Before The

POSTAL RATE COMMISSION

WASHINGTON, D.C. 20268--0001

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  [Postal Rate and Fee Changes,       Docket No. R2000--1
  2000]{.smallcaps}                   

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UNITED STATES POSTAL SERVICE

INTERROGATORIES AND REQUESTS FOR PRODUCTION OF DOCUMENTS TO UNITED
PARCEL SERVICE WITNESS LUCIANI

(USPS/UPS--T1---10--26)

Pursuant to rules 25 and 26 of the Rules of Practice and procedure, the
United States Postal Service directs the following interrogatories and
requests for production of documents to United Parcel Service witness
Luciani: USPS/UPS--T1---10--26.

Respectfully submitted,

UNITED STATES POSTAL SERVICE

By its attorneys:

Daniel J. Foucheaux, Jr.

Chief Counsel, Ratemaking

Scott L. Reiter

475 L\'Enfant Plaza West, S.W.

Washington, D.C. 20260--1137

\(202\) 268--2999; Fax --5402

June 14, 2000

USPS/UPS-T5-10. Please refer to page 22, line 9 of your testimony where
you state:

> The top-down approach uses (1) the old LIOCATT cost breakdown in Cost
> Segment 3.1 that has since been abandoned for general cost allocation
> purposes in favor of the MODs-based approach....

Please confirm that in LR-I-103, Tables 1-4 costs are divided into MODs,
nonMODs and BMC cost pools.

\(a\) If confirmed, please explain exactly what you were referring to as
\" the old LIOCATT cost breakdown.\"

\(b\) If not confirmed, please explain you understanding of how costs
are divided in Tables 1-4.

USPS/UPS-T5-11. Please refer to your testimony, page 26, lines 1 through
6 where you state:

> As a result, I have used the outgoing non-DBMC Parcel Post costs from
> (1) the LD43 cost pool, (2) the Function 4 costs in the LD48 pool, and
> (3) conservatively, all of the non-MODs costs pools....

\(a\) Please confirm that using outgoing costs in cost pools is
consistent with the methodology used by witness Eggelston in her
calculation of DBMC cost avoidance.

\(b\) If confirmed, please justify how you use a methodology that you
yourself have called \"out dated\" and \"abandoned.\" If not confirmed,
please explain in detail how the two methodologies differ.

USPS/UPS-T5-12. Please refer to UPS-T-5, WP-1.

\(a\) Please confirm that in section E, page 2, that the following cost
pools are assumed to be fixed: LD43, LD48, and 7 of the nonMODs cost
pools. If not confirmed, please explain which cost pools are assumed to
be fixed.

\(b\) Please confirm that in section F, page 2 that the .9398 under the
column entitled \"CRA,\" is the sum of the proportional cost pools. If
not confirmed, please explain, in detail, what the number .9398
represents.

\(c\) Please confirm that in section F, page 2, under the title \"As
Corrected with DDU sort + Origin AO,\" you add the estimated cost of a
DDU sort and the estimated cost of origin AOs to the modeled costs, but
add no additional costs to the sum of the proportional cost pools. If
confirmed, please confirm that the impact of adding costs to the model
and not the sum of the proportional cost pools is to lower the CRA
proportional adjustment factor (CRA multiplier). If not confirmed,
please explain in detail how what you did differs from the above
explanation.

USPS/UPS-T5-13. Please refer to footnote 10 in your testimony.

\(a\) Please explain what you are referring to when you say \"the total
would be 11.8 cents.\"

\(b\) Please explain in detail, and show all calculations of how you
derived the number 11.8.

\(c\) Please explain what you mean by "uncorrected Parcel Post volumes."

USPS/UPS-T5-14. Please refer to footnote 11 in your testimony where you
state:

> However, I followed witness Eggleston\'s practice of not applying the
> CRA multiplier in the derivation of Parcel Post destination entry cost
> avoidances using the bottom-up method\...

Please refer to the response to PSA/USPS-T26-1. Please confirm that
witness Eggleston stated her comment about not applying the CRA
adjustment factor to new rate categories was only meant to apply to
DSCF, DDU and BMC presort and the reason she did not apply a CRA
adjustment factor to DBMC cost savings is directly related to the
methodology she used to estimate DBMC cost savings.

