AGENCY:

Postal Regulatory Commission.

ACTION:

Notice of proposed rulemaking.

SUMMARY:

The Commission is acknowledging a recent filing requesting the Commission initiate a rulemaking proceeding to consider changes to analytical principles relating to periodic reports (Proposal Six). This document informs the public of the filing, invites public comment, and takes other administrative steps.

DATES:

Comments are due: November 24, 2020.

ADDRESSES:

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. Introduction

II. Proposal Six

III. Notice and Comment

IV. Ordering Paragraphs

I. Introduction

On September 15, 2020, the Postal Service filed a petition pursuant to 39 CFR 3050.11, requesting that the Commission initiate a rulemaking proceeding to consider changes to analytical principles relating to periodic reports.^[1] The Petition identifies the proposed analytical changes filed in this docket as Proposal Six.

II. Proposal Six

Background. Proposal Six introduces a new methodology for estimating volume variabilities for certain mail processing cost pools: Delivery Barcode Sorter (DBCS), Automated Flats Sorting Machine (AFSM) 100, and Flats Sequencing System (FSS). Petition, Proposal Six at 1. The cost pools at issue involve labor expenses associated with the distribution of letters (DBCS) and flats (AFSM 100 and FSS). Id. at 2. The Postal Service states that accrued labor costs in these three cost pools totaled $2.3 billion in FY 2019. Id. at 1.

The main factor determining labor requirements for sorting operations is the number of pieces inducted into the operation for processing, total pieces fed (TPF) in the Management Operating Data System (MODS). Id. at 2; Variability Report at 7. In automated distribution operations, the actual number of handlings are directly counted by the sorting equipment and automatically transmitted from the equipment to the Web End-of-Run (WebEOR) system. Petition, Proposal Six at 2. MODS collects and aggregates piece handlings and runtime data through automated interfaces with WebEOR. Id. Labor usage or workhour data by operation are derived from time clock rings reported to MODS through the Time and Attendance Collection System. Id; Variability Report at 15.

Currently, In-Office Cost System tallies are used to partition the mail processing cost pools into activities assumed to be 100-percent volume-variable, and other activities assumed to be non-volume-variable. Id. The basis for such determination was an assumption that mail processing costs should vary in proportion to the volume of mail or articles processed. See Variability Report at 4. For the operations that are the subject of this analysis, the associated mail processing costs were taken to be 99.1-percent volume-variable in FY 2019 under the accepted methodology. Id.

This methodology has been in use since Docket No. R71-1, and its origins predate the Postal Reorganization Act and the development of the automated mail processing technologies in this proposal. Petition, Proposal Six at 2. The Postal Service states that the Commission previously declined to adopt any empirical models for mail processing variability, citing data and econometric issues. Id. at 3. However, the Postal Service explains that several factors merit re-examination, including volume changes, the reliability of automated counts of mailpiece handlings, and the availability of machine utilization data. Id. at 4.

Proposal. The proposed methodology is based on econometric analysis of workhour and workload data collected by the Postal Service on an ongoing basis. Id. at 1. Specifically, the estimation of the proposed variabilities employs monthly MODS datasets compiled into a multi-year panel dataset. Id. at 5. The variabilities are derived from a regression equation of the natural logarithm, where workhours are used as a dependent variable and the TPF (current and lagged) as well as seasonal dummy variables are used as explanatory variables. Id. The regression sample periods cover the most recent 4 fiscal years and would be rolled forward to allow for re-estimating the variabilities annually. Id. The variabilities estimated for the three cost pools during a FY 2016-FY 2019 sample period are 0.976 for DBCS, 0.774 for AFSM 100, and 0.804 for FSS. Id. at 6.

Impact. The proposed methodology would permit re-estimation of the variabilities because the underlying data are produced in the course of Postal Service operations and are already included in the Annual Compliance Report. Id. at 1-2. The Postal Service concludes that the proposed methodology would reduce FY 2019 volume-variable labor costs for the three cost pools by 8.3 percent overall. Id. at 6. The Postal Service also states that, including piggybacks, the proposal reduces measured volume-variable and product-specific costs in the Cost and Revenue Analysis C Report by 0.79 percent. Id. The Postal Service provides a table showing the effects of the proposed variabilities on product unit costs. Id. at 6-8. In a separate table filed under seal, the Postal Service shows the impacts of the proposal on individual Competitive products.^[2]

III. Notice and Comment

The Commission establishes Docket No. RM2020-13 for consideration of matters raised by the Petition. More information on the Petition may be accessed via the Commission's website at http://www.prc.gov. Interested persons may submit comments on the Petition and Proposal Six no later than November 24, 2020. Pursuant to 39 U.S.C. 505, Lawrence Fenster is designated as an officer of the Commission (Public Representative) to represent the interests of the general public in this proceeding.

IV. Ordering Paragraphs

It is ordered:

1. The Commission establishes Docket No. RM2020-13 for consideration of the matters raised by the Petition of the United States Postal Service for the Initiation of a Proceeding to Consider Proposed Changes in Analytical Principles (Proposal Six), filed September 15, 2020.

2. Comments by interested persons in this proceeding are due no later than November 24, 2020.^[3]

3. Pursuant to 39 U.S.C. 505, the Commission appoints Lawrence Fenster to serve as an officer of the Commission (Public Representative) to represent the interests of the general public in this docket.

4. The Secretary shall arrange for publication of this order in the Federal Register.

Footnotes