for not providing the applicable service, and would not be set in accordance with at least one specific provision appearing in § 3010.283(b) through (d), the rate adjustment filing shall provide the information specified in paragraphs (c)(1) through (3) of this section: (1) The number of mail owners receiving the workshare discount during the most recent full fiscal year and for the current fiscal year to date; (2) The number of mail owners for the applicable product or products in the most recent full fiscal year and for the current fiscal year to date; and (3) An explanation of how the proposed workshare discount would promote the public interest, even though the proposed workshare discount would substantially exceed the cost avoided by the Postal Service. (d) For each proposed workshare discount that would be below the cost avoided by the Postal Service for not providing the applicable service, the rate adjustment filing shall indicate the applicable paragraph of § 3010.284 under which the Postal Service is justifying the discount that is below the cost avoided and include any relevant analysis supporting the claim. § 3010.286 Application for waiver. (a) In every instance in which the Postal Service determines to adjust a rate associated with a workshare discount in a manner that does not comply with the limitations imposed by §§ 3010.283 through 3010.284, the Postal Service shall file an application for waiver. The Postal Service must file any application for waiver at least 60 days prior to filing the proposal to adjust a rate associated with the applicable workshare discount. In its application for waiver, the Postal Service shall indicate the approximate filing date for its next rate adjustment filing. (b) The application for waiver shall be supported by a preponderance of the E:\FR\FM\11DEP1.SGM 11DEP1 lotter on DSKBCFDHB2PROD with PROPOSALS Federal Register / Vol. 84, No. 238 / Wednesday, December 11, 2019 / Proposed Rules evidence and demonstrate that a waiver from the limitations imposed by §§ 3010.283 through 3010.284 should be granted. Preponderance of the evidence means proof by information that, compared with that opposing it, leads to the conclusion that the fact at issue is more probably true than not. (c) The application for waiver shall include a specific and detailed statement signed by one or more knowledgeable Postal Service official(s) who sponsors the application and attests to the accuracy of the information contained within the statement. The statement shall set forth the information specified in paragraphs (c)(1) through (8) of this section, as applicable to the specific workshare discount for which a waiver is sought: (1) The reason(s) why a waiver is alleged to be necessary (with justification thereof), including all relevant supporting analysis and all assumptions relied upon. (2) The length of time for which a waiver is alleged to be necessary (with justification thereof). (3) For each subsequent rate adjustment filing planned to occur during the length of time for which a waiver is sought, a representation of the proposed minimum amount of the change to the workshare discount. (4) For a claim that the amount of the workshare discount exceeding the cost avoided by the Postal Service for not providing the applicable service is necessary in order to mitigate rate shock (39 U.S.C. 3622(e)(2)(B)), the Postal Service shall provide an explanation addressing all of the items specified in paragraphs (c)(4)(i) through (iii) of this section: (i) A description of the customers that the Postal Service claims would be adversely affected. (ii) Prices and volumes for the workshare discount at issue (the benchmark and workshared mail category) for the last 10 years. (iii) Quantitative analysis or, if not available, qualitative analysis indicating the nature and extent of the likely harm to the customers that would result from setting the workshare discount in compliance with § 3010.283(c). (5) For a claim that setting an excessive or low workshare discount closer or equal to the cost avoided by the Postal Service for not providing the applicable service would impede the efficient operation of the Postal Service, the Postal Service shall provide an explanation addressing all of the items specified in paragraphs (c)(5)(i) through (iii) of this section: (i) A description of the operational strategy at issue. VerDate Sep<11>2014 16:13 Dec 10, 2019 Jkt 250001 (ii) Quantitative analysis or, if not available, qualitative analysis indicating how the workshare discount at issue is related to that operational strategy. (iii) How setting the workshare discount in compliance with § 3010.283(c) or § 3010.284(c), whichever is applicable, would impede that operational strategy. (6) For a claim that reducing or eliminating the excessive workshare discount would lead to a loss of volume in the affected category of mail and reduce the aggregate contribution to the Postal Service’s institutional costs from the mail that is subject to the discount (39 U.S.C. 3622(e)(3)(A)), the Postal Service shall provide an explanation addressing all of the items specified in paragraphs (c)(6)(i) through (iii) of this section: (i) A description of the affected category of mail. (ii) Quantitative analysis or, if not available, qualitative analysis indicating the expected loss of volume and reduced contribution that is claimed would result from reducing or eliminating the excessive workshare discount. (iii) How setting the excessive workshare discount in compliance with § 3010.283(c) would lead to the expected loss of volume and reduced contribution. (7) For a claim that reducing or eliminating the excessive workshare discount would result in a further increase in the rates paid by mailers not able to take advantage of the workshare discount (39 U.S.C. 3622(e)(3)(B)), the Postal Service shall provide an explanation addressing all of the items specified in paragraphs (c)(7)(i) through (iii) of this section: (i) A description of the mailers not able to take advantage of the discount. (ii) Quantitative analysis or, if not available, qualitative analysis indicating the expected size of the rate increase that is claimed would result in the rates paid by mailers not able to take advantage of the discount. (iii) How setting the excessive workshare discount in compliance with § 3010.283(c) would result in a further increase in the rates paid by mailers not able to take advantage of the discount. (8) Any other relevant factors or reasons to support the application for waiver. (d) Unless the Commission otherwise provides, commenters will be given at least 7 calendar days to respond to the application for waiver after it has been filed by the Postal Service. (e) To better evaluate the waiver application, the Commission may, on its own behalf or by request of any PO 00000 Frm 00019 Fmt 4702 Sfmt 4702 67699 interested person, order the Postal Service to provide experts on the subject matter of the waiver application to participate in technical conferences, prepare statements clarifying or supplementing their views, or answer questions posed by the Commission or its representatives. (f) For a proposed workshare discount that would exceed the cost avoided by the Postal Service for not providing the applicable service, the application for waiver shall be granted only if at least one provision appearing in 39 U.S.C. 3622(e)(2)(A) through (e)(2)(D) or 39 U.S.C. 3622(e)(3)(A) through (e)(3)(B) is determined to apply. (g) For a proposed workshare discount that would be set below the cost avoided by the Postal Service for not providing the applicable service, the application for waiver shall be granted only if setting the workshare discount closer or equal to the cost avoided by the Postal Service for not providing the applicable service would impede the efficient operation of the Postal Service. (h) The Commission will issue an order announcing, at a minimum, whether the requested waiver will be granted or denied no later than 21 days following the close of any comment period(s). An order granting the application for waiver shall specify all conditions upon which the waiver is granted, including the date upon which the waiver shall expire. PART 3020—PRODUCT LISTS 2. The authority citation for part 3020 continues to read as follows: ■ Authority: 39 U.S.C. 503; 3622; 3631; 3642; 3682. 3. Amend § 3020.32 by revising paragraphs (a) and (b) to read as follows: ■ § 3020.32 Supporting justification. * * * * * (a) Explain the reason for initiating the docket and explain why the change is not inconsistent with the applicable requirements of this part and any applicable Commission directives and orders; (b) Explain why, as to market dominant products, the change is not inconsistent with the policies and the applicable criteria of chapter 36 of title 39 of the United States Code; * * * * * ■ 4. Amend § 3020.52 by revising paragraphs (a) and (b) to read as follows: § 3020.52 Supporting justification. * * * * * (a) Explain the reason for initiating the docket and explain why the change is not inconsistent with the applicable E:\FR\FM\11DEP1.SGM 11DEP1 67700 Federal Register / Vol. 84, No. 238 / Wednesday, December 11, 2019 / Proposed Rules requirements of this part and any applicable Commission directives and orders; (b) Explain why, as to market dominant products, the change is not inconsistent with the policies and the applicable criteria of chapter 36 of title 39 of the United States Code; * * * * * ■ 5. Amend § 3020.72 by revising paragraphs (a) and (b) to read as follows: § 3020.72 Supporting justification. * * * * * (a) Explain the reason for initiating the docket and explain why the change is not inconsistent with the applicable requirements of this part and any applicable Commission directives and orders; (b) Explain why, as to market dominant products, the change is not inconsistent with the policies and the applicable criteria of chapter 36 of title 39 of the United States Code; * * * * * ■ 6. Amend § 3020.81 by revising paragraph (b)(1) to read as follows: § 3020.81 Supporting justification for material changes to product descriptions. * * * * * (b)(1) As to market dominant products, explain why the changes are not inconsistent with the policies and the applicable criteria of chapter 36 of title 39 of the United States Code, the applicable requirements of this part, and any applicable Commission directives and orders; or * * * * * ■ 7. Amend § 3020.82 by revising paragraph (e) to read as follows: § 3020.82 Docket and notice of material changes to product descriptions. * * * * * (e) Provide interested persons with an opportunity to comment on whether the proposed changes are consistent with the policies and the applicable criteria of chapter 36 of title 39 of the United States Code, the applicable requirements of this part, and any applicable Commission directives and orders. ■ 8. Amend § 3020.90 by revising paragraph (c)(2) to read as follows: lotter on DSKBCFDHB2PROD with PROPOSALS § 3020.90 Minor corrections to product descriptions. * * * * * (c) * * * (2) Explain why the proposed corrections are consistent with the policies and the applicable criteria of chapter 36 of title 39 of the United States Code, the applicable requirements of this part, and any VerDate Sep<11>2014 16:13 Dec 10, 2019 Jkt 250001 applicable Commission directives and orders; and * * * * * ■ 9. Amend § 3020.91 by revising paragraph (e) to read as follows: § 3020.91 Docket and notice of minor corrections to product descriptions. * * * * * (e) Provide interested persons with an opportunity to comment on whether the proposed corrections are consistent with the policies and the applicable criteria of chapter 36 of title 39 of the United States Code, the applicable requirements of this part, and any applicable Commission directives and orders. ■ 10. Add subpart G to read as follows: Subpart G—Requests for Market Dominant Negotiated Service Agreements Sec. 3020.120 General. 3020.121 Additional supporting justification for negotiated service agreements. 3020.122 Data collection plan and report for negotiated service agreements. § 3020.120 General. This subpart imposes additional requirements whenever there is a request to add a negotiated service agreement to the market dominant product list. The additional supporting justification appearing in § 3020.121 also should be provided whenever the Postal Service proposes to modify the terms of an existing market dominant negotiated service agreement. Commission findings that the addition of a special classification is not inconsistent with 39 U.S.C. 3622 are provisional and subject to subsequent review. No rate(s) shall take effect until 45 days after the Postal Service files a request for review of a notice of a new rate or rate(s) adjustment specifying the rate(s) and the effective date. § 3020.121 Additional supporting justification for negotiated service agreements. (a) Each request shall also include the items specified in paragraphs (b) through (j) of this section. (b) A copy of the negotiated service agreement. (c) The planned effective date(s) of the planned rates. (d) The identity of a responsible Postal Service official who will be available to provide prompt responses to requests for clarification from the Commission. (e) A statement identifying all parties to the agreement and a description clearly explaining the operative components of the agreement. PO 00000 Frm 00020 Fmt 4702 Sfmt 4702 (f) Details regarding the expected improvements in the net financial position or operations of the Postal Service (39 U.S.C. 3622(c)(10)(A)(i) and (ii)). The projection of the change in net financial position as a result of the agreement shall be based on accepted analytical principles. The projection of the change in net financial position as a result of the agreement shall include for each year of the agreement: (1) The estimated mailer-specific costs, volumes, and revenues of the Postal Service absent the implementation of the negotiated service agreement; (2) The estimated mailer-specific costs, volumes, and revenues of the Postal Service which result from implementation of the negotiated service agreement; (3) An analysis of the effects of the negotiated service agreement on the contribution to institutional costs from mailers not party to the agreement; (4) If mailer-specific costs are not available, the source and derivation of the costs that are used shall be provided, together with a discussion of the currency and reliability of those costs and their suitability as a proxy for the mailer-specific costs; and (5) If the Postal Service believes the Commission’s accepted analytical principles are not the most accurate and reliable methodology available: (i) An explanation of the basis for that belief; and (ii) A projection of the change in net financial position resulting from the agreement made using the Postal Service’s alternative methodology. (g) An identification of each component of the agreement expected to enhance the performance of mail preparation, processing, transportation, or other functions in each year of the agreement, and a discussion of the nature and expected impact of each such enhancement. (h) Details regarding any and all actions (performed or to be performed) to assure that the agreement will not result in unreasonable harm to the marketplace (39 U.S.C. 3622(c)(10)(B)). (i) A discussion in regard to how functionally similar negotiated service agreements will be made available on public and reasonable terms to similarly situated mailers. (j) Such other information as the Postal Service believes will assist the Commission in issuing a timely determination of whether the requested changes are consistent with applicable statutory policies. E:\FR\FM\11DEP1.SGM 11DEP1 Federal Register / Vol. 84, No. 238 / Wednesday, December 11, 2019 / Proposed Rules § 3020.122 Data collection plan and report for negotiated service agreements. (a) The Postal Service shall include with any request concerning a negotiated service agreement a detailed plan for providing data or information on actual experience under the agreement sufficient to allow evaluation of whether the negotiated service agreement operates in compliance with 39 U.S.C. 3622(c)(10). (b) A data report under the plan is due 60 days after each anniversary date of implementation and shall include, at a minimum, the following information for each 12-month period the agreement has been in effect: (1) The change in net financial position of the Postal Service as a result of the agreement. This calculation shall include for each year of the agreement: (i) The actual mailer-specific costs, volumes, and revenues of the Postal Service; (ii) An analysis of the effects of the negotiated service agreement on the net overall contribution to the institutional costs of the Postal Service; and (iii) If mailer-specific costs are not available, the source and derivation of the costs that are used shall be provided, including a discussion of the currency and reliability of those costs and their suitability as a proxy for the mailer-specific costs. (2) A discussion of the changes in operations of the Postal Service that have resulted from the agreement. This shall include, for each year of the agreement, identification of each component of the agreement known to enhance the performance of mail preparation, processing, transportation, or other functions in each year of the agreement. (3) An analysis of the impact of the negotiated service agreement on the marketplace, including a discussion of any and all actions taken to protect the marketplace from unreasonable harm. PART 3050—PERIODIC REPORTING 11. The authority citation for part 3050 continues to read as follows: ■ Authority: 39 U.S.C. 503; 3651; 3652; 3653. 12. Amend § 3050.20 by revising paragraph (c) to read as follows: lotter on DSKBCFDHB2PROD with PROPOSALS ■ § 3050.20 Compliance and other analyses in the Postal Service’s section 3652 report. * * * * * (c) It shall address such matters as non-compensatory rates and failures to achieve stated goals for on-time delivery standards. A more detailed analysis is required when the Commission observed and commented upon the VerDate Sep<11>2014 16:13 Dec 10, 2019 Jkt 250001 same matter in its Annual Compliance Determination for the previous fiscal year. ■ 13. Amend § 3050.21 by: ■ a. Revising paragraphs (a), (e), and (m); and ■ b. Adding paragraphs (n) and (o). The revisions and additions read as follows: § 3050.21 Content of the Postal Service’s section 3652 report. (a) No later than 90 days after the close of each fiscal year, the Postal Service shall submit a report to the Commission analyzing its cost, volume, revenue, rate, and service information in sufficient detail to demonstrate that all products during such year comply with all applicable provisions of title 39 of the United States Code. The report shall provide the items in paragraphs (b) through (o) of this section. * * * * * (e) For each market dominant workshare discount offered during the reporting year: (1) The per-item cost avoided by the Postal Service by virtue of such discount; (2) The percentage of such per-item cost avoided that the per-item workshare discount represents; (3) The per-item contribution made to institutional costs; (4) The factual and analytical bases for any claim that one or more of the exception provisions of 39 U.S.C. 3622(e)(2)(A) through (e)(2)(D) or 39 U.S.C. 3622(e)(3)(A) through (e)(3)(B) apply; and (5) For each workshare discount that is provided in connection with a subclass of mail, consisting exclusively of mail matter of educational, cultural, scientific, or informational value (39 U.S.C. 3622(e)(2)(C)), exceeded the cost avoided by the Postal Service for not providing the applicable service, and was not set in accordance with at least one specific provision appearing in § 3010.262(b) through (d) of this chapter, the information specified in paragraphs (5)(i) through (iii) of this section: (i) The number of mail owners receiving the workshare discount; (ii) The number of mail owners for the applicable product or products; and (iii) An explanation of how the workshare discount promotes the public interest, even though the workshare discount substantially exceeds the cost avoided by the Postal Service. * * * * * (l) For the Inbound Letter Post product, provide revenue, volume, attributable cost, and contribution data by Universal Postal Union country PO 00000 Frm 00021 Fmt 4702 Sfmt 4702 67701 group and by shape for the fiscal year subject to review and each of the preceding 4 fiscal years; (m) Input data and calculations used to produce the annual Total Factor Productivity estimates; (n) Copies of notifications to the Postal Service by the Office of Personnel Management (OPM) of annual determinations of the funding amounts specific to payments at the end of each fiscal year computed under 5 U.S.C. 8909a(d)(2)(B) and 5 U.S.C. 8909a(d)(3)(B)(ii); 5 U.S.C. 8348(h)(2)(B) and 5 U.S.C. 8423(b)(3)(B); 5 U.S.C. 8423(b)(1)(B) and 5 U.S.C. 8423(b)(2); and (o) Provide any other information that the Postal Service believes will help the Commission evaluate the Postal Service’s compliance with the applicable provisions of title 39 of the United States Code. ■ 14. Add § 3050.55 to read as follows: § 3050.55 Information pertaining to cost reduction initiatives. (a) The reports in paragraphs (b) through (f) of this section shall be filed with the Commission at the times indicated. (b) Within 95 days after the end of each fiscal year, the Postal Service shall file a financial report that analyzes cost data from the fiscal year. For purposes of this paragraph, the percentage change shall compare the fiscal year under review to the previous fiscal year. At a minimum, the report shall include: (1) For all market dominant mail, the percentage change in total unit attributable cost; (2) For each market dominant mail product, the percentage change in unit attributable cost; (3) For the system as a whole, total average cost per piece, which includes all Postal Service competitive and market dominant attributable costs and institutional costs, (4) The percentage change in total average cost per piece; (5) Market dominant unit attributable cost by product; (6) If the percentage change in unit attributable cost for a market dominant mail product is more than 0.0 percent and exceeds the percentage change in total market dominant mail unit attributable cost, then the following information shall be provided: (i) Unit attributable cost workpapers for the product disaggregated into the following cost categories: Mail processing unit cost, delivery unit cost, vehicle service driver unit cost, purchased transportation unit cost, window service unit cost, and other unit cost; E:\FR\FM\11DEP1.SGM 11DEP1 67702 Federal Register / Vol. 84, No. 238 / Wednesday, December 11, 2019 / Proposed Rules lotter on DSKBCFDHB2PROD with PROPOSALS (ii) A narrative that identifies cost categories that are driving above average increases in unit attributable cost for the product and explains the reason for the above-average increase; and (iii) A specific plan to reduce unit attributable cost for the product. (7) An analysis of volume trends and mail mix changes for each market dominant mail product from fiscal year 2017 through the end of the fiscal year under review, which shall include at a minimum: (i) A comparison of actual unit attributable costs and estimated unit attributable costs for each market dominant mail product, using the volume distribution from fiscal year 2017; (ii) A narrative that identifies the drivers of change in volume trends and the mail mix; and (iii) A narrative that explains the methodology used to calculate the estimated unit attributable costs as required by paragraph (b)(7)(i) of this section. (c) Within 95 days after the end of each fiscal year, the Postal Service shall file a report with analysis of each planned cost reduction initiative that is expected to require Postal Service total expenditures of $5 million or more over the duration of the initiative. At a minimum, the report shall include: (1) A narrative that describes each cost reduction initiative planned for future fiscal years, including the status, the expected total expenditure, start date, end date, and any intermediate deadlines; (2) Identification of a metric to measure the impact of each planned cost reduction initiative identified in paragraph (c)(1) of this section, a narrative describing the selected metric, a narrative explaining the reason for selecting that metric, and a schedule approximating the months and fiscal years in which the cost reduction impact is expected to be measureable; (3) Estimates of the expected impact of each planned cost reduction initiative, with supporting workpapers, VerDate Sep<11>2014 16:13 Dec 10, 2019 Jkt 250001 using the metric identified in paragraph (c)(2) of this section, total market dominant mail attributable unit cost, and total unit cost as calculated pursuant to paragraph (b)(3) of this section. (d) Within 95 days after the end of each fiscal year, the Postal Service shall file a report that describes each active cost reduction initiative during the fiscal year which incurred or is expected to incur Postal Service expenditures of $5 million or more over the duration of the initiative. At a minimum, the report shall include: (1) The information described in paragraphs (c)(1) through (c)(3) of this section, based on actual data for the fiscal year, and a specific statement as to whether the initiative actually achieved the expected impact as measured by the selected metric; (2) An explanation of the trends, changes, or other reasons that caused any variance between the actual information provided under paragraph (d)(1) of this section and the estimated information previously provided under paragraphs (c)(1) through (c)(3) of this section, if applicable; (3) A description of any midimplementation adjustments the Postal Service has taken or will take to align the impacts with the schedule; and (4) Any revisions to the schedule of cost reduction impacts for future fiscal years. (e) Within 95 days after the end of each fiscal year, the Postal Service shall file a report that summarizes all projects associated with a Decision Analysis Report for the fiscal year. At a minimum, the report shall include: (1) A description of each project; (2) The status of each project; (3) An estimate of cost savings or additional revenues from each project; and (4) The return on investment expected from each project. (f) Within 95 days after the end of each fiscal year, the Postal Service shall file a report that summarizes all planned projects that will require a Decision PO 00000 Frm 00022 Fmt 4702 Sfmt 9990 Analysis Report in the next fiscal year. At a minimum, the report shall include: (1) A description of each planned project; (2) The status of each project; (3) An estimate of the cost savings or additional revenues expected from each project; and (4) The return on investment expected from each project. ■ 15. Amend § 3050.60 by: ■ a. Revising paragraph (a); ■ b. Removing paragraph (e); ■ c. Redesignating paragraphs (f) and (g) as paragraphs (e); and (f). The revision reads as follows: § 3050.60 Miscellaneous reports and documents. (a) The reports in paragraphs (b) through (f) of this section shall be provided at the times indicated. * * * * * PART 3055—SERVICE PERFORMANCE AND CUSTOMER SATISFACTION REPORTING 16. The authority citation for part 3055 continues to read as follows: ■ Authority: 39 U.S.C. 503; 3622(a); 3652(d) and (e); 3657(c). 17. Amend § 3055.2 by revising paragraph (c) to read as follows: ■ § 3055.2 Contents of the annual report of service performance achievements. * * * * * (c) The applicable service standard(s) for each product. If there has been a change to a service standard(s) since the previous report, a description of and reason for the change shall be provided. If there have been no changes to service standard(s) since the previous report, a certification stating this fact shall be provided. * * * * * By the Commission. Darcie S. Tokioka, Acting Secretary. [FR Doc. 2019–26573 Filed 12–10–19; 8:45 am] BILLING CODE 7710–FW–P E:\FR\FM\11DEP1.SGM 11DEP1

