[Federal Register Volume 88, Number 173 (Friday, September 8, 2023)]
[Proposed Rules]
[Pages 62024-62025]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-19361]


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POSTAL REGULATORY COMMISSION

39 CFR Part 3050

[Docket No. RM2023-9; Order No. 6652]


Periodic Reporting

AGENCY: Postal Regulatory Commission.

ACTION: Notice of proposed rulemaking.

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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 Four). 
This document informs the public of the filing, invites public comment, 
and takes other administrative steps.

DATES: Comments are due: September 29, 2023.

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 Four
III. Notice and Comment
IV. Ordering Paragraphs

I. Introduction

    On August 28, 2023, 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 Four.
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    \1\ Petition of the United States Postal Service for the 
Initiation of a Proceeding to Consider Proposed Changes in 
Analytical Principles (Proposal Four), August 28, 2023 (Petition). 
Proposal Four is attached to the Petition. The Postal Service also 
filed a notice of filing of non-public material relating to Proposal 
Four. Notice of Filing of USPS-RM2023-9-NP1 and Application for 
Nonpublic Treatment, August 28, 2023.
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II. Proposal Four

    Background. The Priority Mail Transportation Cost Model is used in 
financial projections of the expected cost coverage for negotiated 
service agreements (NSAs). Petition, Proposal Four at 1. The current 
model was introduced in Docket No. R2006-1 and is updated annually in 
the Annual Compliance Review (ACR), most recently in Docket No. 
ACR2022.\2\ The Postal Service states that the model disaggregates the 
product-level transportation costs by zone and the resulting cost per 
cube and cost per pound by zone are applied to a customer's weight and 
zone profile in order to generate forward-looking cost projections for 
Priority Mail included in any NSA. Petition, Proposal Four at 1. These 
projections rely on prior fiscal year's costs with inflation factors 
applied to reflect the expected changes in costs due to broader 
economic conditions during the first full year of the NSA. Id. The 
Postal Service states that, however, these projections do not reflect 
expected changes in costs due to Postal Service's changing operational 
conditions during the first full year of the NSA. Id. Thus, the Postal 
Service proposes several changes to the Priority Mail Transportation 
Cost Model in Proposal Four to reflect these types of changes more 
accurately in Priority Mail transportation costs.
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    \2\ Id. (citing Docket No. ACR2022, Library Reference USPS-FY22-
NP27, December 29, 2022).
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    Proposal. The Postal Service proposes several changes to the 
Priority Mail Transportation Cost Model.
    First, the Postal Service proposes a correction to the base year 
model to reflect that a portion of zone 6 pieces utilized distance-
related surface transportation during fiscal year (FY) 2022. Id. at 2. 
The Postal Service states that the current model assumes that zone 6 
pieces are transported entirely by air. Id. The Postal Service states 
that the correction is made by extending the existing methodology used 
for zones 1-5 up to zone 6. Id.
    Second, once the correction to the base year model has been made, 
the Postal Service proposes the following sequence of actions to adjust 
the transportation costs by zone to reflect changes in the split 
between air and surface transportation occurring in the subsequent year 
due to Postal Service's network change. Id.
    A. Collect the proportions of priority mail on air and surface 
transportation by zone from the Product Tracking and Reporting (PTR) 
system, for both the base year and the month most recently ended. Id.
    B. Compare the base year's data with the most recent month's data 
and calculate the change in the percentage of Priority Mail transported 
on air vis-[agrave]-vis surface for each zone. Id. at 3.
    1. If the absolute change from the base year percentage is less 
than five percentage points for a zone, then no adjustment to the base 
year costs is made. Id.
    2. If the absolute change from the base year percentage is more 
than five percentage points for a zone, then the air and surface costs 
for that zone are adjusted by the following method:
    a. The cube-related costs are divided into air-related, distance-
related surface, and non-distance-related surface. Id. The Postal 
Service states that air-related costs include both the air costs and 
the surface costs associated with a connection to air. Id.
    b. The weight-related costs are fully air-related. Id.
    c. The non-distance-related surface costs are excluded from the 
adjustment and remain unchanged. Id. The Postal Service states that 
these are generally

[[Page 62025]]

local transportation costs, which would not be affected by a change in 
the long-distance transportation costs. Id.
    d. The air-related costs (for both cube-related and weight-related 
costs) are adjusted based on the percentage change in the proportion of 
Priority Mail transported on air for that zone. Id.
    e. The distance-related surface costs are adjusted based on the 
percentage change in the proportion of Priority Mail transported on 
surface for that zone. Id. at 4.
    The Postal Service states that this methodology can be updated and 
applied monthly to ensure that the transportation costs reflect the 
most recent operational conditions as operational changes occur 
throughout the year. Id.
    The Postal Service also states that there are two exceptions to 
this methodology. First, for any NSAs filed during January, the 
transportation adjustment from November will be used instead of the 
adjustment from December. Id. The Postal Service explains that this is 
because the air and surface proportions during peak season are 
considerably different from the rest of the fiscal year and would not 
be predictive of the costs that would be incurred during the first full 
year of the NSA. Id. Second, for Priority Mail Non-Published Rates 
agreements filed in Docket No. CP2020-170, instead of applying the 
adjustment every month, the adjustment will only be applied when the 
price floors are updated every year. Id.
    The Postal Service notes that this methodology would only be used 
for forward-looking financial projections, and NSA cost coverage 
reported during the ACR would still be calculated using the average 
costs for the FY. Id. at 4-5.
    Rationale. The Postal Service explains that due to the changes in 
transportation network in FY 2023, the FY 2022 costs for Priority Mail 
may no longer be predictive of the expected costs for Priority Mail 
NSAs being negotiated through the end of calendar year 2023. Id. at 5. 
The Postal Service states that similarly, the FY 2023 costs may also 
not be predictive of the costs for Priority Mail NSAs being negotiated 
during calendar year 2024, because of network changes scheduled to take 
place throughout FY 2024. Id. The Postal Service asserts that Proposal 
Four provides a methodology that uses current census data from PTR to 
adjust the base FY transportation costs to reflect the most recent 
operational changes, which will be an improvement in the accuracy of 
the projected cost coverage of NSAs. Id.
    Impact. According to the Postal Service, the proposed changes have 
no impact on any product-level costs such as those that would have been 
reported in the FY 2022 Public Cost and Revenue Analysis Report, 
because the proposal concerns only the reporting of Priority Mail 
transportation costs by zone. Id. at 5-6. The Postal Service provides 
the impact for each component by zone and the combined impact in 
Library Reference USPS-RM2023-9-NP1 under seal. Id. at 5.

III. Notice and Comment

    The Commission establishes Docket No. RM2023-9 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 Four no later 
than September 29, 2023. Pursuant to 39 U.S.C. 505, Madison 
Lichtenstein 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. RM2023-9 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 Four), filed August 28, 2023.
    2. Comments by interested persons in this proceeding are due no 
later than September 29, 2023.
    3. Pursuant to 39 U.S.C. 505, the Commission appoints Madison 
Lichtenstein 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.

    By the Commission.
Erica A. Barker,
Secretary.
[FR Doc. 2023-19361 Filed 9-7-23; 8:45 am]
BILLING CODE 7710-FW-P