FR Doc 03-20566
[Federal Register: August 13, 2003 (Volume 68, Number 156)]
[Rules and Regulations]               
[Page 48293-48299]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr13au03-11]                         

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POSTAL RATE COMMISSION

39 CFR Part 3001

[Docket No. RM2003-1; Order No. 1380]

 
Additional Filing Requirements

AGENCY: Postal Rate Commission.

ACTION: Final rule.

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SUMMARY: This document adopts, essentially as proposed, a rule that 
requires the Postal Service to provide overview testimony. The 
testimony must discuss how other testimony in a case interrelates and 
identify material changes affecting cost attribution, volume 
projections and rate design. This additional explanation and detail 
will assist the Commission and case participants in more readily 
understanding complex filings without unduly burdening the Postal 
Service.

DATES: This rule takes effect October 1, 2003.

ADDRESSES: Submit correspondence concerning this document to Steven W. 
Williams, Secretary of the Commission, via the Commission's electronic 
Filing Online system.

FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, General Counsel, 
202-789-6818.

SUPPLEMENTARY INFORMATION:

Regulatory History

    See 67 FR 79538 (12/30/2002).

Introduction

    In order no. 1355, the Commission proposed to amend its rules of 
practice in two principal ways.\1\ First, the proposed rulemaking would 
require the Postal Service to submit testimony of a single witness 
providing an overview (or roadmap) of its request, which, among other 
things, would both explain the interrelationship of the testimony 
submitted in support of the filing and highlight all methodological 
changes. See proposed rule 53(b). Second, the rules would be clarified 
regarding the Postal Service's obligation to submit testimony 
addressing material methodological changes affecting costing, volume 
projections, or rate design. See proposed rules 53(c) and 54(a). 
Interested persons were invited to comment on the proposed rules.
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    \1\ See Notice of Proposed Rulemaking Concerning Evidence 
Supporting Rate and Classification Changes, PRC Order No. 1355, 
December 13, 2002.
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    Six sets of initial comments were received,\2\ plus four sets of 
reply comments.\3\ Aside from the Postal Service, all initial 
commenters supported the proposed rule. For its part, the Postal 
Service, while expressing concerns about the proposed rule changes, 
characterizes itself as ``generally sympathetic to the proclaimed need 
for a better overview of its case[.]'' \4\
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    \2\ See Comments of Alliance of Nonprofit Mailers, American 
Business Media, AOL Time Warner, Inc., Dow Jones & Company, Inc., 
Magazine Publishers of America, Inc., The McGraw-Hill Companies, and 
National Newspaper Association, February 12, 2003, (Joint Comments); 
Letter on Behalf of American Bankers Association and National 
Association of Presort Mailers, February 12, 2003, (ABA/NAPM 
Comments); Comments of American Postal Workers Union, AFL-CIO 
Regarding Notice of Proposed Rulemaking Concerning Evidence 
Supporting Rate and Classification Changes, January 15, 2003, (APWU 
Comments); Office of the Consumer Advocate Comments on Notice of 
Proposed Rulemaking Concerning Evidence Supporting Rate and 
Classification Changes, February 12, 2003, (OCA Comments); Comments 
of United Parcel Service in Support of Proposed Rule, February 11, 
2003, (UPS Comments); and Initial Comments of the United States 
Postal Service, February 12, 2003, (Postal Service Comments).
    \3\ See Letter on Behalf of American Bankers Association and 
National Association of Presort Mailers, February 26, 2003, (ABA/
NAPM Reply Comments); Office of the Consumer Advocate Reply Comments 
on Notice of Proposed Rulemaking Concerning Evidence Supporting Rate 
and Classification Changes, February 26, 2003, (OCA Reply Comments); 
Reply Comments of PostCom, February 20, 2003; (PostCom Reply 
Comments); and Reply Comments of the United States Postal Service, 
February 26, 2003, (Postal Service Reply Comments).
    \4\ Postal Service Comments at 1.
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    Its principal concern lay with the form of the roadmap, favoring an 
institutional document over testimony. Id. at 3-6. To that end, the 
Postal Service offers an alternative version of the proposed rules. It 
also outlines its concept of the roadmap document as well as expressing 
concerns regarding the details associated with reporting methodological 
changes. Id. at 6-25.
    Other commenters also suggest revisions to the proposed rule. For 
example, OCA suggests that the Postal Service be required to quantify 
the impact of every methodological change. In a similar vein, ABA/NAPM 
urge the Commission to quantify the meaning of material changes. See 
OCA Comments at 3-6 and ABA/NAPM Comments at 2. UPS suggests revisions 
to the proposed rules regarding details reported by the Postal Service. 
UPS Comments at 4.
    This rulemaking grew out of the Ratemaking Summit, jointly 
sponsored by the Commission and the Postal

[[Page 48294]]

Service during the spring of 2002 to consider potential improvements in 
the ratemaking process. The conferences provided a useful public forum 
to discuss various alternatives intended to make the current process 
more efficient. In order no. 1355, the Commission addressed the 
alternatives suggested. Based on participants' written and oral 
comments, the Commission proposed to amend its rules of practice to 
require that the Postal Service file roadmap testimony as well as 
testimony explaining each material methodological change in its filing 
when submitting formal requests under subparts B and C of the 
Commission's rules.
    The proposed rule is widely supported by mailer-participants, and 
the OCA. The Postal Service opposes the form of the proposed rule, if 
not (entirely) its substance. Among other things, the Postal Service 
expresses concern over any burden that may be associated with the 
proposed rule. In concluding that the proposed rule, with a minor 
modification, will facilitate the ratemaking process, the Commission 
has been particularly mindful of the relative burdens borne by all 
participants during omnibus rate proceedings. Based on a thorough 
consideration of the comments received in this proceeding, the 
Commission concludes that the rules adopted herein represent a 
reasonable balance among competing interests and will improve the 
ratemaking process.
    Participants are commended for their comments. The Commission has 
found them useful during its deliberations. The merit of the various 
suggestions to modify the proposed rule is addressed below. The 
discussion begins with consideration of the Postal Service's comments.