Agencies

[Federal Register Volume 84, Number 238 (Wednesday, December 11, 2019)]
[Proposed Rules]
[Pages 67685-67702]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-26573]


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POSTAL REGULATORY COMMISSION

39 CFR Parts 3010, 3020, 3050, and 3055

[Docket No. RM2017-3; Order No. 5337]


System for Regulating Market Dominant Rates and Classifications

AGENCY: Postal Regulatory Commission.

ACTION: Proposed rule.

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SUMMARY: The Commission proposes revised rules modifying the system for 
regulating rates and classes for market dominant products. The revised 
rules incorporate feedback from comments received from the Commission's 
prior proposed rulemaking. The rule revisions replace some rules in 
their entirety, move others, and change existing rules as necessary.

DATES: Comments are due: February 3, 2020; Reply Comments are due: 
March 4, 2020.

ADDRESSES: For additional information, Order No. 5337 can be accessed 
electronically through the Commission's website at https://www.prc.gov. 
Submit comments electronically via the Commission's Filing Online 
system at http://www.prc.gov. Those who cannot submit comments 
electronically should contact the person identified in the FOR FURTHER 
INFORMATION CONTACT section by telephone for advice on filing 
alternatives.

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

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Relevant Statutory Requirements
II. Background
III. Basis and Purpose of Revised Proposed Rules
IV. Revised Proposed Rules

I. Relevant Statutory Requirements

    Section 3622 of title 39 of the United States Code established a 
system to regulate the rates and classes of Market Dominant Postal 
products. The Commission is required to conduct a review of the Market 
Dominant ratemaking system 10 years after the enactment of the Postal 
Accountability and Enhancement Act (PAEA), Public Law 109-435, 120 
Stat. 3198 (2006). 39 U.S.C. 3622(d)(3). The Commission's purpose in 
the review is to determine whether the system is achieving the 
objectives appearing in subsection (b) of section 3622, taking into 
account the factors appearing in subsection (c) of 3622. If, upon 
completion of the mandatory 10-year review, including an opportunity 
for notice and public comment, the Commission determines that the 
system is not achieving the objectives (taking into account the 
factors), the Commission may ``by regulation, make such modification or 
adopt such alternative system for regulating rates and classes for 
market-dominant products as necessary to achieve the objectives.'' 39 
U.S.C. 3622(d)(3).

II. Background

    Pursuant to the directives in section 3622 of the PAEA, the 
Commission initiated Docket No. RM2017-3 to conduct a comprehensive 
analysis of whether the PAEA system achieved the nine objectives, 
taking into account the factors, in the decade following the PAEA's 
enactment. The Commission issued Order No. 4257 setting forth the 
findings from its review.\1\ In Order No. 4257, the Commission 
determined that the overall PAEA system ``has not achieved the 
objectives taking into account the factors of the PAEA.'' Order No. 
4257 at 4, 275.
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    \1\ Order on the Findings and Determination of the 39 U.S.C. 
3622 Review, December 1, 2017 (Order No. 4257).
---------------------------------------------------------------------------

    In response to its conclusions in Order No. 4257 and as 
contemplated by section 3622(d)(3), the Commission issued a Notice of 
Proposed Rulemaking (NPR) \2\ preceded by an Advance Notice of Proposed 
Rulemaking.\3\ In the NPR, the Commission proposed to amend several 
parts of title 39 of the Code of Federal Regulations to achieve the 
objectives of 39 U.S.C. 3622(b). Order No. 4258 at 3. The NPR sought 
public comment on the Commission's proposed amendments. In response to 
the wide range of comments received and additional considerations, the 
Commission proposes new changes to the regulations and modifies and 
clarifies previous proposals.
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    \2\ Notice of Proposed Rulemaking for the System for Regulating 
Rates and Classes for Market Dominant Products, December 1, 2017 
(Order No. 4258).
    \3\ Advance Notice of Proposed Rulemaking on the Statutory 
Review of the System for Regulating Rates and Classes for Market 
Dominant Products, December 20, 2016 (Order No. 3673).
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III. Basis and Purpose of Revised Proposed Rules

    In Order No. 4257, the Commission concluded that ``while some 
aspects of the system of regulating rates and classes for market 
dominant products have worked as planned, overall, the system has not 
achieved the objectives of the PAEA.'' Order No. 4257 at 5. The 
Commission analyzed the system by reviewing three topical areas that 
encompassed the nine objectives of the PAEA: (1) The structure of the 
ratemaking system; (2) the financial health of the Postal Service; and 
(3) service. Id. at 22. In its review of the structure of the 
ratemaking system, the Commission found that with respect to pricing, 
the system did not result in increased pricing efficiency. Id. at 48. 
It concluded that the system did not result in pricing efficiency 
because ``workshare discounts were not set as close as practicable to 
their avoided costs despite the Postal Service's ability to do so under 
the price cap'' in conjunction with the fact that ``seven products did 
not cover their attributable costs during the PAEA era.'' Id. at 145.
    In its analysis of the financial health of the Postal Service, the 
Commission determined that ``financial stability, including retained 
earnings, has not been maintained for the Postal Service in the medium 
and long-term time frames and that cost reductions and operational 
efficiency gains have not been maximized.'' Id. at 148. The Commission 
further noted that the aggressive Retiree Health Benefits Fund 
prefunding and reductions in volume and revenue added to the Postal 
Service's net losses, as did the impact of the Great Recession combined 
with emergent technological trends resulting in even greater declining 
volumes for First-Class Single-Piece Mail. Id. at 38-40. Finally, in 
its review of service, the Commission determined that the system did 
not effectively encourage the maintenance of high quality service 
standards. Id. at 4-5, 250.
    Subsequently, the Commission issued the NPR setting forth proposed 
rules to address the shortcomings of the system of ratemaking based on 
the conclusions in Order No. 4257. With respect to the finding that the 
system did not achieve pricing efficiency, the Commission proposed 
rules to modify the requirements related to workshare discounts. The 
proposed rules phased out two practices that harm pricing efficiency: 
``workshare discounts set substantially below avoided costs and 
workshare discounts set substantially above avoided costs.'' Order No. 
4258 at 93.
    To address the findings related to the system's failure to provide 
for the financial health of the Postal Service, the Commission made 
three proposals intended to address the failure to attain