\(a\) If confirmed, given that you propose using a different methodology
to estimate DBMC cost savings, please explain in full detail your
rationale for not applying a proportional CRA adjustment factor to your
estimated cost savings

\(b\) If not confirmed, please explain your understanding of that
response.

USPS/UPS-T5-15. Please refer to page 26 of your testimony, lines 12
through 13.

\(a\) Please confirm that the 35.8 cents is the mail processing cost
avoidance.

\(b\) Please confirm that 35.8 cents does not include any costs from
cost segment 3.2.

USPS/UPS-T5-16. Please refer to Footnote 8. Please quantify the "little
difference" in the statement "using 100 percent volume variability for
mail processing costs made little difference to the amount of non-BMC
mail processing costs."

USPS/UPS-T5-17.

\(a\) Please confirm that neither the DDU or DSCF rate categories could
be used by mailers in FY 1998.

\(b\) Please confirm that it would be nonsensical to allocate BY98 costs
to the DDU and DSCF Parcel Post rate categories. If not confirmed,
please explain in detail the justification for allocating BY98 costs to
DDU and DSCF Parcel Post.

USPS/UPS-T5-18. Please see the response to UPS/USPS-T26-24. Please
confirm that in this response it is explained that the test-year costs
in the Parcel Post transportation model are extrapolated from BY98 data.

\(a\) If confirmed, please explain your justification for allocating
test year costs, that only reflect the rate categories that existed in
the base year, to rate categories that did not exist in the base year.

\(b\) If not confirmed, please supply the full citation for where the
test year costs used in the Parcel Post transportation model were
adjusted for the existence of DDU and DSCF.

USPS/UPS-T5-19. Please refer to Exhibit G, page 1 of your testimony.

\(a\) Please confirm that your estimate of test-year inter-BMC cubic
feet is the same as shown in USPS-T-26, Attachment L, page 7.

\(b\) Please confirm that your estimate of test-year intra-BMC cubic
feet is the same as shown in USPS-T-26, Attachment L, page 7.

\(c\) Please confirm that to allocate test-year Alaska air
non-preferential costs to DSCF and DDU parcel post rate categories, you
assume 1,556,328 of test-year cubic feet of DSCF and 15,916,060
test-year cubic feet of DDU.

\(d\) Please refer to USPS-T-26, Attachment L. Please confirm that
test-year cubic feet is estimated by multiplying test-year-before-rates
volumes by the estimated cubic feet per piece.

\(e\) Please confirm that to increase the total test-year before rates
cubic feet implies increasing the total test-year-before-rates volume.
If confirmed, please explain how you justify increasing the
test-year-before-rates volume, without adjusting test-year-before-rates
costs. If not confirmed, please explain in detail how test
-year-before-rates cubic feet could increase, without test-year volume
increasing. Show all evidence to support this claim.

USPS/UPS-T5-20. Please refer to Exhibit G, page 1 of your testimony.

\(a\) Please explain your justification for assuming that DDU, which by
definition is dropped at the destination delivery unit, would incur one
full leg of intermediate costs.

\(b\) Please explain your justification for assuming that DSCF, which by
definition is dropped at the destination SCF, would incur one full leg
of intermediate costs.

\(c\) Please explain your justification for assuming that DDU and DSCF
would both incur the exact same cost per cubic foot of non-preferential
Alaska air costs.

USPS/UPS-T5-21. Please refer to USPS-T-19, section V. entitled \"Alaska
Air Adjustment Factor.\" Please confirm that witness Kashini calculates
the percentage of non-preferential Alaska air costs that are
attributable by multiplying test-year Alaska air non-preferential costs
by the ratio of \"the hypothetical cost of transporting mail in Alaska
by highway divided by the cost incurred for non-preferential air
service.\" If confirmed, please also confirm the result of this
methodology is to attribute that portion of non-preferential Alaska air
costs that would exist if these costs were highway costs. If not
confirmed, please explain in detail how your understanding differs from
the above explanation. (b) If not confirmed, please explain in detail
your understanding of how attributable non-preferential Alaska Air costs
are calculated. Please include whether the methodology results higher or
lower cost per cubic foot miles than other Parcel Post transportation
costs.

UPS/UPS-T5-22. Please refer to USPS-T-26, Attachment A, page 13.

\(a\) Please confirm that in the machinable DBMC mail processing model,
it is assumed that 26.7 percent of machinable DBMC parcels arrive at the
delivery unit in sacks.