1. Postal Service Comments

    Roadmap testimony. The Postal Service offers several reasons in 
support of its contention that the roadmap would be more effective as 
an institutional document than as testimony. As the ``most obvious 
reason,'' it questions whether an individual could be sufficiently 
familiar with the various testimonies to be able to explain them and 
their interrelationship. Even if such a witness were available, the 
Postal Service questions the usefulness of the undertaking, including 
the need to respond to discovery and possibly stand cross-examination. 
Expanding on this point, the Postal Service expresses concern that 
there may be confusion as to the proper scope of the roadmap testimony 
and that of the substantive witnesses, and further that there may be an 
increased need to redirect questions among witnesses.\5\
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    \5\ Postal Service Comments at 4.
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    An additional concern voiced by the Postal Service is that a 
witness would be required to present evidence regarding Commission 
methodologies. This result, the Postal Service contends, would be 
inappropriate since the witness would not be sponsoring the PRC 
version. \6\
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    \6\ Id. at 5. In its comments, APWU also asserts that the 
roadmap might best be an institutional document, as some information 
may be beyond the witness's ken. APWU also expresses concern that 
roadmap testimony would be subject to discovery and possible oral 
cross-examination. In urging the use of an institutional roadmap, 
APWU advocates using informal discovery to clarify matters related 
to the roadmap. APWU Comments at 1. In its reply comments, PostCom 
also endorses the Postal Service's position. PostCom Reply Comments 
at 1.
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    The Commission is not persuaded that an institutional roadmap is 
preferable to testimony. For several reasons, testimony, as opposed to 
an institutional document, is a more appropriate vehicle for providing 
an overview of the Postal Service's filing.
    A witness is directly responsible for the substance of his or her 
testimony. Thus, there is a direct accountability that does not attach 
to an institutional roadmap. Form in this instance matters. Testimony 
from a single witness is more likely to present the Postal Service's 
filing as a coherent whole. Furthermore, discovery can be directed to 
the roadmap witness, an option not available if the roadmap were an 
institutional document.\7\
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    \7\ Questions to the roadmap witness should be of a ``where'' or 
``who'' nature. Questions of a ``why'' or ``how'' nature should be 
directed to subject matter witnesses.
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    Requiring the roadmap to be in the form of testimony does not mean 
that the witness could not rely on others for assistance in producing 
the testimony. Rather, as with any testimony, it must be prepared by or 
under the supervision of the sponsoring witness. This should put to 
rest any concerns that a single witness would be unable to understand 
the elements of the Postal Service's filing. Moreover, that an 
institutional document could be produced belies the suggestion that an 
individual would be incapable of providing the same information in the 
form of testimony.
    Testimony by a roadmap witness is analogous to that of a policy 
witness. Each speaks on behalf of the proponent, providing a focal 
point for its proposal. Thus, including the roadmap testimony as part 
of the evidentiary record is appropriate. The Postal Service compares 
the testimony to documents such as the list of library references or of 
the attorney-witness assignments.\8\ Unlike those documents, which 
simply identify certain organizational features of the filing, the 
testimony has substantive value that warrants its treatment as record 
evidence.
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    \8\ Postal Service Comments at 6.
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    Streamlining the administrative process is central to the proposed 
rule. The roadmap testimony is intended to provide an overview of the 
Postal Service's filing by, among other things, explaining the 
interrelationship of the testimony submitted with the request and 
describing material methodological changes. This testimony is likely to 
be the participants' starting point in attempting to understand the 
Postal Service's filing. Participants will benefit because the 
testimony will provide a means to quickly grasp the essential elements 
of the Postal Service's filing and focus on issues of principal 
concern. This should produce a more focused and comprehensive 
evidentiary record in the limited time available for Sec.  3624 cases 
and lead to more informed and cogent decisions by the Commission. Being 
able to direct clarifying questions to the roadmap witness should 
facilitate the process, and questions going to the substance of 
particular matters should more readily be addressed to the witness 
sponsoring that proposal.\9\
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    \9\ In terms of discovery, roadmap testimony should not be 
perceived as something more than is intended. Participants should 
endeavor to address interrogatories concerning the substantive 
aspects of the matter to the appropriate witness.
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    In its comments, the Postal Service notes that it has and is 
willing to make reasonable efforts to better explain its rate case 
presentations.\10\ In any rate proceeding, the burden initially lies 
with the proponent. The Commission is sensitive to the issue and 
recognizes the Postal Service's considerable efforts in rate cases, 
particularly as relates to discovery. Omnibus rate cases are complex 
and subject to a very expedited schedule. As a consequence, the burdens 
imposed on participants are not insignificant. The roadmap testimony 
attempts to reasonably balance these relative burdens, while also 
facilitating the ratemaking process. As several comments note, the 
testimony should help participants focus more quickly on substantive 
issues.\11\ This, in turn, should reduce the Postal Service's burden of 
responding to discovery, particularly that of an exploratory nature. 
These efficiencies will redound to the benefit of all stakeholders.
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    \10\ Postal Service Comments at 2.
    \11\ See Joint Comments at 2; UPS Comments at 2.
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    The Postal Service's related contentions that participants may be 
confused about the scope of the roadmap testimony and that this may 
cause them to direct interrogatories to