[[Page 67686]]

medium-term and long-term financial stability. Id. at 26. First, the 
Commission proposed a mechanism to provide the Postal Service with an 
additional 2 percentage points of rate authority per calendar year for 
5 years following the effective date of the regulations. Id. This 
amount was aimed at putting the Postal Service ``on the path to medium-
term financial stability by providing [it] the opportunity to generate 
additional revenue to cover its obligations.'' Id. at 38. Second, the 
Commission proposed a performance-based rate authority mechanism to 
provide up to an additional 1 percentage point of rate authority per 
calendar year to address the failure to maintain financial stability in 
the long term. Id. at 39. This proposal was dependent on the Postal 
Service achieving specific performance-based requirements for 
operational efficiency and service standard quality and was aimed at 
putting the ``Postal Service on the path to long-term financial 
stability by providing the Postal Service the opportunity to generate 
retained earnings.'' Id. at 38-39. The proposed amount of performance-
based rate authority was based on ``several reference points related to 
capital investment, capital assets, and borrowing authority.'' Id. at 
39. In addition to placing the Postal Service on the path to long-term 
financial stability, the proposal was aimed at remedying the 
deficiencies of the system with respect to the failure to maximize 
incentives to reduce costs and increase efficiency and maintain high 
quality service standards. Id. at 46. Third, the Commission proposed a 
mechanism to improve the cost coverage of non-compensatory classes and 
products by including rate design requirements for non-compensatory 
products and authorizing an additional 2 percentage points of rate 
authority per calendar year for non-compensatory classes of mail. Id. 
at 77. The proposal was based on the Commission's finding that non-
compensatory classes and products threatened the financial integrity of 
the Postal Service because the revenues from these products and classes 
do not cover their attributable costs. Id. at 73; Order No. 4257 at 
233-235. The proposal was aimed at placing the ``Postal Service on the 
path to having fully compensatory products and classes.'' Order No. 
4258 at 73-74.
    Finally, the NPR proposed additional procedural improvements 
intended to ``improve the ratemaking process relating to planned rate 
adjustments of general applicability.'' Id. at 98. These proposals were 
``within the scope of the Commission's general authority to revise its 
regulations'' and were in line with the Commission's review in Order 
No. 4257 and comments received. Id. The proposed changes related to the 
schedule for regular and predictable rate adjustments and the timing 
for the notice period and related filings for rate adjustments. Id. at 
98-99.
    After further consideration, including consideration of the 
comments received in response to the NPR, the Commission provides 
revisions to its proposed rules in its Revised NPR.\4\
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    \4\ Revised Notice of Proposed Rulemaking, December 5, 2019 
(Order No. 5337).
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    First, the Commission modifies the proposed supplemental rate 
authority mechanism to address specific drivers of the Postal Service's 
inability to achieve net income during the PAEA era. Order No. 5337 at 
12. Instead of a singular, fixed amount of supplemental rate authority, 
the revised supplemental authority proposal includes two separate 
mechanisms intended to provide rate authority to address costs largely 
outside the Postal Service's control. Id. The first mechanism provides 
additional rate authority based on loss of density, and the second 
mechanism provides additional rate authority based on amortization of 
retirement benefit obligations until such time as the Postal Service 
has sufficient revenue incorporated in the rate base to cover these 
payments. Id. at 12-13.
    Second, the Commission adjusts the performance-based authority to 
retain the 1 percentage point of rate authority benchmark but modifies 
how the specific performance-based requirements for operational 
efficiency and service will be measured. Id. at 13-14. Additionally, 
the Postal Service must now meet both efficiency and service benchmarks 
to claim the performance-based rate authority. These revisions to the 
performance-based authority are intended to allow the Postal Service to 
improve its financial health and provide a mechanism for the Postal 
Service to achieve long-term financial stability and increase 
operational efficiency while maintaining high quality service 
standards. Id. at 14.
    Next, the Commission makes minor revisions to the rules for non-
compensatory products and classes, proposing that the use of an 
additional 2 percentage points of rate authority for non-compensatory 
classes be optional and removing the requirement that determinations of 
a class's compensatory status be made only in the Annual Compliance 
Determination proceeding. Id. These modifications are geared towards 
placing the Postal Service on the path to having fully compensatory 
products and classes as well as improving the financial integrity of 
the system while allowing for the continued achievement of objectives 
relating to pricing flexibility, pricing efficiency, and establishing 
and maintaining reasonable rates. Id.
    The Commission further proposes revised rules for worksharing 
discounts that dispense with the use of the 3-year grace period. Id. 
The proposed rules prohibit the Postal Service from: (1) Changing those 
workshare discounts currently set equal to avoided cost; (2) reducing 
workshare discounts set below avoided cost; and (3) increasing 
workshare discounts set above avoided cost. Id. The modifications also 
add a new requirement that the Postal Service provide information and 
analysis specific to certain workshare costs set excessively above or 
below avoided cost. Id. The proposed workshare rules are intended to 
incentivize workshare discounts to adhere as closely as possible to 
Efficient Component Pricing principles in order to help the ratemaking 
system maximize incentives to increase efficiency. Id. at 14-15.
    The Commission also proposes new reporting requirements for costs 
and cost-reduction initiatives in response to commenter concerns and in 
light of the revised proposals for additional rate authority. Id. at 
15. The proposals set forth reporting requirements for changes in unit 
costs, specific cost-reduction initiatives, and Decision Analysis 
Reports. Id. The new cost reporting requirements are intended to 
provide transparency into the Postal Service's efforts to reduce costs 
and increase efficiency. Id.
    Finally, the Commission proposes additional procedural rules 
related to planning rate adjustments of general applicability. Id. 
These revisions are intended to improve the ratemaking process. Id.

IV. Revised Proposed Rules

    Proposed 39 CFR part 3010, subpart A describes the applicability of 
the rules, provides an index, sets forth relevant definitions, and 
modifies the schedule for regular and predictable rate adjustments.
    Proposed 39 CFR part 3010, subpart B modifies procedures applicable 
to periodic rate adjustments (including extending notice and filing 
periods from 45 to 90 days), setting forth specific requirements for 
contents of a rate adjustment filing (including mandating that the 
Postal Service certify that it has used the most recently accepted 
analytical principles in its rate adjustment filing), specifying 
content to

[[Page 67687]]

be included in supporting technical documentation, and describing the 
sequence of a proceeding applicable to a request to review a notice of 
rate adjustment. This section also specifies the calculation of the 
maximum rate adjustment authority and imposes limitations on certain 
rate decreases, providing an exception for certain de minimis rate 
increases.
    Proposed 39 CFR part 3010, subpart C relates to the timing of rate 
adjustment authority dependent on CPI-U.
    Proposed 39 CFR part 3010, subpart D creates additional rate 
authority to address the effects of decreases in mail density and sets 
forth the data sources and calculation of the density rate authority.
    Proposed 39 CFR part 3010, subpart E creates additional rate 
authority to provide the Postal Service with revenue for remittance 
towards the statutorily mandated Retirement Health Benefits Fund, Civil 
Service Retirement System, and Federal Employees Retirement System 
unfunded liabilities. This section provides definitions, procedures 
applicable to claiming the additional rate authority, and the data 
sources, calculation, and requirement that the Postal Service remit the 
amount of revenue collected under this authority towards the 
supplemental and unfunded liabilities.
    Proposed 39 CFR part 3010, subpart F creates an additional 1 
percentage point of rate authority per class of mail based upon the 
Postal Service meeting or exceeding an operational efficiency-based 
requirement and adhering to a service standard-based requirement. This 
section sets forth the timing for the Postal Service to claim the 
additional rate authority and describes the criteria for claiming both 
the operational efficiency-based requirement and the service standard-
based requirement.
    Proposed 39 CFR part 3010, subpart G describes new rate-setting 
criteria applicable to non-compensatory classes and products.
    Proposed 39 CFR part 3010, subpart H relates to the manner by which 
the Postal Service is required to calculate unused rate adjustment 
authority and, if applicable, revise the schedule of banked rate 
adjustment authority whenever it plans to adjust rates.
    Proposed 39 CFR 3010, subpart I incorporates the requirements 
concerning exigent rate increases. These updates are not intended to 
change the meaning or operation of the current rules, but the current 
rules have been reorganized.
    Proposed 39 CFR 3010, subpart J establishes rate design criteria 
for workshare discounts, including setting forth new limited instances 
in which the Postal Service may set workshare discounts below avoided 
costs.
    To create global consistency between 39 CFR parts 3010 and 3020, 
conforming changes are proposed to Sec. Sec.  3020.32, 3020.52, 
3020.72, 3020.81, 3020.82, 3020.90, 3020.91, and 39 CFR 3020, subpart 
G.
    Additional conforming changes are proposed in 39 CFR part 3050 for 
Sec. Sec.  3050.20, 3050.21, 3050.55, and 3050.60. Conforming changes 
are also proposed in 39 CFR part 3055 for Sec.  3055.2.

List of Subjects

39 CFR Part 3010

    Administrative practice and procedure, Postal Service.

39 CFR Part 3020

    Administrative practice and procedure.

39 CFR Part 3050

    Administrative practice and procedure, Postal Service, Reporting 
and recordkeeping requirements.

39 CFR Part 3055

    Administrative practice and procedure, Reporting and recordkeeping 
requirements.

    For the reasons discussed in the preamble, the Commission proposes 
to amend Chapter III of title 39 of the Code of Federal Regulations as 
follows:

0
1. Revise part 3010 to read as follows:

PART 3010--REGULATION OF RATES FOR MARKET DOMINANT PRODUCTS

Subpart A--General Provisions
Sec.
3010.100 Applicability.
3010.101 Definitions.
3010.102 Schedule for regular and predictable rate adjustments.
Subpart B--Rate Adjustments
3010.120 General.
3010.121 Postal Service rate adjustment filing.
3010.122 Contents of a rate adjustment filing.
3010.123 Supporting technical documentation.
3010.124 Docket and notice.
3010.125 Opportunity for comments.
3010.126 Proceedings.
3010.127 Maximum rate adjustment authority.
3010.128 Calculation of percentage change in rates.
3010.129 Exceptions for de minimis rate increases.
Subpart C--Consumer Price Index Rate Authority
3010.140 Applicability.
3010.141 CPI-U data source.
3010.142 CPI-U rate authority when rate adjustment filings are 12 or 
more months apart.
3010.143 CPI-U rate authority when rate adjustment filings are less 
than 12 months apart.
Subpart D--Density Rate Authority
3010.160 Applicability.
3010.161 Density calculation data sources.
3010.162 Calculation of density rate authority.
Subpart E--Retirement Obligation Rate Authority
3010.180 Definitions.
3010.181 Applicability.
3010.182 Retirement obligation data sources.
3010.183 Calculation of retirement obligation rate authority.
3010.184 Required minimum remittances.
3010.185 Forfeiture.
Subpart F--Performance-Based Rate Authority
3010.200 Applicability.
3010.201 Operational efficiency-based requirement.
3010.202 Service quality-based requirement.
Subpart G--Non-Compensatory Classes or Products
3010.220 Applicability.
3010.221 Individual product requirement.
3010.222 Class requirement and additional class rate authority.
Subpart H--Accumulation of Unused and Disbursement of Banked Rate 
Adjustment Authority
3010.240 General.
3010.241 Schedule of banked rate adjustment authority.
3010.242 Calculation of unused rate adjustment authority for rate 
adjustments that involve a rate increase which are filed 12 months 
apart or less.
3010.243 Calculation of unused rate adjustment authority for rate 
adjustments that involve a rate increase which are filed more than 
12 months apart.
3010.244 Calculation of unused rate adjustment authority for rate 
adjustments that only include rate decreases.
3010.245 Application of banked rate authority.
Subpart I--Rate Adjustments Due to Extraordinary and Exceptional 
Circumstances
3010.260 General.
3010.261 Contents of a rate adjustment filing.
3010.262 Supplemental information.
3010.263 Docket and notice.
3010.264 Public hearing.
3010.265 Opportunity for comments.
3010.266 Deadline for Commission decision.
3010.267 Treatment of banked rate adjustment authority.
Subpart J--Workshare Discounts
3010.280 Applicability.

[[Page 67688]]

3010.281 Calculation of passthroughs for workshare discounts.
3010.282 Increased pricing efficiency.
3010.283 Limitations on excessive discounts.
3010.284 Limitations on discounts below avoided cost.
3010.285 Proposal to adjust a rate associated with a workshare 
discount.
3010.286 Application for waiver.

    Authority: 39 U.S.C. 503; 3622.

Subpart A--General Provisions.


Sec.  3010.100   Applicability.

    (a) The rules in this part implement provisions in 39 U.S.C. 
chapter 36, subchapter I, establishing the modern system of ratemaking 
for regulating rates and classes for market dominant products. These 
rules are applicable whenever the Postal Service proposes to adjust a 
rate of general applicability for any market dominant product, which 
includes the addition of a new rate, the removal of an existing rate, 
or a change to an existing rate. Current rates may be found in the Mail 
Classification Schedule appearing on the Commission's website at 
www.prc.gov.
    (b) Rates may be adjusted either subject to the rules appearing in 
subpart B of this part, which includes a limitation on rate increases, 
or subject to the rules appearing in subpart I of this part, which does 
not include a limitation on rate increases but requires either 
extraordinary or exceptional circumstances. The rules applicable to the 
calculation of the limitations on rate increases appear in subparts C 
through H of this part. The rules for workshare discounts, which are 
applicable whenever market dominant rates are adjusted, appear in 
subpart J of this part.


Sec.  3010.101   Definitions.

    (a) The definitions in paragraphs (b) through (m) of this section 
apply to this part.
    (b) ``Annual limitation'' means the annual limitation on the 
percentage change in rates equal to the change in the Consumer Price 
Index for all Urban Consumers (CPI-U) unadjusted for seasonal variation 
over the most recently available 12-month period preceding the date the 
Postal Service files a request to review its notice of rate adjustment, 
as determined by the Commission.
    (c) ``Banked rate authority'' means unused rate adjustment 
authority accumulated for future use pursuant to these rules.
    (d) A ``class'' of mail means the First-Class Mail, USPS Marketing 
Mail, Periodicals, Package Services, or Special Services groupings of 
market dominant Postal Service products or services. Generally, the 
regulations in this part are applicable to individual classes of mail.
    (e) ``Density rate authority'' means rate authority that is 
available to all classes to address the effects of decreases in density 
of mail.
    (f) ``Maximum rate adjustment authority'' means the maximum 
percentage change in rates available to a class for any planned 
increase in rates. It is the sum of: The consumer price index rate 
authority, and any available density rate authority, retirement 
obligation rate authority, banked rate authority, performance-based 
rate authority, and rate authority applicable to non-compensatory 
classes.
    (g) ``Performance-based rate authority'' means rate authority that 
is available to all classes where the Postal Service meets or exceeds 
operational efficiency-based requirement and adheres to service 
standard-based requirement as determined by the Commission.
    (h) ``Rate authority applicable to non-compensatory classes'' means 
rate authority available to classes where revenue for each product 
within the class was insufficient to cover that product's attributable 
costs as determined by the Commission.
    (i) ``Rate cell'' means each and every separate rate identified as 
a rate of general applicability.
    (j) ``Rate incentive'' means a discount that is not a workshare 
discount and that is designed to increase or retain volume, improve the 
value of mail for mailers, or improve the operations of the Postal 
Service.
    (k) ``Rate of general applicability'' means a rate applicable to 
all mail meeting standards established by the Mail Classification 
Schedule, the Domestic Mail Manual, and the International Mail Manual. 
A rate is not a rate of general applicability if eligibility for the 
rate is dependent on factors other than the characteristics of the mail 
to which the rate applies. A rate is not a rate of general 
applicability if it benefits a single mailer. A rate that is only 
available upon the written agreement of both the Postal Service and a 
mailer, a group of mailers, or a foreign postal operator is not a rate 
of general applicability.
    (l) ``Retirement obligation rate authority'' means rate authority 
that is available to all classes to provide revenue for remittance 
towards the statutorily mandated amortization payments for unfunded 
liabilities.
    (m) A ``seasonal or temporary rate'' is a rate that is in effect 
for a limited and defined period of time.


Sec.  3010.102   Schedule for regular and predictable rate adjustments.

    (a) The Postal Service shall develop a Schedule for Regular and 
Predictable Rate Adjustments applicable to rate adjustments subject to 
this part. The Schedule for Regular and Predictable Rate Adjustments 
shall:
    (1) Schedule rate adjustments at specific regular intervals of 
time;
    (2) Provide estimated filing and implementation dates (month and 
year) for future rate adjustments for each class of mail expected over 
a minimum of the next 3 years; and
    (3) Provide an explanation that will allow mailers to predict with 
reasonable accuracy, by class, the amounts of future scheduled rate 
adjustments.
    (b) The Postal Service shall file a current Schedule for Regular 
and Predictable Rate Adjustments annually with the Commission at the 
time of filing the Postal Service's section 3652 report. The Commission 
shall post the current schedule on the Commission's website at 
www.prc.gov.
    (c) Whenever the Postal Service deems it appropriate to change the 
Schedule for Regular and Predictable Rate Adjustments, it shall file a 
revised schedule.
    (d) The Postal Service may vary the magnitude of rate adjustments 
from those estimated by the Schedule for Regular and Predictable Rate 
Adjustments. In such case, the Postal Service shall provide an 
explanation for such variation with its rate adjustment filing.

Subpart B--Rate Adjustments


Sec.  3010.120   General

    This subpart describes the process for the periodic adjustment of 
rates subject to the percentage limitations specified in Sec.  3010.127 
that are applicable to each class of mail.


Sec.  3010.121   Postal Service rate adjustment filing.

