[Federal Register Volume 75, Number 7 (Tuesday, January 12, 2010)]
[Notices]
[Pages 1658-1660]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-295]


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POSTAL REGULATORY COMMISSION

[Docket No. ACR2009; Order No. 380]


FY 2009 Annual Compliance Report; Comment Request

AGENCY:  Postal Regulatory Commission.

ACTION:  Notice.

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SUMMARY: The Postal Service has filed an Annual Compliance Report on 
the costs, revenues, rates, and quality of service associated with its 
products in fiscal year 2009. Within 90 days, the Commission must 
evaluate that information and issue its determination as to whether 
rates were in compliance with title 39, chapter 36 and whether service 
standards in effect were met. To assist in this, the Commission seeks 
public comments on the Postal Service's Annual Compliance Report.

DATES: Comments are due: February 1, 2010. Reply comments are due: 
February 16, 2010.

ADDRESSES:  Submit comments electronically via the Commission's Filing 
Online system at http://www.prc.gov. Commenters who cannot submit their 
views electronically should contact the person identified in ``FOR 
FURTHER INFORMATION CONTACT'' by telephone for advice on alternatives 
to electronic filing.

FOR FURTHER INFORMATION CONTACT:  Stephen L. Sharfman, General Counsel, 
202-789-6820 or <a href="/cdn-cgi/l/email-protection#9cefe8f9ecf4f9f2b2eff4fdeefaf1fdf2dceceeffb2fbf3ea"><span class="__cf_email__" data-cfemail="93e0e7f6e3fbf6fdbde0fbf2e1f5fef2fdd3e3e1f0bdf4fce5">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION: Section 3652 of title 39 of the United 
States Code requires the Postal Service to file several reports with 
the Postal Regulatory Commission. Section 3652(a)(1) requires a report 
on the costs, revenues, rates, and quality of service associated with 
its products within 90 days after the close of each fiscal year. That 
section requires that the Postal Service's annual report be 
sufficiently detailed to allow the Commission and the public to 
determine whether the rates charged and the service provided comply 
with all of the requirements of title 39.
    The Postal Service filed annual reports to the Commission in 
compliance with 39 U.S.C. 3652 on December 29, 2009, referred to 
comprehensively as the Annual Compliance Report (ACR) FY 2009. Appended 
to it are four basic data reports: (1) The Cost and Revenue Analysis 
(CRA); (2) the International Cost and Revenue Analysis (ICRA); (3) the 
models of costs avoided by worksharing; and (4) billing determinant 
information.\1\ A full list of materials supporting the FY 2009 ACR

[[Page 1659]]