\(b\) Please confirm that in the machinable DBMC mail processing model,
the cost of dumping sacks at the destination delivery unit is 2.1 cents.

\(c\) Please confirm that if zero percent of DDU is in sacks, then DDU
will incur zero costs associated with dumping sacks.

\(d\) Please confirm if zero percent of DDU is in sacks, then compared
to the machinable DBMC mail processing model, DDU will avoid the 2.1
cents associated with dumping sacks.

USPS/UPS-T5-23. On page 20 of your testimony, you state that the results
of re-running the volume forecast model for Parcel Post for the Test
Year Before Rates and After Rates are summarized in Table 9. Table 9
only appears to contain information on the Before Rates version. Do the
results of your After Rates volume forecast appear anywhere in your
testimony or exhibits (*i.e.*, other than WP-3)?

USPS/UPS-T5-24. Please refer to page 20, lines 1 through 4, of your
testimony. You state: "I have updated Mr. Plunkett=s analysis to derive
Revenue Adjustment Factors for Parcel Post based on the corrected Parcel
Post Base Year volumes recommended by Mr. Sellick. The results are
provided in UPS-Luciani-WP-3.@ Is the update analysis presented in WP-3,
or just the results? Please specify, beyond the results, where the
details of that analysis can be found, either in WP-3, or elsewhere.

USPS/UPS-.T5-25. Please refer to UPS-Luciani-WP-3 and the Excel
spreadsheet files it contains. On all of the following questions, if you
cannot confirm, please explain.

\(a\) Please confirm that in Spreadsheets 2.1, 3.1, and 3.5 (the Avf@
files), in the sheet APrices,@ cells BB8-BD8, the R97-1 prices have
values of 5.125516, 3.055018, and 2.542216.

\(b\) Please confirm that these are the prices for 1999Q2, the quarter
during which the R97-1 rate increases went into effect, and therefore
reflect an average of old (pre-R97) and new (R97) rates.

\(c\) Please confirm that these cells should contain the prices from the
first *full* quarter (1999Q3) in which the new (R97) rates were in
effect, to avoid the effects of averaging with the old rates.

\(d\) Please confirm that, based on your FWI files 2.3, 2.4, and 2.2,
respectively, the values in cells BB8-BD8 should be 5.436636, 3.335314,
and 2.612319.

\(e\) Please confirm that in Spreadsheets 3.5 (one of the Avf@ files),
in the sheet APrices,@ cells BB9-BD9, the R2000-1 prices have values of
5.808072, 3.592612, and 2.639546.

\(f\) Please confirm that these are the prices for 2001Q1, the quarter
during which the R2000-1 rate increases are assumed to go into effect,
and therefore reflect an average of old (R97) and new (R2000) rates.

\(g\) Please confirm that these cells should contain the prices from the
first *full* quarter (2001Q2) in which the new (R2000) rates are in
effect, to avoid the effects of averaging with the old rates.

\(h\) Please confirm that, based on your FWI files 3.3, 3.4, and 3.2,
respectively, the values in cells BB9-BD9 should be 5.936937, 3.681879,
and 2.648992.

\(i\) Please confirm that if the correct price values (i.e., those
consistent with your FWI spreadsheets, as described above) were
substituted in the Avf@ files in cells BB8-BD8 and BB9-BD9, your TYBR
(including Table 9 on page 21 of your testimony) and TYAR parcel post
volume forecasts would change.

USPS/UPS-T5-26. Please refer to UPS-Luciani-WP-3 and the Excel
spreadsheet files it contains. On all of the following questions, if you
cannot confirm, please explain.

\(a\) Please confirm that the information in your FWI spreadsheets
(files 2.2 - 2.4 and 3.2 - 3.4) can be considered the functional
equivalent of billing determinants.

\(b\) Please confirm that the billing determinants implicit in your FWI
spreadsheets reflect the same amount of total Parcel Post piece volume
as the Postal Service's billing determinants and FWI spreadsheets.

\(c\) Please confirm that the total number of pieces in your billing
determinants is different from the total number of pieces you are using
as your forecast base.

**CERTIFICATE OF SERVICE**

I hereby certify that I have this day served the foregoing document upon
all participants of record in this proceeding in accordance with section
12 of the Rules of Practice.

Scott L. Reiter

475 L\'Enfant Plaza West, S.W.

Washington, D.C. 20260--1137

June 14, 2000