    (a) In every instance in which the Postal Service determines to 
exercise its statutory authority to adjust rates for a class of mail, 
the Postal Service shall comply with the requirements specified in 
paragraphs (b) through (d) of this section.
    (b) The Postal Service shall take into consideration how the 
planned rate adjustments are in accordance with the provisions of 39 
U.S.C. chapter 36.
    (c) The Postal Service shall provide public notice of its planned 
rate adjustments in a manner reasonably designed to inform the mailing 
community and the general public that it intends to adjust rates no 
later than 90

[[Page 67689]]

days prior to the planned implementation date of the rate adjustments.
    (d) The Postal Service shall file a request to review its notice of 
rate adjustment with the Commission no later than 90 days prior to the 
planned implementation date of the rate adjustment.


Sec.  3010.122   Contents of a rate adjustment filing.

    (a) A rate adjustment filing under Sec.  3010.121 shall include the 
items specified in paragraphs (b) through (j) of this section.
    (b) A representation or evidence that public notice of the planned 
changes has been issued or will be issued at least 90 days before the 
effective date(s) for the planned rate adjustments.
    (c) The intended effective date(s) of the planned rate adjustments.
    (d) A schedule of the planned rate adjustments, including a 
schedule identifying every change to the Mail Classification Schedule 
that will be necessary to implement the planned rate adjustments.
    (e) The identity of a responsible Postal Service official who will 
be available to provide prompt responses to requests for clarification 
from the Commission.
    (f) The supporting technical documentation as described in Sec.  
3010.123.
    (g) A demonstration that the planned rate adjustments are 
consistent with 39 U.S.C. 3626, 3627, and 3629.
    (h) A certification that all cost, avoided cost, volume, and 
revenue figures submitted with the rate adjustment filing are developed 
from the most recent applicable Commission accepted analytical 
principles.
    (i) For a rate adjustment that only includes a decrease in rates, a 
statement of whether the Postal Service elects to generate unused rate 
adjustment authority.
    (j) Such other information as the Postal Service believes will 
assist the Commission in issuing a timely determination of whether the 
planned rate adjustments are consistent with applicable statutory 
policies.


Sec.  3010.123   Supporting technical documentation.

    (a) Supporting technical documentation shall include the items 
specified in paragraphs (b) through (k) of this section, as applicable 
to the specific rate adjustment filing. This information must be 
supported by workpapers in which all calculations are shown and all 
relevant values (e.g., rates, CPI-U values, billing determinants) are 
identified with citations to original sources. The information must be 
submitted in machine-readable, electronic format. Spreadsheet cells 
must be linked to underlying data sources or calculations (not hard-
coded), as appropriate.
    (b) The maximum rate adjustment authority, by class, as summarized 
by Sec.  3010.127 and calculated separately for each of subparts C 
through H of this part, as appropriate.
    (c) A schedule showing the banked rate adjustment authority 
available, by class, and the available amount for each of the preceding 
5 years calculated as required by subpart H of this part.
    (d) The calculation of the percentage change in rates, by class, 
calculated as required by Sec.  3010.128.
    (e) The planned usage of rate adjustment authority, by class, and 
calculated separately for each of subparts C through H of this part, as 
appropriate.
    (f) The amount of new unused rate adjustment authority, by class, 
if any, that will be generated by the rate adjustment calculated as 
required by subpart H of this part, as applicable.
    (g) A schedule of the workshare discounts included with the planned 
rate adjustments, and a companion schedule listing the avoided costs 
that underlie each such discount.
    (h) Whenever the Postal Service establishes a new workshare 
discount rate, it must include with its filing:
    (1) A statement explaining its reasons for establishing the 
workshare discount;
    (2) All data, economic analyses, and other information relied on to 
justify the workshare discount; and
    (3) A certification based on comprehensive, competent analyses that 
the discount will not adversely affect either the rates or the service 
levels of users of postal services who do not take advantage of the 
workshare discount.
    (i) Whenever the Postal Service establishes a new discount or 
surcharge rate it does not view as creating a workshare discount, it 
must include with its filing:
    (1) An explanation of the basis for its view that the discount or 
surcharge rate is not a workshare discount; and
    (2) A certification that the Postal Service applied accepted 
analytical principles to the discount or surcharge rate.
    (j) Whenever the Postal Service includes a rate incentive with its 
planned rate adjustment, it must include with its filing:
    (1) If the rate incentive is a rate of general applicability, 
sufficient information to demonstrate that the rate incentive is a rate 
of general applicability; and
    (2) A statement of whether the Postal Service has excluded the rate 
incentive from the calculation of the percentage change in rates under 
Sec.  3010.128.
    (k) For each class or product where the attributable cost for that 
class or product exceeded the revenue from that class or product as 
determined by the Commission, a demonstration that the planned rate 
adjustments comply with the requirements in subpart G of this part.


Sec.  3010.124   Docket and notice.

    (a) The Commission will establish a docket for each rate adjustment 
filed by the Postal Service under Sec.  3010.121, promptly publish 
notice of the filing in the Federal Register, and post the filing on 
its website. The notice shall include the items specified in paragraphs 
(b) through (g) of this section.
    (b) The general nature of the proceeding.
    (c) A reference to legal authority under which the proceeding is to 
be conducted.
    (d) A concise description of the planned changes in rates, fees, 
and the Mail Classification Schedule.
    (e) The identification of an officer of the Commission to represent 
the interests of the general public in the docket.
    (f) A period of 30 days from the date of the filing for public 
comment.
    (g) Such other information as the Commission deems appropriate.


Sec.  3010.125   Opportunity for comments.

    Public comments should focus on whether planned rate adjustments 
comport with applicable statutory and regulatory requirements.


Sec.  3010.126   Proceedings.

    (a) If the Commission determines that the rate adjustment filing 
does not substantially comply with the requirements of Sec. Sec.  
3010.122 and 3010.123, the Commission may:
    (1) Inform the Postal Service of the deficiencies and provide an 
opportunity for the Postal Service to take corrective action;
    (2) Toll or otherwise modify the procedural schedule until such 
time the Postal Service takes corrective action;
    (3) Dismiss the rate adjustment filing without prejudice; or
    (4) Take other action as deemed appropriate by the Commission.
    (b) Within 21 days of the conclusion of the public comment period 
the Commission will determine whether the planned rate adjustments are 
consistent with applicable law and issue an order announcing its 
findings. Applicable law means only the applicable requirements

[[Page 67690]]

of this part, Commission directives and orders, and 39 U.S.C. 3626, 
3627, and 3629.
    (c) If the planned rate adjustments are found consistent with 
applicable law, they may take effect.
    (d) If the planned rate adjustments are found inconsistent with 
applicable law, the Commission will notify and require the Postal 
Service to respond to any issues of noncompliance.
    (e) Following the Commission's notice of noncompliance, the Postal 
Service may submit an amended rate adjustment filing that describes the 
modifications to its planned rate adjustments that will bring its rate 
adjustments into compliance. An amended rate adjustment filing shall be 
accompanied by sufficient explanatory information to show that all 
deficiencies identified by the Commission have been corrected.
    (f) The Commission will allow a period of 10 days from the date of 
the amended rate adjustment filing for public comment.
    (g) The Commission will review the amended rate adjustment filing 
together with any comments filed for compliance and issue an order 
announcing its findings within 21 days after the comment period ends.
    (h) If the planned rate adjustments as amended are found to be 
consistent with applicable law, they may take effect. However, no 
amended rate shall take effect until 45 days after the Postal Service 
transmits its rate adjustment filing specifying that rate.
    (i) If the planned rate adjustments in an amended rate adjustment 
filing are found to be inconsistent with applicable law, the Commission 
shall explain the basis for its determination and suggest an 
appropriate remedy. Noncompliant rates may not go into effect.
    (j) A Commission finding that a planned rate adjustment is in 
compliance with the applicable requirements of this part, Commission 
directives and orders, and 39 U.S.C. 3626, 3627, and 3629 is decided on 
the merits. A Commission finding that a planned rate adjustment does 
not contravene other policies of 39 U.S.C. chapter 36, subchapter I is 
provisional and subject to subsequent review.


Sec.  3010.127   Maximum rate adjustment authority.

    (a) The maximum rate adjustment authority available to the Postal 
Service for each class of market dominant mail is limited to the sum of 
the percentage points developed in:
    (1) Subpart C--Consumer Price Index Rate Authority;
    (2) Subpart D--Density Rate Authority;
    (3) Subpart E--Retirement Obligation Rate Authority;
    (4) Subpart F--Performance-based Rate Authority;
    (4) Subpart G--Non-compensatory Classes or Products; and
    (5) Subpart H--Accumulation of Unused and Disbursement of Banked 
Rate Adjustment Authority.
    (b) For any product where the attributable cost for that product 
exceeded the revenue from that product as determined by the Commission, 
rates may not be reduced.


Sec.  3010.128   Calculation of percentage change in rates.

    (a) For the purpose of calculating the percentage change in rates, 
the current rate is the rate in effect at the time of the rate 
adjustment filing under Sec.  3010.121 with the following exceptions.
    (1) A seasonal or temporary rate shall be identified and treated as 
a rate cell separate and distinct from the corresponding non-seasonal 
or permanent rate. When used with respect to a seasonal or temporary 
rate, the current rate is the most recent rate in effect for the rate 
cell, regardless of whether the seasonal or temporary rate is available 
at the time of the rate adjustment filing.
    (2) When used with respect to a rate cell that corresponds to a 
rate incentive that was previously excluded from the calculation of the 
percentage change in rates, the current rate is the full undiscounted 
rate in effect for the rate cell at the time of the rate adjustment 
filing, not the discounted rate in effect for the rate cell at such 
time.
    (b) For the purpose of calculating the percentage change in rates, 
the volume for each rate cell shall be obtained from the most recently 
available 12 months of Postal Service billing determinants with the 
following permissible adjustments.
    (1) The Postal Service shall make reasonable adjustments to the 
billing determinants to account for the effects of classification 
changes such as the introduction, deletion, or redefinition of rate 
cells. The Postal Service shall identify and explain all adjustments. 
All information and calculations relied upon to develop the adjustments 
shall be provided together with an explanation of why the adjustments 
are appropriate.
    (2) Whenever possible, adjustments shall be based on known mail 
characteristics or historical volume data, as opposed to forecasts of 
mailer behavior.
    (3) For an adjustment accounting for the effects of the deletion of 
a rate cell when an alternate rate cell is not available, the Postal 
Service should adjust the billing determinants associated with the rate 
cell to 0. If the Postal Service does not adjust the billing 
determinants for the rate cell to 0, the Postal Service shall include a 
rationale for its treatment of the rate cell with the information 
required under paragraph (b)(1) of this section.
    (c) For a rate adjustment that involves a rate increase, for each 
class of mail and product within the class, the percentage change in 
rates is calculated in three steps. First, the volume of each rate cell 
in the class is multiplied by the planned rate for the respective cell 
and the resulting products are summed. Second, the same set of rate 
cell volumes is multiplied by the corresponding current rate for each 
cell and the resulting products are summed. Third, the percentage 
change in rates is calculated by dividing the results of the first step 
by the results of the second step and subtracting 1 from the quotient. 
The result is expressed as a percentage.
    (d) For rate adjustments that only involve a rate decrease, for 
each class of mail and product within the class, the percentage change 
in rates is calculated by amending the workpapers attached to the 
Commission's order relating to the most recent rate adjustment filing 
that involved a rate increase to replace the planned rates under the 
most recent rate adjustment filing that involves a rate increase with 
the corresponding planned rates applicable to the class from the rate 
adjustment filing involving only a rate decrease.
    (e) The formula for calculating the percentage change in rates for 
a class, described in paragraphs (c) and (d) of this section, is as 
follows:
    Percentage change in rates =
    [GRAPHIC] [TIFF OMITTED] TP11DE19.002
    

[[Page 67691]]


Where,

N = number of rate cells in the class
i = denotes a rate cell (i = 1, 2, . . . , N)
Ri,n = planned rate of rate cell i
Ri,c = current rate of rate cell i (for rate adjustment involving a 
rate increase) or rate from most recent rate adjustment involving a 
rate increase for rate cell i (for a rate adjustment only involving 
a rate decrease)
Vi = volume of rate cell i

    (f) Treatment of rate incentives.
    (1) Rate incentives may be excluded from a percentage change in 
rates calculation. If the Postal Service elects to exclude a rate 
incentive from a percentage change in rates calculation, the rate 
incentive shall be treated in the same manner as a rate under a 
negotiated service agreement (as described in Sec.  3010.128(g)).
    (2) A rate incentive may be included in a percentage change in 
rates calculation if it meets the following criteria:
    (i) The rate incentive is in the form of a discount or can be 
easily translated into a discount;
    (ii) Sufficient billing determinants are available for the rate 
incentive to be included in the percentage change in rate calculation 
for the class, which may be adjusted based on known mail 
characteristics or historical volume data (as opposed to forecasts of 
mailer behavior); and
    (iii) The rate incentive is a rate of general applicability.
    (g) Treatment of volume associated with negotiated service 
agreements and rate incentives that are not rates of general 
applicability.
    (1) Mail volumes sent at rates under a negotiated service agreement 
or a rate incentive that is not a rate of general applicability are to 
be included in the calculation of the percentage change in rates under 
this section as though they paid the appropriate rates of general 
applicability. Where it is impractical to identify the rates of general 
applicability (e.g., because unique rate categories are created for a 
mailer), the volumes associated with the mail sent under the terms of 
the negotiated service agreement or the rate incentive that is not a 
rate of general applicability shall be excluded from the calculation of 
the percentage change in rates.
    (2) The Postal Service shall identify and explain all assumptions 
it makes with respect to the treatment of negotiated service agreements 
and rate incentives that are not rates of general applicability in the 
calculation of the percentage change in rates and provide the rationale 
for its assumptions.


Sec.  3010.129   Exceptions for de minimis rate increases.

    (a) The Postal Service may request that the Commission review a de 
minimis rate increase without immediately calculating the maximum rate 
adjustment authority or banking unused rate adjustment authority. For 
this exception to apply, requests to review de minimis rate adjustments 
must be filed separately from any other request to review a rate 
adjustment filing.
    (b) Rate adjustments resulting in rate increases are de minimis if:
    (1) For each affected class, the rate increases do not result in 
the percentage change in rates for the class equaling or exceeding 
0.001 percent; and
    (2) For each affected class, the sum of all rate increases included 
in de minimis rate increases since the most recent rate adjustment 
resulting in a rate increase, or the most recent rate adjustment due to 
extraordinary and exceptional circumstances, that was not a de minimis 
rate increase does not result in the percentage change in rates for the 
class equaling or exceeding 0.001 percent.
    (c) If the rate adjustments are de minimis, no unused rate 
adjustment authority will be added to the schedule of banked rate 
adjustment authority maintained under subpart G of this part as a 
result of the de minimis rate increase.
    (d) If the rate adjustments are de minimis, no rate decreases may 
be taken into account when determining whether rate increases comply 
with paragraphs (b)(1) and (2) of this section.
    (e) In the next rate adjustment filing proposing to increase rates 
for a class that is not a de minimis rate increase:
    (1) The maximum rate adjustment authority shall be calculated as if 
the de minimis rate increase had not been filed; and
    (2) For purposes of calculating the percentage change in rates, the 
current rate shall be the current rate from the de minimis rate 
increase.
    (f) The Postal Service shall file supporting workpapers with each 
request to review a de minimis rate increase that demonstrate that the 
sum of all rate increases included in de minimis rate increases since 
the most recent rate adjustment resulting in a rate increase that was 
not de minimis, or the most recent rate adjustment due to extraordinary 
and exceptional circumstances, does not result in a percentage change 
in rates for the class equaling or exceeding 0.001 percent.
    (g) For any product where the attributable cost for that product 
exceeded the revenue from that product as determined by the Commission, 
rates may not be reduced.

Subpart C--Consumer Price Index Rate Authority


Sec.  3010.140   Applicability.