accompanies the report as Attachment One.
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    \1\ United States Postal Service FY 2009 Annual Compliance 
Report, December 29, 2009 (FY 2009 ACR). Public portions of the 
Postal Service's filing are available at the Commission's Web site, 
http://www.prc.gov.
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    The Postal Service observes that all four basic data reports (CRA, 
ICRA, avoided cost studies, and billing determinants) have 
traditionally been filed with the Commission on an annual basis, and 
therefore are familiar to the Commission, both from prior rate cases 
and the previous two ACRs. It notes that there has been a significant 
change in the format of some of these materials. Where the CRA formerly 
presented financial data for competitive products as a single line 
item, it now presents data for five competitive product groups, 
consistent with the new format in which the Postal Service presents the 
public version of the Revenue, Pieces, and Weight report. In addition, 
the non-public annex filed by the Postal Service for the first time 
presents detailed financial data for competitive product NSAs. The 
supporting documentation for this new level of detail in these areas 
also remains in its non-public annex. Id. at 83-85. Finally, the Postal 
Service has filed a public and a non-public version of its Cost 
Segments and Components Reconciliation to Financial Statements and 
Account Reallocations report. Financial accounts relating to 
competitive products have been redacted from the public version. In the 
FY 2008 ACR, this was filed as an unredacted public document.
    Section 3652(g) of title 39 requires that the Comprehensive 
Statement of Postal Operations mandated by 39 U.S.C. 2401(e) and 
performance and program plans mandated by sections 2803 and 2804 be 
included as a part of the Postal Service's annual compliance report. 
The Postal Service's Comprehensive Statement is filed as USPS-FY09-17 
and is also available on its Web site: http://www.usps.com/strategicplanning/cs09/CSPO_09.pdf.
    After receiving the FY 2009 ACR, the Commission is required under 
39 U.S.C. 3653 to provide interested persons with an opportunity to 
comment on these reports and to appoint a Public Representative to 
represent the interests of the general public. Kenneth E. Richardson 
serves as the Public Representative in this docket.\2\
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    \2\ See Notice of Appointment of Public Representative, October 
28, 2009.
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    The Commission hereby solicits public comment on these reports, and 
on whether any rates or fees in effect during FY 2009 (for products 
individually or collectively) were not in compliance with applicable 
provisions of chapter 36 of title 39 (or regulations promulgated 
thereunder). Commenters addressing market dominant products are 
referred in particular to applicable requirements (39 U.S.C. 3622(d), 
(e) and 3626); objectives (39 U.S.C. 3622(b)); and factors (39 U.S.C. 
3622(c)). Commenters addressing competitive products are referred to 39 
U.S.C. 3633.
    The Commission also solicits public comment on whether any service 
standards in effect during FY 2009 were not met. Commenters addressing 
the achievement of service standards for products within the market 
dominant classes of mail or special services are referred to 39 CFR 
parts 121 and 122, adopted 72 FR 72216 et seq., December 19, 2007.
    Additionally, the Commission solicits public comment on whether the 
Postal Service has met the goals established in the annual 
Comprehensive Statement and program and performance plans included in 
the Comprehensive Statement, which will assist the Commission in 
developing appropriate recommendations to the Postal Service related to 
the protection or promotion of the public policy objectives of title 
39.
    Comments by interested persons are due on or before February 1, 
2010. Reply comments are due on or before February 16, 2010. After 
completing its review of the FY 2009 ACR, public comments, and any 
other information submitted in this proceeding, the Commission will 
issue an Annual Compliance Determination (ACD).
    This is the third compliance report filed by the Postal Service 
since passage of the Postal Accountability and Enhancement Act (PAEA). 
Some of the issues raised by transitioning from the Postal 
Reorganization Act to the PAEA were resolved in FY 2009, easing the 
task of the Postal Service in preparing its report, and the task of the 
Commission and the public in evaluating it. The Commission has adopted 
rules prescribing the form and content of the Postal Service's periodic 
reports, including its annual compliance report.\3\ In its FY 2009 ACR, 
the Postal Service presents costs and revenues aligned (for the most 
part) with the market dominant and competitive product lists in the 
Mail Classification Schedule.
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    \3\ See Docket No. RM2008-4, Notice of Final Rule Prescribing 
Form and Content of Periodic Reports, April 16, 2009.
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    In FY 2009, the Commission also adopted rules governing the 
treatment of commercially sensitive information. Those rules require 
the Postal Service to apply for non-public treatment of information 
required in periodic reports. Its application must specify its reasons 
for concluding the particular information is commercially sensitive and 
in need of non-public treatment, and describe with particularity the 
nature of the competitive harm that public disclosure is likely to 
cause.\4\ Accordingly, the Postal Service has accompanied its FY 2009 
ACR with an application for non-public treatment of certain competitive 
product information, including its supporting rationale in Attachment 
Two. There, the Postal Service argues that costs at the level of 
individual competitive products and below are generally commercially 
sensitive, and that volume and revenue at the level of billing 
determinants are commercially sensitive. In its domestic CRA, the 
Postal Service has aggregated competitive products into five groups 
that it views as appropriate for public disclosure--Total Express Mail, 
Total Priority Mail, Total Ground, Total International Competitive, and 
Competitive Services. In its FY 2008 domestic CRA, it had presented 
comparable data in a single competitive products line item.
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    \4\ See Docket No. RM2008-1, Final Rule Establishing Appropriate 
Confidentiality Procedures, June 19, 2009.
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    Among the materials submitted by the Postal Service as part of its 
filing is a document identified as USPS-FY09-9, which serves as a 
roadmap summarizing other materials submitted as part of the FY 2009 
ACR and discussing changes in methodologies from those used in the FY 
2008 ACD. The Postal Service explains that methodological changes are 
discussed in general terms in a separate section of the roadmap 
document (USPS-FY09-9), and in more detail in the narrative preface 
accompanying each of the appended materials. The Postal Service 
explains that to the extent feasible it has adhered to the 
methodologies used in the FY 2008 ACD or approved by the Commission in 
informal rulemakings subsequent to the FY 2008 ACD. On pages 5 and 6 of 
the FY 2009 ACR, the Postal Service provides a list of dockets in which 
it has proposed changes to analytical principles used in periodic 
reporting, and identifies those rulemakings that have been completed 
and those that are still pending. With respect to those that are still 
pending, the Postal Service observes that in some instances, use of a 
changed analytical principle was necessary to reflect changed 
circumstances. In all other instances, the Postal Service explains that 
it has provided ``toggle switches'' in the documentation to allow the 
impact of the proposed change to be separately identified and reversed, 
if necessary. FY 2009 ACR at 6.