[[Page 48295]]

the wrong witness are largely makeweights. As set forth in the proposed 
rule, the roadmap testimony simply provides an overview of the Postal 
Service's filing. Participants are unlikely to confuse that purpose 
with the role played by witnesses sponsoring the more substantive 
aspects of the testimony on point. However, even if on occasion an 
interrogatory is directed to the wrong witness, the solution is simple. 
The Postal Service is well practiced at redirecting interrogatories to 
the appropriate witness, and the roadmap witness should be especially 
familiar with which witness addresses a particular topic. Hence, the 
Postal Service's argument provides no basis to reject the roadmap 
testimony.
    The Postal Service expresses concern that the roadmap witness 
would, in effect, be sponsoring testimony regarding PRC methodologies 
when addressing material changes to the preexisting PRC versions 
proposed by the Postal Service in that proceeding.\12\ The comparison 
required by this exercise cannot be equated with sponsoring the 
preexisting methodology. It merely identifies and gives context to the 
proposed change, serving as a benchmark so that the impact can be 
assessed. Testimony by the roadmap witness describes the areas of 
change. This does not amount to sponsoring the preexisting methodology. 
Similarly, witnesses submitting testimony under rule 53(c) sponsor the 
proposed methodological changes, not the preexisting methodology. That 
they may be compelled to reference the preexisting methodology does not 
mean they are sponsoring it.\13\
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    \12\ Postal Service Comments at 4-5.
    \13\ As the OCA notes, ``The Postal Service witness is obviously 
not deemed to be sponsoring the PRC version; only explaining how the 
Postal Service's presentation relates to the Commission's 
methodologies.'' OCA Reply Comments at 5.
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    Interrelationships among testimonies. The Postal Service suggests 
the format and level of detail that would, in its view, satisfy the 
intent of the proposed rule to provide an overview of its filing.\14\ 
For example, the Postal Service states that a roadmap explaining the 
functional components of the case, including identifying testimonies 
that addressed each component, would appear to provide a sufficient 
overview of its filing in conformance with the proposed rule, except as 
relates to methodological changes.\15\ While it states that one might 
quibble over whether such a document would adequately explain how the 
testimonies interrelate, it believes that ``the description of the 
functional organization of the filing would encapsulate the 
informational flows that define the interrelationships [among] the 
testimonies.'' \16\ Further, it indicates that it would have no 
difficulty summarizing sources of material inputs, including outputs 
used as inputs, employed by its various witnesses.\17\
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    \14\ See Postal Service Comments at 6-12.
    \15\ Id. at 7-8.
    \16\ Id. at 8.
    \17\ Ibid.
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    In order no. 1355, the Commission, illustratively citing the 
testimony of witness Van-Ty-Smith in docket no. R2001-1, observed that 
she briefly notes that certain witnesses use her mail processing 
volume-variable costs. The order concludes that ``something more'' 
would be required of the roadmap witness.\18\
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    \18\ PRC Order No. 1355, December 12, 2002, at 7.
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    Quoting an excerpt from Van-Ty-Smith's testimony, the Postal 
Service questions what more would be required of it to satisfy this 
facet of the proposed rule.\19\ Order no. 1355, as pointed out by the 
OCA, expands on the statement: \20\ ``Specifically, the roadmap 
witness's overview of the Postal Service's filing would identify the 
subject matter of each witness's testimony, explain how the testimony 
of the various witnesses interrelates, and highlight changes in cost 
methodology, volume estimation and rate design.'' See proposed Sec.  
3001.53(b). Thus, with reference to Van-Ty-Smith's testimony, the 
roadmap witness would, among other things, explain the linkage between 
her analysis and the testimony of those witnesses who rely on it.
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    \19\ Postal Service Comments at 7-8.
    \20\ PRC Order No. 1355, December 12, 2002, at 7-8.
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    The roadmap testimony should provide a coherent overview of the 
Postal Service's filing. To be sure, the excerpt from Van-Ty-Smith's 
testimony does identify some interrelationship between her testimony 
and that of other witnesses. Certain interrelationships are reasonably 
clear, e.g., the description regarding witness Kay's development of 
incremental costs and Meehan's base year costs. It is less clear, 
however, regarding the ``updates [of] other types of information coming 
out of the methodology for mail processing costs which are used by 
other witnesses, such as [Smith, Mayes, Eggleston, and Miller], as the 
source of inputs for some of their cost studies.'' \21\ While the 
statement would alert the reader that some relationship exists between 
Van-Ty-Smith's and the referenced testimony, it lacks specifics other 
than a general reference to cost studies. Moreover, the statement is 
somewhat qualified, referring to witnesses ``such as'' Smith, et al., 
and that the inputs are used in ``some of their cost studies.'' \22\
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    \21\ Postal Service Comments at 9, quoting USPS-T-13 at 1.
    \22\ Ibid.
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    As written, that testimony falls short of explaining the linkage 
between Van-Ty-Smith's analysis and the testimony of those witnesses 
who rely on it. The Commission recognizes, of course, that the 
testimony was not written with the proposed rule in mind. Moreover, as 
the Postal Service suggests, the foregoing description might be 
sufficient ``[i]n the context of a comprehensive roadmap * * * because 
any potential questions with respect to the more specific purposes of, 
for example, the testimony of witness Miller, could be quickly resolved 
by other information within the roadmap document discussing Mr. 
Miller's cost study testimony.'' \23\ Thus, if the linkages to Van-Ty-
Smith's testimony are adequately detailed in the portion of the roadmap 
testimony that addresses, for example, witness Miller's testimony, the 
proposed rule would be satisfied.
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    \23\ Id. at 9.
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    The description in the roadmap testimony is not a surrogate for the 
underlying testimony of the witness referenced, e.g., Miller's 
testimony in docket no. R2001-1, USPS-T-22. It should, however, be 
sufficiently detailed to explain linkages between the two testimonies. 
This does not mean that the roadmap testimony is to function as a 
cross-referencing vehicle. That function, as the Postal Service notes, 
is ``fulfilled by the complete documentation submitted by each 
witness.'' \24\
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    \24\ Id. at 10.
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    In sum, the roadmap testimony is intended to facilitate 
consideration of complex rate and classification requests by providing 
participants with an overview of the filing, including identifying 
changes in methodology. It should enable participants to focus more 
quickly on issues affecting rates (or service) of concern to them. The 
level of detail to be included in the roadmap testimony undoubtedly 
will evolve over time. Based on its comments, the Postal Service 
appears committed to making a good faith effort to comply with the 
rules. The Commission would expect no less and, based on experience, 
believes that Postal Service adheres to that standard in matters before 
the Commission.
    Changes in methodology. Under the proposed rule, the roadmap 
testimony would highlight changes in cost methodology, volume 
estimation, and