    The Postal Service may adjust rates based upon changes in the 
Consumer Price Index for all Urban Consumers (CPI-U) identified in 
Sec.  3010.141. If rate adjustment filings involving rate increases are 
filed 12 or more months apart, rate adjustments are subject to a full 
year limitation calculated pursuant to Sec.  3010.142. If rate 
adjustment filings involving rate increases are filed less than 12 
months apart, rate adjustments are subject to a partial year limitation 
calculated pursuant to Sec.  3010.143.


Sec.  3010.141   CPI-U data source.

    The monthly CPI-U values needed for the calculation of rate 
adjustment limitations under this section shall be obtained from the 
Bureau of Labor Statistics (BLS) Consumer Price Index--All Urban 
Consumers, U.S. All Items, Not Seasonally Adjusted, Base Period 1982-84 
= 100. The current Series ID for the index is ``CUUR0000SA0.''


Sec.  3010.142   CPI-U rate authority when rate adjustment filings are 
12 or more months apart.

    (a) If a rate adjustment filing involving a rate increase is filed 
12 or more months after the most recent rate adjustment filing 
involving a rate increase, then the calculation of an annual limitation 
for the class (full year limitation) involves three steps. First, a 
simple average CPI-U index is calculated by summing the most recently 
available 12 monthly CPI-U values from the date of the rate adjustment 
filing and dividing the sum by 12 (Recent Average). Second, a second 
simple average CPI-U index is similarly calculated by summing the 12 
monthly CPI-U values immediately preceding the Recent Average and 
dividing the sum by 12 (Base Average). Third, the full year limitation 
is calculated by dividing the Recent Average by the Base Average and 
subtracting 1 from the quotient. The result is expressed as a 
percentage, rounded to three decimal places.
    (b) The formula for calculating a full year limitation for a rate 
adjustment filing filed 12 or more months after the last rate 
adjustment filing is as follows: Full Year Limitation = (Recent 
Average/Base Average)-1.

[[Page 67692]]

Sec.  3010.143   CPI-U rate authority when rate adjustment filings are 
less than 12 months apart.

    (a) If a rate adjustment filing involving a rate increase is filed 
less than 12 months after the most recent rate adjustment filing 
involving a rate increase, then the annual limitation for the class 
(partial year limitation) will recognize the rate increases that have 
occurred during the preceding 12 months. When the effects of those 
increases are removed, the remaining partial year limitation is the 
applicable restriction on rate increases.
    (b) The applicable partial year limitation is calculated in two 
steps. First, a simple average CPI-U index is calculated by summing the 
12 most recently available monthly CPI-U values from the date of the 
rate adjustment filing and dividing the sum by 12 (Recent Average). 
Second, the partial year limitation is then calculated by dividing the 
Recent Average by the Recent Average from the most recent previous rate 
adjustment filing (Previous Recent Average) applicable to each affected 
class of mail and subtracting 1 from the quotient. The result is 
expressed as a percentage, rounded to three decimal places.
    (c) The formula for calculating the partial year limitation for a 
rate adjustment filing filed less than 12 months after the last rate 
adjustment filing is as follows: Partial Year Limitation = (Recent 
Average/Previous Recent Average)-1.

Subpart D--Density Rate Authority


Sec.  3010.160   Applicability.

    (a) This subpart allocates rate authority to address the effects of 
decreases in the density of mail as measured by the sources identified 
in Sec.  3010.161. The calculation of the additional rate authority 
corresponding to the change in density is described in Sec.  3010.162.
    (b) The Postal Service shall file a notice with the Commission by 
December 31 of each year that calculates the amount of density rate 
authority that is eligible to be authorized under this subpart.
    (c) The Commission shall review the Postal Service's notice and 
determine how much, if any, rate authority will be authorized under 
this subpart. Any rate authority allocated under this subpart:
    (1) Shall be made available to the Postal Service as of the date of 
the Commission's determination;
    (2) Must be included in the calculation of the maximum rate 
adjustment authority in the first generally applicable rate adjustment 
filed after the Commission's determination;
    (3) Shall lapse if unused, within 12 months of the Commission's 
determination; and
    (4) May not be used to generate unused rate authority, nor shall it 
affect existing banked rate authority.


Sec.  3010.161   Density calculation data sources.

    (a) The data needed for the calculation of the density rate 
authority in Sec.  3010.162 shall be obtained from the values reported 
by the Postal Service as specified in paragraphs (b) through (d) of 
this section. When both originally filed and annually revised data are 
available, the originally filed data shall be used. When the originally 
filed data are corrected through a refiling or in the Commission's 
Annual Compliance Determination report, the corrected version of the 
originally filed data shall be used.
    (b) Market dominant volume and total volume from the Revenue, 
Pieces, and Weight report, filed by the Postal Service under Sec.  
3050.25 of this chapter;
    (c) Institutional costs and total costs from the Cost and Revenue 
Analysis report, filed with the Postal Service's section 3652 report; 
and
    (d) The number of delivery points, from the input data used to 
produce the Total Factor Productivity estimates, filed with the Postal 
Service's section 3652 report.


Sec.  3010.162   Calculation of density rate authority.

    (a) Formulas--(1) The formula for calculating the amount of density 
rate authority, in conformance with paragraph (c)(1) of this section, 
is as follows:
    Density rate authority = the greater of 0 and
    [GRAPHIC] [TIFF OMITTED] TP11DE19.003
    
Where,

T = most recently completed fiscal year
T-1 = fiscal year prior to fiscal year T
ICT = institutional cost in fiscal year T
TCT = total cost in fiscal year T
%[Delta]D[T-1,T] = Percentage change in density from 
fiscal year T-1 to fiscal year T

    (2) The formula for calculating the percentage change in density, 
in conformance with paragraph (b)(2) of this section, is as follows:
    Percentage change in density from prior fiscal year =
    [GRAPHIC] [TIFF OMITTED] TP11DE19.004
    
Where,

T = most recently completed fiscal year
T-1 = fiscal year prior to fiscal year T
VT = volume in fiscal year T (either market dominant 
volume or total volume as discussed in paragraph (b)(2) of this 
section)
DPT = delivery points in fiscal year T

    (b) Calculation--(1) The amount of density rate authority available 
under this section shall be calculated in three steps. First, the 
percentage change in density during the most recently completed fiscal 
year shall be calculated using the formula in paragraph (a)(2) of this 
section as described in paragraph (b)(2) of this section. Second, this 
percentage change shall be multiplied by the institutional cost ratio, 
which is calculated as institutional costs for the most recently 
completed fiscal year divided by total costs for that fiscal year. 
Finally, this product shall be multiplied by negative 1 so that 
declines in density correspond to a positive increase in rates. If the 
result of this calculation is less than 0, the amount of additional 
rate authority shall be 0.

[[Page 67693]]

    (2) The percentage change in density from the prior fiscal year 
shall be calculated as the ratio of volume to delivery points for the 
most recently completed fiscal year, divided by the same ratio for the 
prior fiscal year, and subtracting 1 from the quotient. The result is 
expressed as a percentage, rounded to three decimal places. To ensure 
that decreases in competitive product volume will not result in the 
Postal Service receiving greater additional rate adjustment authority 
under this subpart, the percentage change in density shall be 
calculated two ways: Using market dominant volume and using total 
volume. The greater of the two results (not using absolute value) shall 
be used as the percentage change in density from the prior fiscal year.

Subpart E--Retirement Obligation Rate Authority


Sec.  3010.180   Definitions.

    (a) The definitions in paragraphs (b) through (e) of this section 
apply to this subpart.
    (b) ``Amortization payments'' mean the amounts that the Postal 
Service is invoiced by the U.S. Office of Personnel Management to 
provide for the liquidation of the specific and supplemental unfunded 
liabilities by statutorily predetermined dates, as described in Sec.  
3010.182(a).
    (c) ``Phase-in period'' means the period of time spanning the 
fiscal years of issuance of the first five determinations following the 
effective date of this subpart, as specified by the timing provisions 
in Sec.  3010.181.
    (d) ``Required minimum remittance'' means the minimum amount the 
Postal Service is required to remit during a particular fiscal year, as 
calculated under Sec.  3010.184.
    (e) ``Revenue collected under this subpart'' means the amount of 
revenue collected during a fiscal year as a result of all previous rate 
increases authorized under this subpart, as calculated under Sec.  
3010.184.


Sec.  3010.181   Applicability.

    (a) This subpart allocates additional rate authority to provide the 
Postal Service with revenue for remittance towards the statutorily 
mandated amortization payments for supplemental and unfunded 
liabilities identified in Sec.  3010.182. As described in Sec.  
3010.184, for retirement obligation rate authority to be made 
available, the Postal Service must annually remit towards these 
amortization payments all revenue collected under this subpart 
previously. The full retirement obligation rate authority, calculated 
as described in Sec.  3010.183, shall be phased in over 5 fiscal years, 
taking into account changes in volume during the phase-in period. If 
combined with an equal rate increase on Competitive products, the 
compounded rate increase resulting from retirement obligation rate 
authority is calculated to generate sufficient additional revenue at 
the end of the phase-in period to permit the Postal Service to remit 
the entire invoiced amount of its amortization payments.
    (b) The Postal Service shall file a notice with the Commission by 
December 31 of each year, until the conclusion of the phase-in period, 
that calculates the amount of retirement obligation rate authority that 
is eligible to be authorized under this subpart.
    (c) The Commission shall review the Postal Service's notice and 
determine how much, if any, rate authority will be authorized under 
this subpart. Any rate authority allocated under this subpart:
    (1) Shall be made available to the Postal Service as of the date of 
the Commission's determination;
    (2) Must be included in the calculation of the maximum rate 
adjustment authority in the first generally applicable rate adjustment 
filed after the Commission's determination;
    (3) Shall lapse if not used in the first generally applicable rate 
adjustment filed after the Commission's determination;
    (4) Shall lapse if unused, within 12 months of the Commission's 
determination; and
    (5) May not be used to generate unused rate authority, nor shall it 
affect existing banked rate authority.


Sec.  3010.182   Retirement obligation data sources.

    (a) The amounts of the amortization payments needed for the 
calculation of retirement obligation rate adjustment authority in Sec.  
3010.183 shall be obtained from notifications to the Postal Service by 
the Office of Personnel Management of annual determinations of the 
funding amounts specific to payments at the end of each fiscal year for 
Retiree Health Benefits as computed under 5 U.S.C. 8909a(d)(2)(B) and 
(d)(3)(B)(ii); the Civil Service Retirement System as computed under 5 
U.S.C. 8348(h)(2)(B); and the Federal Employees Retirement System as 
computed under 5 U.S.C. 8423(b)(1)(B), (b)(2) and (b)(3)(B), filed with 
the Postal Service's section 3652 report.
    (b) The values for market dominant revenue, total revenue and 
market dominant volumes needed for the calculation of retirement 
obligation rate authority in Sec.  3010.183 shall be obtained from 
values reported in the Revenue, Pieces, and Weight report, filed by the 
Postal Service under Sec.  3050.25 of this chapter.
    (c) The values for additional rate authority previously provided 
under this subpart, if any, needed for the calculation of retirement 
obligation rate authority in Sec.  3010.182 and the calculation of 
required minimum remittances under Sec.  3010.183 shall be obtained 
from the Commission's prior determinations.


Sec.  3010.183   Calculation of retirement obligation rate authority.

    (a) Formulas--(1) The formula for calculating the amount of 
retirement obligation rate authority available under this subpart, 
described in paragraph (b)(1) of this section, is as follows:
    Additional rate authority in fiscal year T+1 =
    [GRAPHIC] [TIFF OMITTED] TP11DE19.005
    
Where,

T = most recently completed fiscal year
APT = total amortization payment for fiscal year T
TRT = total revenue in fiscal year T
PARAT = previously authorized retirement obligation rate 
authority, compounded through fiscal year T, expressed as a 
proportion of the market dominant rate base and calculated using the 
formula in paragraph (a)(2) of this section as described in 
paragraph (b)(2) of this section
N = number of previously issued determinations in which retirement 
obligation rate authority was made available under this subpart

    (2) The formula for calculating the amount of previously authorized 
retirement obligation rate authority through fiscal year T, described 
in paragraph (b)(2) of this section, is as follows:
    Previously authorized retirement obligation rate authority through 
fiscal year T =
[GRAPHIC] [TIFF OMITTED] TP11DE19.006

Where,

T = most recently completed fiscal year
rt = retirement obligation rate authority authorized in 
fiscal year t
N = number of previously issued determinations in which retirement 
obligation rate authority was made available under this subpart

    (c) Calculations--(1) The amount of retirement obligation rate 
authority available for a fiscal year shall be

[[Page 67694]]

calculated in four steps. First, the ratio of the total amortization 
payment for the fiscal year under review to the total revenue in the 
fiscal year under review shall be added to 1. This sum represents the 
factor by which an equal increase in market dominant and competitive 
rates in the fiscal year under review would generate sufficient 
additional revenue to make the full amortization payment. It does not 
account, however, for any previous rate authority authorized under this 
subpart. The second step is therefore to subtract the proportion of the 
market dominant rate base resulting from previously authorized 
retirement obligation rate authority. That proportion is calculated 
using the formula in Sec.  3010.184(a)(2) as described in Sec.  
3010.183(b)(2) Third, to amortize the resulting amount of retirement 
obligation rate authority over the remainder of the phase-in period, 
the difference shall be raised to the power of the inverse of the 
number of determinations remaining in the phase-in period, including 
the current determination. Finally, 1 shall be subtracted from the 
result to convert from a proportional change in rates to a percentage 
of rate adjustment authority.
    (2) The amount of previously authorized retirement obligation rate 
authority shall be calculated in two steps. First, the sums of 1 and 
the amount of retirement obligation rate authority authorized in each 
of the previous fiscal years shall be multiplied together. This product 
represents the compounded amount of such rate authority, expressed as a 
net rate increase. To express this product as a proportion of the 
market dominant rate base, the second step is to subtract the inverse 
of this product from 1.


Sec.  3010.184   Required minimum remittances.