[[Page 1660]]

    The Postal Service's FY 2009 ACR discusses the evolution of its 
measurement of service standards to meet the mandate of 39 U.S.C. 
3652(a)(2)(B)(i). The Postal Service reports that its hybrid IMb-based 
system for obtaining service performance results for bulk market 
dominant products is still under development. The Postal Service 
intends to use data from this system to measure service performance of 
its bulk mail products in the future. Id. at 9-10. Also of interest is 
the expansion of the coverage of the Postal Service's EXFC system for 
measuring the service performance of single-piece First-Class Mail from 
463 3-digit ZIP Code areas to 892 3-digit ZIP Code areas. It notes that 
on-time performance in the expansion ZIP Codes initially lagged the on-
time performance of the legacy ZIP Codes by 13.5 percent, but that 
management initiatives reduced that gap to less than 1 percent by the 
end of FY 2009. Id. at 12-13.
    In its most recent compliance determination, the Commission raised 
concerns about the customer satisfaction measurement survey used by the 
Postal Service in its FY 2008 ACR. The Postal Service describes new 
modifications it made to improve that system, id. at 16-17, and 
customer satisfaction measurement instruments it has developed and is 
implementing for use in its FY 2010 ACR. Id. at 19.
    Generally, market dominant products that were flat shaped or parcel 
shaped failed to cover their attributable costs in FY 2009. For 
example, Periodicals lost $642 million, earning revenues that were only 
76 percent of attributable costs. Id. at 40, Table 3. Standard Regular 
flats, and Standard Regular parcels and NFMs together lost $830 
million. Flats were roughly 82 percent of attributable costs, and 
revenues for parcels and NFMs were roughly 75 percent of attributable 
costs. Id. at 26, Table 2. Package Services, as a class, lost $53 
million. Among package services products, only Bound Printed Matter 
flats and Inbound Surface Parcel Post covered their attributable costs. 
Id. at 42-43, Table 4. Four Special Services failed to recover their 
attributable costs--Registered Mail, Stamped Cards, International 
Ancillary Services, and Confirm. Id. at 52-53, Table 5. Finally, 
International Inbound Single-Piece First-Class Mail failed to cover its 
costs, earning revenues that were approximately 60 percent of 
attributable costs. Id. at 22. Additionally, the Postal Service 
provides a discussion of the competing policy considerations that 
impact workshare discounts and the reasons a substantial number of 
workshare discounts may have exceeded avoided costs in FY 2009. Id. at 
58-73.
    With respect to competitive products, seven international products 
failed to recover their attributable costs--Inbound International 
Expedited Services 1 and 2; Inbound Surface Parcel Post at Non-UPU 
Rates; International Money Transfer Service; Competitive Registered 
Mail; Competitive Insurance; Competitive Return Receipt; and 
Competitive International Business Reply Service negotiated service 
agreement contracts. Id. at 77-79.
    The Postal Service estimates that competitive products as a whole 
covered their incremental costs, calculated two alternative ways, and 
therefore pass the test for identifying cross-subsidy of competitive 
products by market dominant products. It, therefore, concludes 
competitive products were in compliance with 39 U.S.C. 3633(a)(1).
    It is ordered:
    1. The Commission establishes Docket No. ACR2009 to consider 
matters raised by the Postal Service's FY 2009 Annual Compliance 
Report.
    2. Comments on the United States Postal Service FY 2009 Annual 
Compliance Report to the Commission, including the Comprehensive 
Statement of Postal Operations and other reports, are due on or before 
February 1, 2010.
    3. Reply comments are due on or before February 16, 2010.
    4. The Secretary shall arrange for publication of this order in the 
Federal Register.

    By the Commission.
Shoshana M. Grove,
Secretary.
[FR Doc. 2010-295 Filed 1-11-10; 8:45 am]
BILLING CODE 7710-FW-S


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