[[Page 48296]]

rate design. In addition, the witness sponsoring the methodological 
changes would be required to explain each material change and quantify 
its impact. The Postal Service raises concerns about each.
    First, the Postal Service states its assumptions regarding the term 
``cost methodology,'' correctly noting that the term extends to 
subclass costs (CRA costs) and cost study costs.\25\ The Postal Service 
then outlines what it characterizes as an appropriate response to 
address changes in cost methodology under proposed Rule 53(b) and (c). 
Under its suggested approach, the roadmap document would contain a 
summary of each witness's testimony, identifying material changes in 
cost methodology.\26\ The summaries could include a comparison of 
results under the proposed methodology with those obtained under that 
used by the Commission in the most recent rate proceeding. Generally, 
such comparisons would simply present the relevant material from PRC-
version library references along with the results of the witness 
sponsoring the change.\27\
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    \25\ Id. at 13.
    \26\ Id. at 14.
    \27\ Ibid.
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    If the roadmap were an institutional document perhaps the foregoing 
would be satisfactory. That approach, however, has been rejected. 
Moreover, under the Postal Service's proposal, any distinctions between 
rule 53(b) and (c) are lost. The distinctions are not insignificant.
    Perhaps because it would prefer the roadmap be an institutional 
document, the Postal Service pays scant attention to proposed rule 
53(c), suggesting that the rule be revised in two ways. The Postal 
Service proposes that any discussion of the impact of material changes 
be removed to its proposed rule 53(b), the institutional roadmap 
document.\28\ In addition, because of its concern over sponsoring PRC 
versions, the Postal Service suggests modifying proposed rule 53(c) to 
eliminate any reference to the Commission.\29\
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    \28\ Id. at 15-16.
    \29\ Id. at 16, n.6; see also attachment to Postal Service 
Comments.
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    These suggested revisions reflect the Postal Service's preference 
for an institutional roadmap document in lieu of testimony. Since that 
approach has been rejected, these suggestions will not be adopted. 
Accordingly, the Commission will adopt rule 53(c) as initially 
proposed.
    Proposed rule 53(b) requires the filing of a single piece of 
testimony providing an overview of the request, including, among other 
things, highlighting methodological changes. Proposed rule 53(c) 
directs the Postal Service to file testimony addressing the details of 
material methodological changes, including the impact of such changes. 
The rule assures that testimony will be filed by a witness sponsoring 
and explaining each relevant methodological change.
    Aside from reiterating its advocacy of an institutional roadmap 
document in lieu of testimony, the Postal Service, in a rather 
extensive discussion, compares the proposed rule to what is required 
under current rule 54(a).\30\ The discussion is useful to the extent it 
points out that, as a practical matter, judgment must be exercised in 
reporting on various types of changes, e.g., those due to updates, 
operational changes, or new analytical approaches. In the context of 
current rule 54(a), the Postal Service indicates that it has attempted 
``to employ a rule of reason'' in responding to the requirements of 
that rule.\31\ The larger point of the discussion, however, is concern 
that the proposed rule not undermine the Postal Service's ability to 
develop, support, and present its case.\32\ This concern appears to be 
overstated. While the Commission is not adopting the Postal Service's 
suggestion that the roadmap take the form of an institutional document, 
the end result nonetheless strikes a reasonable balance between 
competing interests. The roadmap testimony will facilitate litigation 
of Postal Service rate requests without significantly increasing 
burdens borne by the Postal Service. Moreover, should they not work as 
intended, the rules may be revisited in the future.
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    \30\ Id. at 16-20.
    \31\ Id. at 18, n.8.
    \32\ Id. at 19-20.
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    Second, the Postal Service expresses a preference for eliminating 
any discussion of volume forecasting from the roadmap, arguing, for 
example, that the issue is uncontroversial and that there are no 
appreciable differences between its approach to forecasting volume and 
the Commission's.\33\ Nonetheless, the Postal Service does not foresee 
any major difficulties in complying, and this aspect of the proposed 
rule will be retained. While the volume estimates currently are perhaps 
less controversial than other rate issues, they remain important in 
determining an overall revenue requirement and methodological changes 
should be identified clearly at the outset of any rate proceeding.
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    \33\ Id. at 21.
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    Finally, the Postal Service addresses changes in rate design. It 
questions the need for any extensive discussion within the roadmap, 
finding it unlikely that any participant interested in rates for a 
particular subclass would not turn to the testimony of the relevant 
rate design witness. Thus, it suggests that the rule would be satisfied 
if the subclasses or services addressed by each rate design witness 
plus any material rate design changes were identified in the 
roadmap.\34\
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    \34\ Id. at 24-25. The latter, the Postal Service observes, may 
cause the summaries of rate design testimonies to be more detailed 
than those for other witnesses. Id. at 25.
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    Systems for developing rates for some subclasses rival the 
complexity of those used to develop costs, and changes may be difficult 
to identify easily. The Postal Service's interpretation might appear to 
be a reasonable first cut in complying with this facet of the proposed 
rule in some instances, but it should be borne in mind that the purpose 
of these amendments is to facilitate immediate awareness of changes and 
their impact. Rate design is an undeniably important ratemaking 
function. To the extent that the Postal Service proposes changes, 
whether as a classification change or part of its rate request, the 
discussion of rate design changes is part of the coherent whole that 
the roadmap testimony is designed to present. Whether the level of 
detail provided in the testimony is adequate or not can best be 
assessed after experience with the rule is gained. Thereafter, changes, 
if any, can be considered. It bears emphasizing, however, that the 
proposed rule attempts to strike a reasonable balance between the 
litigation burdens imposed on participants and the Postal Service. It 
makes more sense to specifically identify changes in one place than to 
assume that all intervenors can, without help, identify the testimony 
most relevant to their specific interest areas. In the Commission's 
view, the rules adopted will improve the process and thus benefit all 
concerned.