    (a) Minimum remittances. During each fiscal year subsequent to the 
year of the effective date of this subpart, the Postal Service shall 
remit towards the liabilities identified in Sec.  3010.182 an amount 
equal to or greater than the amount of revenue collected as a result of 
all previous rate increases under this subpart during the previous 
fiscal year, as calculated using the formulas in paragraph (b) of this 
section, as described in paragraph (c) of this section.
    (b) Formulas--(1) The formula for calculating the amount of revenue 
collected under this subpart during a fiscal year, described in 
paragraph (c)(1) of this section, is as follows:
    Amount of revenue =
    [GRAPHIC] [TIFF OMITTED] TP11DE19.007
    
Where,

T = most recently completed fiscal year
MDRT = market dominant revenue in fiscal year T
N = number of previously issued determinations in which retirement 
obligation rate authority was made available under this subpart
rt = retirement obligation rate authority authorized in 
fiscal year t
pt = prorated fraction of rt that was in 
effect during fiscal year T, calculated using the formula in 
paragraph (a)(2) of this section, as described in paragraph (b)(2) 
of this section

    (2) The formula for calculating the prorated fraction of retirement 
obligation rate authority authorized in a particular fiscal year t that 
was in effect during the most recently completed fiscal year, described 
in paragraph (c)(2) of this section, is as follows:
    Prorated fraction =
    [GRAPHIC] [TIFF OMITTED] TP11DE19.008
    
Where,

T = most recently completed fiscal year
rt = retirement obligation rate authority authorized 
under this subpart in fiscal year t
Q = the number of the quarter during the fiscal year of the 
effective date of the price increase including retirement obligation 
rate authority made available under this subpart
EQ = number of days in quarter Q subsequent to and 
including the effective date of the price increase
DQ = total number of days in quarter Q
QMDVQ = market dominant volume in quarter Q
MDVT = market dominant volume in fiscal year T

    (c) Calculations--(1) The amount of revenue collected under this 
subpart during a fiscal year, as calculated by the formula in paragraph 
(a)(1) of this section, shall be calculated in three steps. First, the 
sums of 1 and the amount of retirement obligation rate authority made 
available under this subpart during each previous fiscal year--prorated 
to account for mid-year price increases as described in paragraph 
(b)(2) of this section--shall by multiplied together. This product 
represents the proportion by which prices were higher during the most 
recently completed during the fiscal year as a result of retirement 
obligation rate authority. Second, to express this net price increase 
as a proportion of market dominant revenue, the inverse of this product 
shall be subtracted from 1. Finally, the result shall be multiplied by 
market dominant revenue for the fiscal year to change the proportion 
into a dollar amount.
    (2) The prorated fraction of retirement obligation rate authority 
authorized in a particular fiscal year that was in effect during the 
most recently completed fiscal year, as calculated by the formula in 
paragraph (b)(2) of this section, shall be a piecewise function of 
three parts. First, if the retirement obligation rate authority 
authorized in a particular year was not in effect during the most 
recently completed fiscal year, the prorated fraction shall be 0. 
Second, if the retirement obligation rate authority

[[Page 67695]]

authorized in a particular year was in effect during the entirety of 
the most recently completed fiscal year, the prorated fraction shall be 
1. Finally, if the retirement obligation rate authority authorized in a 
particular fiscal year was used to raise prices during the most 
recently completed fiscal year, the prorated fraction shall be the 
proportion of volume sent during the fiscal year after that rate 
increase went into effect.
    (c) This proportion shall be calculated in four steps. First, the 
number of days of the fiscal quarter after and including the effective 
date of the price adjustment including the retirement obligation rate 
authority shall be divided by the total number of days in that fiscal 
quarter. This quotient determines the proportion of days in that 
quarter in which the higher rates were in effect. Second, that quotient 
shall be multiplied by the market dominant volume from that fiscal 
quarter to determine the amount of volume during the quarter receiving 
the higher rates. Third, that product shall be added to the market 
dominant volume from any subsequent quarters of the fiscal year because 
the volume in those quarters was also sent under the higher rates. 
Finally, this sum shall be divided by the total market dominant volume 
from the fiscal year to determine the proportion of annual volume sent 
after the rate increase went into effect.


Sec.  3010.185   Forfeiture.

    (a) If any of the circumstances described in paragraphs (b) through 
(d) of this section occur, the Postal Service shall not be eligible for 
future retirement obligation rate authority under this subpart, and the 
Commission may commence additional proceedings as appropriate.
    (b) If, subsequent to 45 calendar days after the effective date of 
this subpart and prior to the end of the phase-in period, the Postal 
Service fails to timely file the notice required under Sec.  
3010.181(b);
    (c) In any fiscal year in which retirement obligation rate 
authority was determined to be available under this subpart, the Postal 
Service fails to timely file under Sec.  3010.122 for a rate increase 
including the full amount of retirement obligation rate authority 
authorized under this subpart during that fiscal year, to take effect 
prior to the end of that fiscal year; or
    (d) In any fiscal year including or subsequent to the first fiscal 
year in which rate authority under this subpart was used to adjust 
market dominant rates, the Postal Service's total payments towards the 
supplemental and unfunded liabilities identified in Sec.  3010.182 are 
not equal to or greater than the minimum remittance required for that 
fiscal year under Sec.  3010.184(a).

Subpart F--Performance-Based Rate Authority


Sec.  3010.200   Applicability.

    (a) This subpart allocates performance-based rate authority of 1 
percentage point for each class of mail, which is available upon 
meeting or exceeding both an operational efficiency-based requirement 
and adhering to a service standard-based requirement. This rate 
authority is allocated based on both meeting the operational 
efficiency-based requirement appearing in Sec.  3010.201 and meeting 
the service standard-based requirement appearing in Sec.  3010.202.
    (b) The Postal Service shall file a notice with the Commission by 
December 31 of each year that demonstrates whether or not performance-
based rate authority is eligible to be authorized under this subpart.
    (c) The Commission shall review the Postal Service's notice and any 
challenges filed pursuant to Sec.  3010.202(b) and announce how much, 
if any, rate authority will be authorized under this subpart. Any rate 
authority allocated under this subpart:
    (1) Shall be made available to the Postal Service as of the date of 
the Commission's announcement;
    (2) Must be included in the calculation of the maximum rate 
adjustment authority in the first generally applicable rate adjustment 
filed after the Commission's announcement;
    (3) Shall lapse if unused, 12 months after the Commission's 
announcement; and
    (4) May not be used to generate unused rate authority, nor shall it 
affect existing banked rate authority.


Sec.  3010.201   Operational efficiency-based requirement.

    The operational efficiency-based requirement is met if the Postal 
Service's Total Factor Productivity for the measured fiscal year 
exceeds the previous fiscal year as determined by the Commission.


Sec.  3010.202   Service standard-based requirement.

    (a) The service standard-related criteria is met if all of the 
Postal Service's service standards (including applicable business 
rules) for that class during the applicable fiscal year meet or exceed 
the service standards in place for the prior fiscal year on a 
nationwide or substantially nationwide basis as determined by the 
Commission.
    (b) Any interested person may file a challenge to the notice 
provided by the Postal Service under Sec.  3010.200(b) by March 15 of 
each year. The scope of such a challenge shall be limited to whether or 
not the Postal Service's service standards (including applicable 
business rules) during the applicable fiscal year met or exceeded the 
service standards in place for the prior fiscal year on a nationwide or 
substantially nationwide basis. The Commission shall issue an order 
which rules on any challenge as soon as practicable.

Subpart G--Non-Compensatory Classes or Products


Sec.  3010.220   Applicability.

    This subpart is applicable to a class or product where the 
attributable cost for that class or product exceeded the revenue from 
that class or product as determined by the Commission. Section 3010.221 
is applicable where the attributable cost for a product within a class 
exceeded the revenue from that particular product. Section 3010.222 is 
applicable where the attributable cost for an entire class exceeded the 
revenue from that class.


Sec.  3010.221   Individual product requirement.

    Whenever the Postal Service files a rate adjustment filing 
affecting a class of mail which includes a product where the 
attributable cost for that product exceeded the revenue from that 
product, as determined by the Commission, the Postal Service shall 
increase the rates for each non-compensatory product by a minimum of 2 
percentage points above the percentage increase for that class. This 
section does not create additional rate authority applicable to any 
class of mail.


Sec.  3010.222   Class requirement and additional class rate authority.

    (a) This section provides 2 percentage points of additional rate 
authority for any class of mail where the attributable cost for that 
class exceeded the revenue from that class as determined by the 
Commission. This additional rate authority is optional and may be used 
at the Postal Service's discretion.
    (b) The Commission shall announce how much, if any, rate authority 
will be authorized under this subpart. Any rate authority allocated 
under this subpart:
    (1) Shall be made available to the Postal Service as of the date of 
the Commission's announcement;
    (2) Must be included in the calculation of the maximum rate 
adjustment authority change in rates in the first generally applicable 
rate

[[Page 67696]]

adjustment filed after the Commission's announcement;
    (3) Shall lapse if unused, within 12 months of the Commission's 
announcement; and
    (4) May not be used to generate unused rate authority, nor shall it 
affect existing banked rate authority.

Subpart H--Accumulation of Unused and Disbursement of Banked Rate 
Adjustment Authority


Sec.  3010.240   General.

    Unless a specific exception applies, unused rate adjustment 
authority, on a class-by-class basis, shall be calculated for each rate 
adjustment filing. Unused rate adjustment authority shall be added to 
the schedule of banked rate authority in each instance, and be 
available for application to rate adjustments pursuant to the 
requirements of this subpart.


Sec.  3010.241   Schedule of banked rate adjustment authority.

    Upon the establishment of unused rate adjustment authority, the 
Postal Service shall devise and maintain a schedule that tracks the 
establishment and subsequent use of banked rate authority on a class-
by-class basis. At a minimum, the schedule must track the amount of 
banked rate authority available immediately prior to the rate 
adjustment filing and the amount of banked rate authority available 
upon acceptance of the rates included in the rate adjustment filing. It 
shall also track all changes to the schedule, including the docket 
numbers of Commission decisions affecting the schedule, the dates and 
amounts that any rate authority was generated or subsequently expended, 
and the expiration dates of all rate adjustment authority. The schedule 
shall be included with any rate adjustment filing purporting to modify 
the amount of banked rate adjustment authority.


Sec.  3010.242   Calculation of unused rate adjustment authority for 
rate adjustments that involve a rate increase which are filed 12 months 
apart or less.

    (a) When rate adjustment filings that involve a rate increase are 
filed 12 months apart or less, unused rate adjustment authority for a 
class is equal to the difference between the maximum rate adjustment 
authority as summarized by Sec.  3010.127 and calculated pursuant to 
subparts C through H of this part, as appropriate, and the percentage 
change in rates for the class calculated pursuant to Sec.  3010.128, 
subject to the limitations described in paragraphs (b) and (c) of this 
section.
    (b) Unused rate adjustment authority cannot be generated and is 
assumed to be 0 percent for classes subject to Sec.  3010.222, Class 
requirement and additional class rate authority.
    (c) For rate adjustment filings that involve a rate increase, 
unused rate adjustment authority cannot exceed the unused portion of 
rate authority calculated pursuant to subpart C of this part.


Sec.  3010.243   Calculation of unused rate adjustment authority for 
rate adjustments that involve a rate increase which are filed more than 
12 months apart.

    (a) When rate adjustment filings that involve a rate increase are 
filed more than 12 months apart, any interim rate adjustment authority 
must first be added to the schedule of banked rate authority before the 
unused rate adjustment authority is calculated.
    (b) Interim rate adjustment authority for a class is equal to the 
Base Average applicable to the second rate adjustment filing (as 
developed pursuant to Sec.  3010.142) divided by the Recent Average 
utilized in the first rate adjustment filing (as developed pursuant to 
Sec.  3010.142) and subtracting 1 from the quotient. The result is 
expressed as a percentage and immediately added to the schedule of 
banked rate authority as of the date the rate adjustment filing is 
filed.
    (c) Unused rate adjustment authority for a class is equal to the 
difference between the maximum rate adjustment authority as summarized 
by Sec.  3010.127 and calculated pursuant to subparts C through H of 
this part, as appropriate, and the percentage change in rates for the 
class calculated pursuant to Sec.  3010.128, subject to the limitations 
described in paragraphs (d) and (e) of this section.
    (d) Unused rate adjustment authority cannot be generated and is 
assumed to be 0 percent for classes subject to Sec.  3010.222, Class 
requirement and additional class rate authority.
    (e) For rate adjustment filings that involve a rate increase, 
unused rate adjustment authority cannot exceed the unused portion of 
rate authority calculated pursuant to subpart C of this part.


Sec.  3010.244   Calculation of unused rate adjustment authority for 
rate adjustments that only include rate decreases.

    (a) For rate adjustment filings that only include rate decreases, 
unused rate adjustment authority for a class is calculated in two 
steps. First, the difference between the maximum rate adjustment 
authority as summarized by Sec.  3010.127 and calculated pursuant to 
subparts C through H of this part, as appropriate, for the most recent 
rate adjustment that involves a rate increase and the percentage change 
in rates for the class calculated pursuant to Sec.  3010.128(d) is 
calculated. Second, the unused rate adjustment authority generated in 
the most recent rate adjustment that involves a rate increase is 
subtracted from that result.
    (b) Unused rate adjustment authority generated under paragraph (a) 
of this section for a class shall be added to the unused rate 
adjustment authority generated in the most recent rate adjustment that 
involves a rate increase on the schedule maintained under Sec.  
3010.241. For purposes of Sec.  3010.244, the unused rate adjustment 
authority generated under paragraph (a) of this section for a class 
shall be deemed to have been added to the schedule maintained under 
Sec.  3010.241 on the same date as the most recent rate adjustment 
filing that involves a rate increase.
    (c) For rate adjustment filings that only include rate decreases, 
the sum of unused rate adjustment authority generated under paragraph 
(a) of this section and the unused rate adjustment authority generated 
in the most recent rate adjustment that involves a rate increase cannot 
exceed the unused portion of rate adjustment authority calculated 
pursuant to subpart C of this part in the most recent rate adjustment 
that involves a rate increase.
    (d) Unused rate adjustment authority generated under paragraph (a) 
of this section shall be subject to the limitation under Sec.  
3010.245, regardless of whether it is used alone or in combination with 
other existing unused rate adjustment authority.
    (e) For rate adjustment filings that only include rate decreases, 
unused rate adjustment authority generated under this section lapses 5 
years from the date of filing of the most recent rate adjustment filing 
that involves a rate increase.
    (f) A rate adjustment filing that only includes rate decreases that 
is filed immediately after a rate adjustment due to extraordinary or 
exceptional circumstances (i.e., without an intervening rate adjustment 
involving a rate increase) may not generate unused rate adjustment 
authority.


Sec.  3010.245   Application of banked rate authority.

    (a) Banked rate authority may be applied to any planned rate 
adjustment subject to the limitations appearing in paragraphs (b) 
through (f) of this section.
    (b) Banked rate authority may only be applied to a proposal to 
adjust rates

[[Page 67697]]

after applying rate authority as described in subparts C through F of 
this part and in Sec.  3010.222, Class requirement and additional class 
rate authority.
    (c) A maximum of 2 percentage points of banked rate authority may 
be applied to a rate adjustment for any class in any 12-month period. 
If banked rate authority is used, it shall be subtracted from the 
schedule of banked rate adjustment authority as of the date of the 
final order accepting the rates.
    (d) Subject to paragraphs (b) and (c) of this section, interim rate 
adjustment authority may be used to make a rate adjustment pursuant to 
the rate adjustment filing that led to its calculation. If interim rate 
adjustment authority is used to make such a rate adjustment, the 
interim rate adjustment authority generated pursuant to the rate 
adjustment filing shall first be added to the schedule of banked rate 
adjustment authority pursuant to Sec.  3010.241 as the most recent 
entry. Then, any interim rate adjustment authority used in accordance 
with this paragraph shall be subtracted from the existing banked rate 
adjustment authority using a first-in, first-out (FIFO) method, 
beginning 5 years before the instant rate adjustment filing.
    (e) Banked rate authority for a class must be applied, using a 
first-in, first-out (FIFO) method, beginning 5 years before the instant 
rate adjustment filing.
    (f) Banked rate adjustment authority calculated under this section 
shall lapse 5 years from the date of the rate adjustment filing leading 
to its calculation.

Subpart I--Rate Adjustments Due to Extraordinary and Exceptional 
Circumstances


Sec.  3010.260   General.

    The Postal Service may request to adjust rates for market dominant 
products due to extraordinary or exceptional circumstances pursuant to 
39 U.S.C. 3622(d)(1)(E). The rate adjustments are not subject to rate 
adjustment limitations or the restrictions on the use of unused rate 
adjustment authority. The rate adjustment request may not include 
material classification changes. The request is subject to public 
participation and Commission review within 90 days.


Sec.  3010.261   Contents of a request.

    (a) Each exigent request shall include the items specified in 
paragraphs (b) through (i) of this section.
    (b) A schedule of the planned rates.
    (c) Calculations quantifying the increase for each affected product 
and class.
    (d) A full discussion of the extraordinary or exceptional 
circumstances giving rise to the request, and a complete explanation of 
how both the requested overall increase and the specific rate 
adjustments requested relate to those circumstances.
    (e) A full discussion of why the requested rate adjustments are 
necessary to enable the Postal Service, under best practices of honest, 
efficient, and economical management, to maintain and continue the 
development of postal services of the kind and quality adapted to the 
needs of the United States.
    (f) A full discussion of why the requested rate adjustments are 
reasonable and equitable as among types of users of market dominant 
products.
    (g) An explanation of when, or under what circumstances, the Postal 
Service expects to be able to rescind the exigent rate adjustments in 
whole or in part.
    (h) An analysis of the circumstances giving rise to the exigent 
request, which should, if applicable, include a discussion of whether 
the circumstances were foreseeable or could have been avoided by 
reasonable prior action.
    (i) Such other information as the Postal Service believes will 
assist the Commission in issuing a timely determination of whether the 
requested rate adjustments are consistent with applicable statutory 
policies.


Sec.  3010.262   Supplemental information.

    The Commission may require the Postal Service to provide 
clarification of its request or to provide additional information in 
order to gain a better understanding of the circumstances leading to 
the request or the justification for the specific rate adjustments 
requested. The Postal Service shall include within its request the 
identification of one or more knowledgeable Postal Service official(s) 
who will be available to provide prompt responses to Commission 
requests for clarification or additional information.


Sec.  3010.263   Docket and notice.

    (a) The Commission will establish a docket for each request to 
adjust rates due to extraordinary or exceptional circumstances, publish 
notice of the request in the Federal Register, and post the filing on 
its website. The notice shall include the items specified in paragraphs 
(b) through (g) of this section.
    (b) The general nature of the proceeding.
    (c) A reference to legal authority under which the proceeding is to 
be conducted.
    (d) A concise description of the proposals for changes in rates, 
fees, and the Mail Classification Schedule.
    (e) The identification of an officer of the Commission to represent 
the interests of the general public in the docket.
    (f) A specified period for public comment.
    (g) Such other information as the Commission deems appropriate.


Sec.  3010.264   Public hearing.

    (a) The Commission will hold a public hearing on the Postal 
Service's request. During the public hearing, responsible Postal 
Service officials will appear and respond under oath to questions from 
the Commissioners or their designees addressing previously identified 
aspects of the Postal Service's request and supporting information.
    (b) Interested persons will be given an opportunity to submit to 
the Commission suggested relevant questions that might be posed during 
the public hearing. Such questions, and any explanatory materials 
submitted to clarify the purpose of the questions, should be filed in 
accordance with Sec.  3001.9 of this chapter, and will become part of 
the administrative record of the proceeding.
    (c) The timing and length of the public hearing will depend on the 
nature of the circumstances giving rise to the request and the clarity 
and completeness of the supporting materials provided with the request.
    (d) If the Postal Service is unable to provide adequate 
explanations during the public hearing, supplementary written or oral 
responses may be required.


Sec.  3010.265   Opportunity for comments.

    (a) Following the conclusion of the public hearings and submission 
of any supplementary materials, interested persons will be given the 
opportunity to submit written comments on:
    (1) The sufficiency of the justification for an exigent rate 
adjustment;
    (2) The adequacy of the justification for adjustments in the 
amounts requested by the Postal Service; and
    (3) Whether the specific rate adjustments requested are reasonable 
and equitable.
    (b) An opportunity to submit written reply comments will be given 
to the Postal Service and other interested persons.


Sec.  3010.266   Deadline for Commission decision.

    Requests under this subpart seek rate relief required by 
extraordinary or exceptional circumstances and will be

[[Page 67698]]

treated with expedition at every stage. It is Commission policy to 
provide appropriate relief as quickly as possible consistent with 
statutory requirements and procedural fairness. The Commission will act 
expeditiously on the Postal Service's request, taking into account all 
written comments. In every instance, a Commission decision will be 
issued within 90 days of the filing of an exigent request.


Sec.  3010.267   Treatment of banked rate adjustment authority.

    (a) Each request will identify the banked rate adjustment authority 
available as of the date of the request for each class of mail and the 
available amount for each of the preceding 5 years.
    (b) Rate adjustments may use existing banked rate adjustment 
authority in amounts greater than the limitations described in Sec.  
3010.245.
    (c) Increases will exhaust all banked rate adjustment authority for 
each class of mail before imposing additional rate adjustments in 
excess of the maximum rate adjustment for any class of mail.

Subpart J--Workshare Discounts


Sec.  3010.280   Applicability.

    This subpart is applicable whenever the Postal Service proposes to 
adjust a rate associated with a workshare discount. For the purpose of 
this subpart, the cost avoided by the Postal Service for not providing 
the applicable service refers to the amount identified in the most 
recently applicable Annual Compliance Determination, unless the 
Commission otherwise provides.


Sec.  3010.281   Calculation of passthroughs for workshare discounts.

    For the purpose of this subpart, the percentage passthrough for any 
workshare discount shall be calculated by dividing the workshare 
discount by the cost avoided by the Postal Service for not providing 
the applicable service and expressing the result as a percentage.


Sec.  3010.282   Increased pricing efficiency.

    (a) For a workshare discount that is equal to the cost avoided by 
the Postal Service for not providing the applicable service, no 
proposal to adjust a rate associated with that workshare discount may 
change the size of the discount.
    (b) For a workshare discount that exceeds the cost avoided by the 
Postal Service for not providing the applicable service, no proposal to 
adjust a rate associated with that workshare discount may increase the 
size of the discount.
    (c) For a workshare discount that is less than the cost avoided by 
the Postal Service for not providing the applicable service, no 
proposal to adjust a rate associated with that workshare discount may 
decrease the size of the discount.


Sec.  3010.283   Limitations on excessive discounts.

    (a) No proposal to adjust a rate may set a workshare discount that 
would exceed the cost avoided by the Postal Service for not providing 
the applicable service, unless at least one of the following reasons 
provided in paragraphs (b) through (e) of this section applies.
    (b) The proposed workshare discount is associated with a new postal 
service, a change to an existing postal service, or a new workshare 
initiative.
    (c) The proposed workshare discount is a minimum of 20 percent less 
than the existing workshare discount.
    (d) The proposed workshare discount is set in accordance with a 
Commission order issued pursuant to Sec.  3010.286.
    (e) The proposed workshare discount is provided in connection with 
a subclass of mail, consisting exclusively of mail matter of 
educational, cultural, scientific, or informational value (39 U.S.C. 
3622(e)(2)(C)) and is in compliance with Sec.  3010.285(c).


Sec.  3010.284   Limitations on discounts below avoided cost.

    (a) No proposal to adjust a rate may set a workshare discount that 
would be below the cost avoided by the Postal Service for not providing 
the applicable service, unless at least one of the following reasons 
provided in paragraphs (b) through (e) of this section applies.
    (b) The proposed workshare discount is associated with a new postal 
service, a change to an existing postal service, or a new workshare 
initiative.
    (c) The proposed workshare discount is a minimum of 20 percent more 
than the existing workshare discount.
    (d) The proposed workshare discount is set in accordance with a 
Commission order issued pursuant to Sec.  3010.286.
    (e) The percentage passthrough for the proposed workshare discount 
is at least 85 percent.


Sec.  3010.285   Proposal to adjust a rate associated with a workshare 
discount.

    (a) Each proposal to adjust a rate associated with a workshare 
discount shall be supported by substantial evidence and demonstrate 
that each proposed workshare discount has been set in compliance with 
39 U.S.C. 3622(e) and this subpart. Substantial evidence means such 
relevant evidence as a reasonable mind might accept as adequate to 
support a conclusion.
    (b) For each proposed workshare discount that would exceed the cost 
avoided by the Postal Service for not providing the applicable service, 
the rate adjustment filing shall indicate the applicable paragraph of 
Sec.  3010.283 under which the Postal Service is justifying the 
excessive discount and include any relevant analysis supporting the 
claim.
    (c) For each proposed workshare discount that is provided in 
connection with a subclass of mail, consisting exclusively of mail 
matter of educational, cultural, scientific, or informational value (39 
U.S.C. 3622(e)(2)(C)), would exceed the cost avoided by the Postal 
Service for not providing the applicable service, and would not be set 
in accordance with at least one specific provision appearing in Sec.  
3010.283(b) through (d), the rate adjustment filing shall provide the 
information specified in paragraphs (c)(1) through (3) of this section:
    (1) The number of mail owners receiving the workshare discount 
during the most recent full fiscal year and for the current fiscal year 
to date;
    (2) The number of mail owners for the applicable product or 
products in the most recent full fiscal year and for the current fiscal 
year to date; and
    (3) An explanation of how the proposed workshare discount would 
promote the public interest, even though the proposed workshare 
discount would substantially exceed the cost avoided by the Postal 
Service.
    (d) For each proposed workshare discount that would be below the 
cost avoided by the Postal Service for not providing the applicable 
service, the rate adjustment filing shall indicate the applicable 
paragraph of Sec.  3010.284 under which the Postal Service is 
justifying the discount that is below the cost avoided and include any 
relevant analysis supporting the claim.


Sec.  3010.286   Application for waiver.

    (a) In every instance in which the Postal Service determines to 
adjust a rate associated with a workshare discount in a manner that 
does not comply with the limitations imposed by Sec. Sec.  3010.283 
through 3010.284, the Postal Service shall file an application for 
waiver. The Postal Service must file any application for waiver at 
least 60 days prior to filing the proposal to adjust a rate associated 
with the applicable workshare discount. In its application for waiver, 
the Postal Service shall indicate the approximate filing date for its 
next rate adjustment filing.
    (b) The application for waiver shall be supported by a 
preponderance of the

[[Page 67699]]

evidence and demonstrate that a waiver from the limitations imposed by 
Sec. Sec.  3010.283 through 3010.284 should be granted. Preponderance 
of the evidence means proof by information that, compared with that 
opposing it, leads to the conclusion that the fact at issue is more 
probably true than not.
    (c) The application for waiver shall include a specific and 
detailed statement signed by one or more knowledgeable Postal Service 
official(s) who sponsors the application and attests to the accuracy of 
the information contained within the statement. The statement shall set 
forth the information specified in paragraphs (c)(1) through (8) of 
this section, as applicable to the specific workshare discount for 
which a waiver is sought:
    (1) The reason(s) why a waiver is alleged to be necessary (with 
justification thereof), including all relevant supporting analysis and 
all assumptions relied upon.
    (2) The length of time for which a waiver is alleged to be 
necessary (with justification thereof).
    (3) For each subsequent rate adjustment filing planned to occur 
during the length of time for which a waiver is sought, a 
representation of the proposed minimum amount of the change to the 
workshare discount.
    (4) For a claim that the amount of the workshare discount exceeding 
the cost avoided by the Postal Service for not providing the applicable 
service is necessary in order to mitigate rate shock (39 U.S.C. 
3622(e)(2)(B)), the Postal Service shall provide an explanation 
addressing all of the items specified in paragraphs (c)(4)(i) through 
(iii) of this section:
    (i) A description of the customers that the Postal Service claims 
would be adversely affected.
    (ii) Prices and volumes for the workshare discount at issue (the 
benchmark and workshared mail category) for the last 10 years.
    (iii) Quantitative analysis or, if not available, qualitative 
analysis indicating the nature and extent of the likely harm to the 
customers that would result from setting the workshare discount in 
compliance with Sec.  3010.283(c).
    (5) For a claim that setting an excessive or low workshare discount 
closer or equal to the cost avoided by the Postal Service for not 
providing the applicable service would impede the efficient operation 
of the Postal Service, the Postal Service shall provide an explanation 
addressing all of the items specified in paragraphs (c)(5)(i) through 
(iii) of this section:
    (i) A description of the operational strategy at issue.
    (ii) Quantitative analysis or, if not available, qualitative 
analysis indicating how the workshare discount at issue is related to 
that operational strategy.
    (iii) How setting the workshare discount in compliance with Sec.  
3010.283(c) or Sec.  3010.284(c), whichever is applicable, would impede 
that operational strategy.
    (6) For a claim that reducing or eliminating the excessive 
workshare discount would lead to a loss of volume in the affected 
category of mail and reduce the aggregate contribution to the Postal 
Service's institutional costs from the mail that is subject to the 
discount (39 U.S.C. 3622(e)(3)(A)), the Postal Service shall provide an 
explanation addressing all of the items specified in paragraphs 
(c)(6)(i) through (iii) of this section:
    (i) A description of the affected category of mail.
    (ii) Quantitative analysis or, if not available, qualitative 
analysis indicating the expected loss of volume and reduced 
contribution that is claimed would result from reducing or eliminating 
the excessive workshare discount.
    (iii) How setting the excessive workshare discount in compliance 
with Sec.  3010.283(c) would lead to the expected loss of volume and 
reduced contribution.
    (7) For a claim that reducing or eliminating the excessive 
workshare discount would result in a further increase in the rates paid 
by mailers not able to take advantage of the workshare discount (39 
U.S.C. 3622(e)(3)(B)), the Postal Service shall provide an explanation 
addressing all of the items specified in paragraphs (c)(7)(i) through 
(iii) of this section:
    (i) A description of the mailers not able to take advantage of the 
discount.
    (ii) Quantitative analysis or, if not available, qualitative 
analysis indicating the expected size of the rate increase that is 
claimed would result in the rates paid by mailers not able to take 
advantage of the discount.
    (iii) How setting the excessive workshare discount in compliance 
with Sec.  3010.283(c) would result in a further increase in the rates 
paid by mailers not able to take advantage of the discount.
    (8) Any other relevant factors or reasons to support the 
application for waiver.
    (d) Unless the Commission otherwise provides, commenters will be 
given at least 7 calendar days to respond to the application for waiver 
after it has been filed by the Postal Service.
    (e) To better evaluate the waiver application, the Commission may, 
on its own behalf or by request of any interested person, order the 
Postal Service to provide experts on the subject matter of the waiver 
application to participate in technical conferences, prepare statements 
clarifying or supplementing their views, or answer questions posed by 
the Commission or its representatives.
    (f) For a proposed workshare discount that would exceed the cost 
avoided by the Postal Service for not providing the applicable service, 
the application for waiver shall be granted only if at least one 
provision appearing in 39 U.S.C. 3622(e)(2)(A) through (e)(2)(D) or 39 
U.S.C. 3622(e)(3)(A) through (e)(3)(B) is determined to apply.
    (g) For a proposed workshare discount that would be set below the 
cost avoided by the Postal Service for not providing the applicable 
service, the application for waiver shall be granted only if setting 
the workshare discount closer or equal to the cost avoided by the 
Postal Service for not providing the applicable service would impede 
the efficient operation of the Postal Service.
    (h) The Commission will issue an order announcing, at a minimum, 
whether the requested waiver will be granted or denied no later than 21 
days following the close of any comment period(s). An order granting 
the application for waiver shall specify all conditions upon which the 
waiver is granted, including the date upon which the waiver shall 
expire.

PART 3020--PRODUCT LISTS

0
2. The authority citation for part 3020 continues to read as follows:

    Authority:  39 U.S.C. 503; 3622; 3631; 3642; 3682.

0
3. Amend Sec.  3020.32 by revising paragraphs (a) and (b) to read as 
follows:


Sec.  3020.32   Supporting justification.

* * * * *
    (a) Explain the reason for initiating the docket and explain why 
the change is not inconsistent with the applicable requirements of this 
part and any applicable Commission directives and orders;
    (b) Explain why, as to market dominant products, the change is not 
inconsistent with the policies and the applicable criteria of chapter 
36 of title 39 of the United States Code;
* * * * *
0
4. Amend Sec.  3020.52 by revising paragraphs (a) and (b) to read as 
follows:


Sec.  3020.52   Supporting justification.

* * * * *
    (a) Explain the reason for initiating the docket and explain why 
the change is not inconsistent with the applicable

[[Page 67700]]

requirements of this part and any applicable Commission directives and 
orders;
    (b) Explain why, as to market dominant products, the change is not 
inconsistent with the policies and the applicable criteria of chapter 
36 of title 39 of the United States Code;
* * * * *
0
5. Amend Sec.  3020.72 by revising paragraphs (a) and (b) to read as 
follows:


Sec.  3020.72   Supporting justification.