2. OCA Comments

    In order no. 1355, the Commission stated that ``[p]ursuant to 
proposed rule 53(c), it would fall to the sponsoring witness to provide 
details of the change, including estimating (or quantifying) its 
effects.'' \35\ The responsibility of the sponsoring witness is clear. 
The Commission recognized, however, that quantifying a material change 
was subject to some ambiguity. Accordingly, it invited interested 
parties to comment

[[Page 48297]]

on the benefits of imposing the requirement.
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    \35\ PRC Order No. 1355, December 12, 2002, at 9.
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    OCA urges the Commission to modify proposed rule 53(c) to make more 
explicit the requirement that the Postal Service quantify the impact of 
material changes in cost methodology, volume estimation, and rate 
design.\36\ OCA contends that the proposed rule does not specifically 
require the Postal Service to quantify such effects, as, in its view, 
the text of order no. 1355 suggests is required. Thus, OCA suggests 
that proposed rule 53(c) employ specific language to require 
quantitative estimates of the impact of each methodological change. 
\37\
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    \36\ OCA Comments at 2-4.
    \37\ Id. at 3. ABA/NAPM appear to raise a similar concern in 
their comments that the rule should require the Postal Service to 
identify situations when several small changes ``all going in the 
same direction'' have a material effect even if taken individually 
the changes may not. ABA/NAPM Comments at 2.
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    The Postal Service opposes this suggestion, asserting that the rule 
should not be altered to require quantification in all 
circumstances.\38\ Reiterating its initial comments, the Postal Service 
states that, when comparisons between the PRC and Postal Service 
versions can be made, the most relevant type of quantification would be 
routinely provided in the roadmap document it envisions.\39\ It asserts 
that in most instances parties will be interested in only the 
cumulative effect of the changes, particularly as relates to the 
roadmap document. The Postal Service also criticizes the suggestion as 
overlooking the extensive documentation that it files in support of its 
requests. The Postal Service concludes that its focus should be on the 
cumulative effects of new analyses, with participants free to 
investigate whatever components they believe to be most 
significant.\40\
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    \38\ Postal Service Reply Comments at 10.
    \39\ Ibid.
    \40\ Id. at 11.
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    To some degree, OCA and the Postal Service appear to be talking at 
cross-purposes. OCA's comments address proposed rule 53(c), which 
directs the Postal Service to file testimony addressing the details of 
material methodological changes, including the impact of such changes. 
For its part, however, the Postal Service's response is based on ``the 
roadmap document it envisions[,]'' \41\ an approach, as noted, that 
ignores distinctions between proposed rules 53(b) and (c).
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    \41\ Id. at 10.
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    As proposed, rule 53(c) requires the Postal Service to submit 
testimony that identifies and explains each material change in cost 
methodology, volumes, and rate design. That testimony shall also 
discuss the impact of each such change on the levels of attributable 
costs, volumes, and rate levels. In order no. 1355, the Commission 
recognized that quantifying the effects of methodological changes may, 
in some instances, prove difficult. The Commission further noted that 
the proposed rules are not intended to require the Postal Service to 
address each change regardless of its consequences.
    The Commission appreciates the OCA's comments. OCA's comments, 
however, gloss over any difficulties associated with quantifying 
interrelated methodological changes. OCA's suggestion that the 
Commission's rules be revised to require the Postal Service to quantify 
the impact of each separate methodological change overreaches. 
Furthermore, while OCA's basic point that the proposed rule does not 
hew explicitly to the discussion in order no. 1355 is not in dispute, 
the intent of the proposed rule is nonetheless reasonably clear.
    As the Postal Service indicates, quantification becomes more 
difficult when several changes operate jointly.\42\ To be sure, the 
cumulative effect of these changes is important. It remains to be seen 
whether parties will, for the most part, be interested only in the 
cumulative effect as the Postal Service contends. In any event, parties 
wanting more detail can avail themselves of discovery. Moreover, as the 
Postal Service notes, as part of its filing it provides comprehensive 
rate case documentation that permits replication of its analyses. 
Consequently, the Commission declines to adopt the OCA's suggestion.
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    \42\ Id. at 10.
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    The OCA also suggests that the rules be amended to bar 
institutional responses to interrogatories seeking to clarify a 
proponent's proposal(s) and evidence.\43\ In support, OCA notes that 
responses to presiding officer information requests are sponsored by 
witnesses. In addition, OCA argues that timing may become an issue with 
written discovery.\44\ The Postal Service opposes this suggestion, 
arguing, principally, that OCA fails to demonstrate that institutional 
responses have caused problems in recent dockets.\45\
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    \43\ OCA Comments at 4-6. Alternatively, OCA would permit 
institutional responses provided a witness is identified at the time 
and is available to stand cross-examination should it be requested. 
Id. at 6.
    \44\ Id. at 5.
    \45\ Postal Service Reply Comments at 11-13.
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    The expedition required in omnibus rate cases puts a premium on 
attempting to quickly understand the Postal Service's filing. Written 
discovery is the principal means for clarifying the Postal Service's 
proposals. Informal discussions with the Postal Service and technical 
conferences may supplement this process. While timing can be an issue 
with respect to written discovery, cross-examination remains available 
to participants as well. The rationale offered by OCA for the 
suggestion does not warrant its adoption. It is well understood that 
participants submitting institutional responses to discovery requests 
must be prepared to provide a sponsoring witness if follow-up oral 
cross-examination is required. OCA has failed to demonstrate that 
institutional responses have caused participants problems in 
understanding the Postal Service's case in recent proceedings. Should 
it become a problem, however, the Commission's rules provide means for 
seeking redress.
    OCA also proposes that the Commission should, as a matter of 
practice, formally notice in the Federal Register participants' 
alternative proposals in any case set for hearing.\46\ OCA believes 
that such notice would apprise interested persons of any new proposals 
and preempt any due process claims that adequate notice was not given. 
No commenter addressed this suggestion.
---------------------------------------------------------------------------

    \46\ OCA Comments at 6-8.
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    The Commission declines to adopt this suggestion. OCA does not 
advocate codifying this practice in the Commission's rules.\47\ Thus, 
for purposes of this rulemaking, the suggestion is essentially a 
nullity. The Commission could, were it so inclined, adopt the practice 
irrespective of this rulemaking. Moreover, as OCA notes, generally the 
original notice issued by the Commission is sufficient to apprise 
interested persons of the nature of the proceeding, including the 
possibility that its recommendations may differ from the Postal 
Service's request.
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    \47\ Id. at 8.
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    Finally, OCA incorporates its comments from docket no. RM2003-3 to 
the extent they may be more appropriately considered in this 
proceeding.\48\ The Commission finds those comments more relevant to 
docket no. RM2003-3.
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    \48\ Ibid.
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3. UPS Comments

    UPS proposes two modifications to the proposed rules. The Postal 
Service opposes both. First, UPS suggests revising rule 53(b) by 
substituting the

[[Page 48298]]

word ``describing'' for ``highlighting.'' The intent of this proposal 
is to have the roadmap witness generally explain the change and the 
reason for it.\49\ The Postal Service opposes the wording change. While 
acknowledging that the word describe may not be ``utterly 
inappropriate,'' contending that the use of ``highlighting'' better 
conveys the appropriate level of detail.\50\
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    \49\ UPS Comments at 4.
    \50\ Postal Service Reply Comments at 5.
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    The Commission adopts this UPS suggestion. On reflection, the term 
``highlighting'' is perhaps too ambiguous in the context of the rule. 
The roadmap witness should describe changes in cost methodology, volume 
projections, and rate design in sufficient detail to inform the reader 
of the nature of the change.\51\ This should adequately inform the 
reader of the change and direct him or her to the testimony of the 
witness sponsoring the proposed change, where the complete details of 
material methodological changes will be contained. In this fashion, the 
roadmap testimony will fulfill its intended role. Moreover, this 
clarifying change appears to be consistent with the Postal Service's 
understanding of the roadmap's function. Specifically, the Postal 
Service recognizes that the description of the changes must be 
sufficient to enable readers to understand the nature of the 
changes.\52\
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    \51\ It will not be necessary for the roadmap witness to explain 
the reason for the change, provided that the sponsoring witness 
does.
    \52\ Postal Service Reply Comments at 5.
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    Second, UPS suggests that rule 53(c) be modified by inserting the 
phrase ``for each affected subclass'' at the end of the final sentence 
to that subsection.\53\ UPS states that its proposal is intended to 
make the intent of the proposed rule clear.\54\ In opposing this 
suggestion, the Postal Service observes, first, that the effect of some 
changes cannot be presented at the subclass level. In support, it 
references a study done by witness Bozzo. Second, the Postal Service 
states that certain cost studies are done below the subclass level. 
Finally, the Postal Service asserts the change is unnecessary as it 
intends, where appropriate, to provide the impacts by subclass.\55\
---------------------------------------------------------------------------