* * * * *
    (a) Explain the reason for initiating the docket and explain why 
the change is not inconsistent with the applicable requirements of this 
part and any applicable Commission directives and orders;
    (b) Explain why, as to market dominant products, the change is not 
inconsistent with the policies and the applicable criteria of chapter 
36 of title 39 of the United States Code;
* * * * *
0
6. Amend Sec.  3020.81 by revising paragraph (b)(1) to read as follows:


Sec.  3020.81   Supporting justification for material changes to 
product descriptions.

* * * * *
    (b)(1) As to market dominant products, explain why the changes are 
not inconsistent with the policies and the applicable criteria of 
chapter 36 of title 39 of the United States Code, the applicable 
requirements of this part, and any applicable Commission directives and 
orders; or
* * * * *
0
7. Amend Sec.  3020.82 by revising paragraph (e) to read as follows:


Sec.  3020.82   Docket and notice of material changes to product 
descriptions.

* * * * *
    (e) Provide interested persons with an opportunity to comment on 
whether the proposed changes are consistent with the policies and the 
applicable criteria of chapter 36 of title 39 of the United States 
Code, the applicable requirements of this part, and any applicable 
Commission directives and orders.
0
8. Amend Sec.  3020.90 by revising paragraph (c)(2) to read as follows:


Sec.  3020.90   Minor corrections to product descriptions.

* * * * *
    (c) * * *
    (2) Explain why the proposed corrections are consistent with the 
policies and the applicable criteria of chapter 36 of title 39 of the 
United States Code, the applicable requirements of this part, and any 
applicable Commission directives and orders; and
* * * * *
0
9. Amend Sec.  3020.91 by revising paragraph (e) to read as follows:


Sec.  3020.91   Docket and notice of minor corrections to product 
descriptions.

* * * * *
    (e) Provide interested persons with an opportunity to comment on 
whether the proposed corrections are consistent with the policies and 
the applicable criteria of chapter 36 of title 39 of the United States 
Code, the applicable requirements of this part, and any applicable 
Commission directives and orders.
0
10. Add subpart G to read as follows:
Subpart G--Requests for Market Dominant Negotiated Service Agreements
Sec.
3020.120 General.
3020.121 Additional supporting justification for negotiated service 
agreements.
3020.122 Data collection plan and report for negotiated service 
agreements.


Sec.  3020.120   General.

    This subpart imposes additional requirements whenever there is a 
request to add a negotiated service agreement to the market dominant 
product list. The additional supporting justification appearing in 
Sec.  3020.121 also should be provided whenever the Postal Service 
proposes to modify the terms of an existing market dominant negotiated 
service agreement. Commission findings that the addition of a special 
classification is not inconsistent with 39 U.S.C. 3622 are provisional 
and subject to subsequent review. No rate(s) shall take effect until 45 
days after the Postal Service files a request for review of a notice of 
a new rate or rate(s) adjustment specifying the rate(s) and the 
effective date.


Sec.  3020.121   Additional supporting justification for negotiated 
service agreements.

    (a) Each request shall also include the items specified in 
paragraphs (b) through (j) of this section.
    (b) A copy of the negotiated service agreement.
    (c) The planned effective date(s) of the planned rates.
    (d) The identity of a responsible Postal Service official who will 
be available to provide prompt responses to requests for clarification 
from the Commission.
    (e) A statement identifying all parties to the agreement and a 
description clearly explaining the operative components of the 
agreement.
    (f) Details regarding the expected improvements in the net 
financial position or operations of the Postal Service (39 U.S.C. 
3622(c)(10)(A)(i) and (ii)). The projection of the change in net 
financial position as a result of the agreement shall be based on 
accepted analytical principles. The projection of the change in net 
financial position as a result of the agreement shall include for each 
year of the agreement:
    (1) The estimated mailer-specific costs, volumes, and revenues of 
the Postal Service absent the implementation of the negotiated service 
agreement;
    (2) The estimated mailer-specific costs, volumes, and revenues of 
the Postal Service which result from implementation of the negotiated 
service agreement;
    (3) An analysis of the effects of the negotiated service agreement 
on the contribution to institutional costs from mailers not party to 
the agreement;
    (4) If mailer-specific costs are not available, the source and 
derivation of the costs that are used shall be provided, together with 
a discussion of the currency and reliability of those costs and their 
suitability as a proxy for the mailer-specific costs; and
    (5) If the Postal Service believes the Commission's accepted 
analytical principles are not the most accurate and reliable 
methodology available:
    (i) An explanation of the basis for that belief; and
    (ii) A projection of the change in net financial position resulting 
from the agreement made using the Postal Service's alternative 
methodology.
    (g) An identification of each component of the agreement expected 
to enhance the performance of mail preparation, processing, 
transportation, or other functions in each year of the agreement, and a 
discussion of the nature and expected impact of each such enhancement.
    (h) Details regarding any and all actions (performed or to be 
performed) to assure that the agreement will not result in unreasonable 
harm to the marketplace (39 U.S.C. 3622(c)(10)(B)).
    (i) A discussion in regard to how functionally similar negotiated 
service agreements will be made available on public and reasonable 
terms to similarly situated mailers.
    (j) Such other information as the Postal Service believes will 
assist the Commission in issuing a timely determination of whether the 
requested changes are consistent with applicable statutory policies.

[[Page 67701]]

Sec.  3020.122   Data collection plan and report for negotiated service 
agreements.

    (a) The Postal Service shall include with any request concerning a 
negotiated service agreement a detailed plan for providing data or 
information on actual experience under the agreement sufficient to 
allow evaluation of whether the negotiated service agreement operates 
in compliance with 39 U.S.C. 3622(c)(10).
    (b) A data report under the plan is due 60 days after each 
anniversary date of implementation and shall include, at a minimum, the 
following information for each 12-month period the agreement has been 
in effect:
    (1) The change in net financial position of the Postal Service as a 
result of the agreement. This calculation shall include for each year 
of the agreement:
    (i) The actual mailer-specific costs, volumes, and revenues of the 
Postal Service;
    (ii) An analysis of the effects of the negotiated service agreement 
on the net overall contribution to the institutional costs of the 
Postal Service; and
    (iii) If mailer-specific costs are not available, the source and 
derivation of the costs that are used shall be provided, including a 
discussion of the currency and reliability of those costs and their 
suitability as a proxy for the mailer-specific costs.
    (2) A discussion of the changes in operations of the Postal Service 
that have resulted from the agreement. This shall include, for each 
year of the agreement, identification of each component of the 
agreement known to enhance the performance of mail preparation, 
processing, transportation, or other functions in each year of the 
agreement.
    (3) An analysis of the impact of the negotiated service agreement 
on the marketplace, including a discussion of any and all actions taken 
to protect the marketplace from unreasonable harm.

PART 3050--PERIODIC REPORTING

0
11. The authority citation for part 3050 continues to read as follows:

    Authority:  39 U.S.C. 503; 3651; 3652; 3653.

0
12. Amend Sec.  3050.20 by revising paragraph (c) to read as follows:


Sec.  3050.20   Compliance and other analyses in the Postal Service's 
section 3652 report.

* * * * *
    (c) It shall address such matters as non-compensatory rates and 
failures to achieve stated goals for on-time delivery standards. A more 
detailed analysis is required when the Commission observed and 
commented upon the same matter in its Annual Compliance Determination 
for the previous fiscal year.
0
13. Amend Sec.  3050.21 by:
0
a. Revising paragraphs (a), (e), and (m); and
0
b. Adding paragraphs (n) and (o).
    The revisions and additions read as follows:


Sec.  3050.21   Content of the Postal Service's section 3652 report.

    (a) No later than 90 days after the close of each fiscal year, the 
Postal Service shall submit a report to the Commission analyzing its 
cost, volume, revenue, rate, and service information in sufficient 
detail to demonstrate that all products during such year comply with 
all applicable provisions of title 39 of the United States Code. The 
report shall provide the items in paragraphs (b) through (o) of this 
section.
* * * * *
    (e) For each market dominant workshare discount offered during the 
reporting year:
    (1) The per-item cost avoided by the Postal Service by virtue of 
such discount;
    (2) The percentage of such per-item cost avoided that the per-item 
workshare discount represents;
    (3) The per-item contribution made to institutional costs;
    (4) The factual and analytical bases for any claim that one or more 
of the exception provisions of 39 U.S.C. 3622(e)(2)(A) through 
(e)(2)(D) or 39 U.S.C. 3622(e)(3)(A) through (e)(3)(B) apply; and
    (5) For each workshare discount that is provided in connection with 
a subclass of mail, consisting exclusively of mail matter of 
educational, cultural, scientific, or informational value (39 U.S.C. 
3622(e)(2)(C)), exceeded the cost avoided by the Postal Service for not 
providing the applicable service, and was not set in accordance with at 
least one specific provision appearing in Sec.  3010.262(b) through (d) 
of this chapter, the information specified in paragraphs (5)(i) through 
(iii) of this section:
    (i) The number of mail owners receiving the workshare discount;
    (ii) The number of mail owners for the applicable product or 
products; and
    (iii) An explanation of how the workshare discount promotes the 
public interest, even though the workshare discount substantially 
exceeds the cost avoided by the Postal Service.
* * * * *
    (l) For the Inbound Letter Post product, provide revenue, volume, 
attributable cost, and contribution data by Universal Postal Union 
country group and by shape for the fiscal year subject to review and 
each of the preceding 4 fiscal years;
    (m) Input data and calculations used to produce the annual Total 
Factor Productivity estimates;
    (n) Copies of notifications to the Postal Service by the Office of 
Personnel Management (OPM) of annual determinations of the funding 
amounts specific to payments at the end of each fiscal year computed 
under 5 U.S.C. 8909a(d)(2)(B) and 5 U.S.C. 8909a(d)(3)(B)(ii); 5 U.S.C. 
8348(h)(2)(B) and 5 U.S.C. 8423(b)(3)(B); 5 U.S.C. 8423(b)(1)(B) and 5 
U.S.C. 8423(b)(2); and
    (o) Provide any other information that the Postal Service believes 
will help the Commission evaluate the Postal Service's compliance with 
the applicable provisions of title 39 of the United States Code.
0
14. Add Sec.  3050.55 to read as follows:


Sec.  3050.55   Information pertaining to cost reduction initiatives.

    (a) The reports in paragraphs (b) through (f) of this section shall 
be filed with the Commission at the times indicated.
    (b) Within 95 days after the end of each fiscal year, the Postal 
Service shall file a financial report that analyzes cost data from the 
fiscal year. For purposes of this paragraph, the percentage change 
shall compare the fiscal year under review to the previous fiscal year. 
At a minimum, the report shall include:
    (1) For all market dominant mail, the percentage change in total 
unit attributable cost;
    (2) For each market dominant mail product, the percentage change in 
unit attributable cost;
    (3) For the system as a whole, total average cost per piece, which 
includes all Postal Service competitive and market dominant 
attributable costs and institutional costs,
    (4) The percentage change in total average cost per piece;
    (5) Market dominant unit attributable cost by product;
    (6) If the percentage change in unit attributable cost for a market 
dominant mail product is more than 0.0 percent and exceeds the 
percentage change in total market dominant mail unit attributable cost, 
then the following information shall be provided:
    (i) Unit attributable cost workpapers for the product disaggregated 
into the following cost categories: Mail processing unit cost, delivery 
unit cost, vehicle service driver unit cost, purchased transportation 
unit cost, window service unit cost, and other unit cost;

[[Page 67702]]

    (ii) A narrative that identifies cost categories that are driving 
above average increases in unit attributable cost for the product and 
explains the reason for the above-average increase; and
    (iii) A specific plan to reduce unit attributable cost for the 
product.
    (7) An analysis of volume trends and mail mix changes for each 
market dominant mail product from fiscal year 2017 through the end of 
the fiscal year under review, which shall include at a minimum:
    (i) A comparison of actual unit attributable costs and estimated 
unit attributable costs for each market dominant mail product, using 
the volume distribution from fiscal year 2017;
    (ii) A narrative that identifies the drivers of change in volume 
trends and the mail mix; and
    (iii) A narrative that explains the methodology used to calculate 
the estimated unit attributable costs as required by paragraph 
(b)(7)(i) of this section.
    (c) Within 95 days after the end of each fiscal year, the Postal 
Service shall file a report with analysis of each planned cost 
reduction initiative that is expected to require Postal Service total 
expenditures of $5 million or more over the duration of the initiative. 
At a minimum, the report shall include:
    (1) A narrative that describes each cost reduction initiative 
planned for future fiscal years, including the status, the expected 
total expenditure, start date, end date, and any intermediate 
deadlines;
    (2) Identification of a metric to measure the impact of each 
planned cost reduction initiative identified in paragraph (c)(1) of 
this section, a narrative describing the selected metric, a narrative 
explaining the reason for selecting that metric, and a schedule 
approximating the months and fiscal years in which the cost reduction 
impact is expected to be measureable;
    (3) Estimates of the expected impact of each planned cost reduction 
initiative, with supporting workpapers, using the metric identified in 
paragraph (c)(2) of this section, total market dominant mail 
attributable unit cost, and total unit cost as calculated pursuant to 
paragraph (b)(3) of this section.
    (d) Within 95 days after the end of each fiscal year, the Postal 
Service shall file a report that describes each active cost reduction 
initiative during the fiscal year which incurred or is expected to 
incur Postal Service expenditures of $5 million or more over the 
duration of the initiative. At a minimum, the report shall include:
    (1) The information described in paragraphs (c)(1) through (c)(3) 
of this section, based on actual data for the fiscal year, and a 
specific statement as to whether the initiative actually achieved the 
expected impact as measured by the selected metric;
    (2) An explanation of the trends, changes, or other reasons that 
caused any variance between the actual information provided under 
paragraph (d)(1) of this section and the estimated information 
previously provided under paragraphs (c)(1) through (c)(3) of this 
section, if applicable;
    (3) A description of any mid-implementation adjustments the Postal 
Service has taken or will take to align the impacts with the schedule; 
and
    (4) Any revisions to the schedule of cost reduction impacts for 
future fiscal years.
    (e) Within 95 days after the end of each fiscal year, the Postal 
Service shall file a report that summarizes all projects associated 
with a Decision Analysis Report for the fiscal year. At a minimum, the 
report shall include:
    (1) A description of each project;
    (2) The status of each project;
    (3) An estimate of cost savings or additional revenues from each 
project; and
    (4) The return on investment expected from each project.
    (f) Within 95 days after the end of each fiscal year, the Postal 
Service shall file a report that summarizes all planned projects that 
will require a Decision Analysis Report in the next fiscal year. At a 
minimum, the report shall include:
    (1) A description of each planned project;
    (2) The status of each project;
    (3) An estimate of the cost savings or additional revenues expected 
from each project; and
    (4) The return on investment expected from each project.
0
15. Amend Sec.  3050.60 by:
0
a. Revising paragraph (a);
0
b. Removing paragraph (e);
0
c. Redesignating paragraphs (f) and (g) as paragraphs (e); and (f).
    The revision reads as follows:


Sec.  3050.60   Miscellaneous reports and documents.

    (a) The reports in paragraphs (b) through (f) of this section shall 
be provided at the times indicated.
* * * * *

PART 3055--SERVICE PERFORMANCE AND CUSTOMER SATISFACTION REPORTING

0
16. The authority citation for part 3055 continues to read as follows:

    Authority:  39 U.S.C. 503; 3622(a); 3652(d) and (e); 3657(c).

0
17. Amend Sec.  3055.2 by revising paragraph (c) to read as follows:


Sec.  3055.2   Contents of the annual report of service performance 
achievements.

* * * * *
    (c) The applicable service standard(s) for each product. If there 
has been a change to a service standard(s) since the previous report, a 
description of and reason for the change shall be provided. If there 
have been no changes to service standard(s) since the previous report, 
a certification stating this fact shall be provided.
* * * * *

    By the Commission.
Darcie S. Tokioka,
Acting Secretary.
[FR Doc. 2019-26573 Filed 12-10-19; 8:45 am]
 BILLING CODE 7710-FW-P