    \53\ UPS Comments at 5. Thus, as proposed, the sentence would 
read: ``The testimony required in this subsection (c) shall also 
include a discussion of the impact of each such change on the levels 
of attributable costs, projected volumes, and rate levels for each 
affected subclass.''
    \54\ Ibid.
    \55\ Postal Service Reply Comments at 5-6.
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    The rule will be adopted as proposed. The testimony required by 
this subsection directs, first, that material changes in cost 
methodology, volume projections, and rate design be identified and 
explained. The intent of this provision is that the relevant witness 
explain each material change, which may affect the system as a whole or 
individual classes or subclasses of mail. Rule 53(c) also requires that 
the impact of each material change on the levels of attributable costs, 
projected volumes, and rate levels be discussed. The nature and impact 
of the change will dictate the form of the discussion. On occasion, it 
may involve the system as a whole. More often, however, the discussion 
of impacts is likely to be at the subclass level or below. The Postal 
Service appears to acknowledge this possibility with its comment that 
``certain cost studies are done below the subclass level (i.e., at the 
rate category level).'' \56\
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    \56\ Id. at 5.
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    The Postal Service's contention that the impact of certain changes 
cannot be presented at the subclass level warrants brief comment, 
albeit not for its substance. As support for its position, the Postal 
Service refers to witness Bozzo's analyses of mail processing cost pool 
variabilities, stating that his results did not relate directly to 
subclasses. The Postal Service notes that witness Van-Ty-Smith 
distributed mail processing costs to subclasses in the last 
proceeding.\57\ While the Bozzo example may adequately answer UPS's 
suggestion, ambiguity may nonetheless persist as to Van-Ty-Smith's 
testimony. Under the proposed rule, it would fall to witness Van-Ty-
Smith to discuss the impact of any material changes in the distribution 
of mail processing costs.
---------------------------------------------------------------------------

    \57\ Ibid.
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4. ABA/NAPM Comments

    ABA/NAPM suggest that the Commission should quantify, perhaps by 
examples, what constitutes ``material effect.'' \58\ While the phrase 
``material effect'' appears in the text of order no. 1355 (at 9), it 
does not, as the Postal Service notes,\59\ appear in the proposed rule. 
At that point in the text, the phrase is describing the 
responsibilities of the roadmap witness, which are set forth in 
proposed rule 53(b). The details of the change, however, are the 
responsibility of the witness sponsoring the change. See order no. 
1355, December 12, 2002 at 9.
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    \58\ ABA/NAPM Comments at 2.
    \59\ Postal Service Reply Comments at 6.
---------------------------------------------------------------------------

    In urging the Commission to quantify ``material effect,'' ABA/NAPM 
focus on rate changes, noting that changes as small as a few hundreds 
of a cent are material to them.\60\ Attempting to quantify ``material 
effect'' at the rate cell level, as the commenters appear to suggest, 
would be impractical and would impose an unwarranted burden on the 
Postal Service. The central issue is what is material, and that, as the 
Postal Service recognizes, may vary depending on the circumstances. 
Thus, while the Postal Service's observation that small rate changes 
may be material for one rate schedule but not another may adequately 
rebut ABA/NAPM's request for quantification, it also implies the 
standard of materiality that should govern its response to the rules. 
As the Postal Service recognizes, small changes, e.g., tenths of a 
cent, might be material for certain rate schedules, e.g., First-Class, 
Standard, but unlikely to be for others, e.g., Express Mail, Priority 
Mail.\61\ Accordingly, the issue of materiality fairly answers itself.
---------------------------------------------------------------------------

    \60\ ABA/NAPM Comments at 2.
    \61\ Postal Service Reply Comments at 6.
---------------------------------------------------------------------------

    In order no. 1355, the Commission provided guidance concerning the 
types of changes that fall within the scope of the proposed rule.\62\ 
In brief, as set forth in proposed rule 53(c), the ``intent is to 
capture substantive changes.'' \63\ The Postal Service appears to 
understand the intent of the proposed rule. In opposing ABA/NAPM's 
suggestion, it states that in testimonies it routinely addresses 
methodological changes considered to be material.\64\ The new rules 
should not impose substantial additional burden on the Postal Service. 
Inevitably, the rules will require the Postal Service to exercise some 
judgment. In its initial comments, the Postal Service indicates it 
employs a rule of reason when addressing the requirements of rule 
54(a). When addressing the requirements of the new rules, the Postal 
Service would do well to bear that standard in mind. If in doubt, 
however, it should err on the side of noting the matter in the relevant 
testimony.
---------------------------------------------------------------------------

    \62\ PRC Order No. 1355, December 12, 2002 at 8-9.
    \63\ Id. at 8.
    \64\ Postal Service Reply Comments at 6.
---------------------------------------------------------------------------

    ABA/NAPM also request that the Commission require that the 
``alternate cost presentation'' mandated by rule 54(a)(1) be sponsored 
by a Postal Service witness rather than simply being submitted as a 
library reference. ABA/NAPM indicate that sponsorship would be limited 
essentially to explaining the calculations.\65\ The Postal Service 
opposes this suggestion.\66\
---------------------------------------------------------------------------

    \65\ ABA/NAPM Comments at 3.
    \66\ Postal Service Reply Comments at 7-8.
---------------------------------------------------------------------------

    ABA/NAPM have not shown that the current format fails to provide

[[Page 48299]]

participants with sufficient information about results under the PRC 
version to warrant requiring a Postal Service witness to sponsor the 
results. Institutional discovery and technical conferences remain 
available to participants. Accordingly, the suggestion will not be 
adopted at this time.
    Finally, ABA/NAPM request that the Commission clarify that the 
proposed amendment to rule 54(a)(1) does not change the reporting 
requirements regarding attribution procedures, but rather that they 
will now be covered by rule 53(c).\67\ The Commission clarifies that 
ABA/NAPM's understanding is correct.
---------------------------------------------------------------------------

    \67\ ABA/NAPM Comments at 2-3.
---------------------------------------------------------------------------

Conclusion

    For the reasons discussed above, the Commission hereby amends 
subparts B and C of its rules of practice and procedure as set forth 
below. Any suggestion or request to modify the Commission's rules 
raised by any participant not specifically addressed herein is denied.
    It is ordered:
    1. The Commission adopts the provisions set forth below as final 
rules amending 39 CFR 3001.53, 54, and 63.
    2. These rules will take effect on October 1, 2003.
    3. The Secretary shall cause this notice and order adopting final 
rule to be published in the Federal Register.

    By the Commission.

    Dated: August 7, 2003.
Garry J. Sikora,
Acting Secretary.

List of Subjects in 39 CFR Part 3001

    Administrative practice and procedure, Postal Service.

0
For the reasons stated in the accompanying order, the Commission adopts 
the following amendments to 39 CFR part 3001--Rules of Practice and 
Procedure Subpart B--Rules Applicable to Requests for Changes in Rates 
or Fees and Subpart C--Rules Applicable to Requests for Establishing or 
Changing the Mail Classification Schedule as follows:

PART 3001--RULES OF PRACTICE AND PROCEDURE

0
1. The authority citation for part 3001 continues to read as follows:

    Authority: 39 U.S.C. 404(b); 3603; 3622-24; 3661, 3662, 3663.

Subpart B--Rules Applicable to Requests for Changes in Rates or 
Fees

0
2. Revise Sec.  3001.53 to read as follows:


Sec.  3001.53  Filing of prepared direct evidence.

    (a) General requirements. Simultaneously with the filing of the 
formal request for a recommended decision under this subpart, the 
Postal Service shall file all of the prepared direct evidence upon 
which it proposes to rely in the proceeding on the record before the 
Commission to establish that the proposed changes or adjustments in 
rates or fees are in the public interest and are in accordance with the 
policies and the applicable criteria of the Act. Such prepared direct 
evidence shall be in the form of prepared written testimony and 
documentary exhibits which shall be filed in accordance with Sec.  
3001.31.
    (b) Overview of filing. As part of its direct evidence, the Postal 
Service shall include a single piece of testimony that provides an 
overview of its filing, including identifying the subject matter of 
each witness's testimony, explaining how the testimony of its witnesses 
interrelates, and describing changes in cost methodology, volume 
estimation, or rate design, as compared to the manner in which they 
were calculated by the Commission to develop recommended rates and fees 
in the most recent general rate proceeding. This testimony should also 
identify, with reference to the appropriate testimony, each witness 
responsible for addressing any methodological change described in 
paragraph (c) of this section.
    (c) Proposed changes. As part of its direct evidence, the Postal 
Service shall submit testimony that identifies and explains each 
material change in cost methodology, volume estimation, or rate design, 
compared to the method employed by the Commission in the most recent 
general rate proceeding. This requirement shall not apply to any such 
change adopted by the Commission in an intervening proceeding. The 
testimony required in this paragraph (c) shall also include a 
discussion of the impact of each such change on the levels of 
attributable costs, projected volumes, and rate levels.
0
3. In Sec.  3001.54 paragraph (a)(1) is revised to read as follows:


Sec.  3001.54  Contents for formal requests.

    (a) General requirements. (1) Each formal request filed under this 
subpart shall include such information and data and such statements of 
reasons and bases as are necessary and appropriate fully to inform the 
Commission and the parties of the nature, scope, significance, and 
impact of the proposed changes or adjustments in rates or fees and to 
show that the changes or adjustments in rates or fees are in the public 
interest and in accordance with the policies of the Act and the 
applicable criteria of the Act. To the extent information is available 
or can be made available without undue burden, each formal request 
shall include the information specified in paragraphs (b) through (r) 
of this section. If a request proposes to change the cost attribution 
principles applied by the Commission in the most recent general rate 
proceeding in which its recommended rates were adopted, the Postal 
Service's request shall include an alternate cost presentation 
satisfying paragraph (h) of this section that shows what the effect on 
its request would be if it did not propose changes in attribution 
principles.
* * * * *

Subpart C--Rules Applicable to Requests for Establishing or 
Changing the Mail Classification Schedule

0
4. Revise Sec.  3001.63 to read as follows:


Sec.  3001.63  Filing of prepared direct evidence.

    (a) General requirements. Simultaneously with the filing of the 
formal request for a recommended decision under this subpart, the 
Postal Service shall file all of the prepared direct evidence upon 
which it proposes to rely in the proceeding on the record before the 
Commission to establish that the mail classification schedule or 
changes therein proposed by the Postal Service are in accordance with 
the policies and the applicable criteria of the Act. Such prepared 
direct evidence shall be in the form of prepared written testimony and 
documentary exhibits which shall be filed in accordance with Sec.  
3001.31.
    (b) Requests affecting more than one subclass. Each formal request 
filed under this subpart affecting more than one subclass or special 
service is subject to the requirements of Sec.  3001.53(b) and (c).

[FR Doc. 03-20566 Filed 8-12-03; 8:45 am]