Source: http://il.findacase.com/research/wfrmDocViewer.aspx/xq/fac.19790608_0000092.CDC.htm/qx
Timestamp: 2016-10-27 13:15:00
Document Index: 794576111

Matched Legal Cases: ['§ 3622', '§ 3622', '§ 3622', '§ 3622', '§ 3622', '§ 3625', '§ 403', '§ 101', '§ 3622', '§ 3621', '§ 3621', '§ 2005', '§ 2005', '§ 3622', '§ 3622', '§ 292']

| 06/08/79 National Association of v. United States Postal
06/08/79 National Association of v. United States Postal
NATIONAL ASSOCIATION OF GREETING CARD PUBLISHERS, PETITIONERv.UNITED STATES POSTAL SERVICE, RESPONDENT, ASSOCIATION OF AMERICAN PUBLISHERS, INC., RECORDING INDUSTRY ASSOCIATIONGREETING CARD PUBLISHERS, APPELLANTv.UNITED STATES POSTAL SERVICE, APPELLEE; NATIONAL ASSOCIATION OF GREETING CARDPUBLISHERS, APPELLANTv.UNITED STATES POSTAL SERVICE, APPELLEE; TIME INCORPORATED, PETITIONERv.
OF AMERICA, INC., COUNCIL OF PUBLIC UTILITY MAILERS,
GROWERS & SHIPPERS LEAGUE OF FLORIDA, ET AL., ASSOCIATED
THIRD CLASS MAIL USERS, AMERICAN BANKERS ASSOCIATION,
AMERICAN BUSINESS PRESS, INC., MAGAZINE PUBLISHERS
ASSOCIATION, INC., DIRECT MAIL/MARKETING ASSOCIATION, INC.,
READER'S DIGEST ASSOCIATION, INC., AMERICAN COUNCIL ON
EDUCATION, UNITED PARCEL SERVICE OF AMERICA, AMERICAN
NEWSPAPER PUBLISHERS ASSOCIATION, and the NATIONAL
NEWSPAPER ASSOCIATION, DOW JONES & COMPANY, INC., NATIONAL
FOUNDATION -- MARCH OF DIMES, UNITED PARCEL SERVICE OF
AMERICA, INC., INTERVENORS; NATIONAL ASSOCIATION OF
POSTAL SERVICE, RESPONDENT; TIME INCORPORATED, APPELLANT v.
UNITED STATES POSTAL SERVICE; GROWERS AND SHIPPERS LEAGUE
OF FLORIDA, and FLORIDA GIFT FRUIT SHIPPERS ASSOCIATION, APPELLANTS v. UNITED STATES POSTAL SERVICE, APPELLEE;
NEWSPAPER ASSOCIATION, PETITIONERS v. UNITED STATES POSTAL
SERVICE, RESPONDENT; AMERICAN BUSINESS PRESS, INC., PETITIONER v. UNITED STATES POSTAL SERVICE, RESPONDENT;
AMERICAN BUSINESS PRESS, INC., APPELLANT v. UNITED STATES
POSTAL SERVICE; MAGAZINE PUBLISHERS ASSOCIATION, INC., APPELLANT v. UNITED STATES POSTAL SERVICE; MAGAZINE
PUBLISHERS ASSOCIATION, INC., PETITIONER v. UNITED STATES
POSTAL SERVICE, RESPONDENT; STATE OF MAINE, STATE OF INDIANA, STATE OF FLORIDA, STATE OF RHODE ISLAND, STATE OF
WASHINGTON, and STATE OF ARKANSAS, PETITIONERS v. UNITED
STATES POSTAL SERVICE, RESPONDENT, AMERICAN BUSINESS PRESS, INC., STATES OF UTAH, IOWA AND ILLINOIS, DIRECT
MAIL/MARKETING ASSOCIATION, INC., MAGAZINE PUBLISHERS
ASSOCIATION, INC., READERS DIGEST ASSOCIATION, INC., TIME, INC. & UNITED PARCEL SERVICE OF AMERICA, INC., ASSOCIATION
OF AMERICAN PUBLISHERS, INC., MAIL ORDER ASSOCIATION OF
AMERICA, PARCEL SHIPPERS ASSOCIATION, AMERICAN NEWSPAPER
PUBLISHERS ASSOCIATION & NATIONAL NEWSPAPER ASSOCIATION,
DOW JONES & CO., INC., INTERVENORS; COMMONWEALTH OF
MASSACHUSETTS, PETITIONER v. UNITED STATES POSTAL SERVICE, RESPONDENT, MAGAZINE PUBLISHERS ASSOCIATION, INC., TIME INCORPORATED, UNITED PARCEL SERVICE OF AMERICA, INC.,
AMERICAN NEWSPAPER PUBLISHERS ASSOCIATION, NATIONAL
NEWSPAPERS ASSOCIATION, STATE OF CONNECTICUT, DIRECT
MAIL/MARKETING ASSOCIATION, INC., DOW JONES & CO., INC., INTERVENORS*
Nos. 78-1448, 78-1449, 78-1453, 78-1483, 78-1484, 78-1494, 78-1509, 78-1517, 78-1518, 78-1531, 78-1532, 78-1683, 78-1684 1979.CDC.92
Petitions for Review of and Appeals from an Order of the United States Postal Service.
DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE TAMM; LEVENTHAL
In this case the court again has occasion to consider the response of the United States Postal Service ("USPS" or "Postal Service") to the "special, and quite demanding, ratemaking requirements" *fn1 of the Postal Reorganization Act of 1970 ("Act")2 and to this court's views concerning those requirements.
This case arises from the fourth general ratemaking proceeding under the Act. Our principal focus here, as in our cases reviewing earlier ratemaking proceedings,3 is on the methods by which the Postal Service, in setting the rates for the various classes of mail, allocates its costs among those classes. In particular, we must assess the Postal Service's "service related cost" methodology, by which it undertook in response to this court's mandate in National Association of Greeting Card Publishers v. USPS 4 to assign to certain classes of mail fixed delivery costs deemed to result from the maintenance of a six-day-a-week, as opposed to a three-day-a-week, mail delivery schedule.
As to the cost allocation issues that are the subject of this opinion, we affirm. The ratemaking process under the Act has reflected a constructive interaction between the Postal Service and this court that has, to a large extent, developed and sharpened the governing concepts. While certain gaps remain that will be highlighted, the efforts of the Postal Service in this ratemaking proceeding represent a reasonable response to these governing concepts. I. ADMINISTRATIVE PROCEEDINGS
The decision that we review was the culmination of a proceeding, known as Docket No. R77-1, carried out in accordance with the Act's complex ratemaking procedures.5 The Postal Service initiated the process on July 13, 1977, by filing with the Postal Rate Commission a request for a recommended decision on changes in postage rates and fees for postal services. As required by applicable regulations,6 the request contained detailed information on the Postal Service's current financial position, its anticipated revenue needs, and its proposed cost allocation and rate schedule. The request was accompanied by the direct testimony and workpapers of 11 supporting witnesses, and numerous exhibits.
Because of a statutory deadline mandating transmittal of a recommended decision within 10 months,10 the proceedings were conducted before the Commission en banc, without initial reference to an administrative law judge. A total of 62 intervenors and limited participants, together with an Officer of the Commission appointed to represent the interests of the general public, took part. The Commission heard 75 witnesses in 62 days of hearings. The record was closed on February 22, 1978, briefs were submitted, and oral argument was heard for two days on March 28 and 29, 1978.11
In two separate decisions, one addressed to the citizens' rate and one to the other determinations of the PRC, the Board of Governors of the Postal Service approved the recommended decision on May 19, 1978. The rate increases took effect on May 29, 1978. Numerous parties then filed the petitions for review that are now before us. II. JUDICIAL CONSTRAINTS
In the second step, the costs remaining after the attribution in the first step were "assigned" to the various classes under a "value of service" or demand theory approach. Specifically, the Commission developed an "inverse elasticity rule," under which final rates were derived "by assigning to the various classes of mail different markups (above attributed costs) in inverse proportion to the relative elasticity of demand for each of the classes."15 In this way, the Commission purported to " "assign costs in a manner that fully takes into account the noncost factors of the statute.' "16
On judicial review, we held that this two step approach of the PRC did not comply with the requirements of the Act. National Association of Greeting Card Publishers v. USPS , 186 U.S.App.D.C. 331, 569 F.2d 570 (1976), Vacated as to other issues, 434 U.S. 884, 98 S. Ct. 253, 54 L. Ed. 2d 169 (1977). In the language of § 3622(b)(3) and the legislative history of the Act, we discerned an obligation to apply cost-of-service ratemaking principles to the greatest extent possible. Id., 186 U.S.App.D.C. at 346-50, 569 F.2d at 585-89. Thus, of the ratemaking criteria enumerated in § 3622(b), only § 3622(b)(3) was framed as a "requirement," emphasizing the special role played by cost considerations. The requirement that each class or type of service bear the "direct and indirect costs attributable" to it necessitated an "extended attribution" that would take into account indirect costs that were not measurably variable but that could, by employing cost allocation formulae based on accounting principles, "be determined with reasonable confidence to be the consequence of providing the service." Id., 186 U.S.App.D.C. at 347, 569 F.2d at 586. Further, by referring to "all other Costs of the Postal Service reasonably assignable to such class or type," the section required that even the process of assignment was to be carried out in accordance with cost-of-service principles. Finally, we found that the proper locus for allocation on non-cost principles was to be found in the language of § 3622(b)(3), which contemplated that not all postal costs were to be attributed or assigned to a particular class or service. As to the residuum of costs, the other, "discretionary" criteria of § 3622(b) would come into play.
Prior to the Act the Service enjoyed broad discretion in the allocation of postal costs, a discretion which in the past had made the setting of postal rates susceptible to political bartering and the frequently abusive influence of lobbyist efforts. . . . t would be anomalous to construe subsection 3622(b)(3) as permitting a grudging use of cost-of-service principles which, by expanding the residuum of costs subject to discretionary allocation, simply preserves the potential for continuing the very same discriminatory treatment that the Act so clearly intended to remedy.
he Postal Rate Commission must first of all attribute to each mail class or postal service all postal costs which may reasonably be determined, through variability theory as well as through other reasonable inferences of causation, to be the consequence of providing the service. It must then distribute among the mail classes and services that significant portion of all remaining costs of the Postal Service that may reasonably be assigned to each on the basis of best available cost-of-service estimates. The residuum of costs is subject to discretionary allocation in accord with the noncost factors set forth in the Act.
In NAGCP I, we recognized our obligation to defer to the PRC's expert judgment in the selection of cost allocation methodologies. 186 U.S.App.D.C. at 353-54, 569 F.2d at 592-93. We noted that "to be acceptable, a methodology need only be reasoned, non-arbitrary and permissible under the statute." Id., 186 U.S.App.D.C. at 352, 569 F.2d at 591. Our deference is particularly great where the PRC has gone beyond even the "reasonable inferences of causation" that permit "extended attribution" into the zone of "assignment." While both attribution and assignment involve inferences of causation, we observed in NAGCP I that "the latter concept permits a greater degree of estimation and connotes somewhat more judgment and discretion than the former." Id., 186 U.S.App.D.C. at 348 n.59, 569 F.2d at 587 n.59.
B. Marginal Cost Pricing
In terms of economic efficiency, the advantage of marginal cost pricing for regulated utilities is that it serves as a means of "encouraging the maximum economic use of a company's services consistent with the so-called "full-cost' requirement."27 A corollary is its potential for close control of consumer demand, by assuring that consumption choices reflect the current costs to society of providing the resource. Marginal cost pricing has attained some currency in electric power ratemaking, where efficient utilization of increasingly scarce energy resources is a matter of primary concern.28
In the context of postal ratemaking, however, the dominant objective of Congress, as ascertained by the court in NAGCP I, was not so much the regulation of demand for postal services, as the prevention of discrimination among the mail classes. In any event, the concern for maximization of use of capacity is less compelling where demand is inelastic. The court in NAGCP I noted that the Postal Service had conceded that demand for all classes of mail was essentially inelastic at foreseeable rates.29 It rejected the effort to assign almost half the costs of USPS on the basis of relative inelasticities of demand as inappropriate, as in effect permitting a discretion barred by the Act, and as unduly burdening first class mail, the most inelastic of the classes. NAGCP I certainly did not command a complete jettison of economic principles. It approved cost variability as an appropriate starting point for cost determinations. The path to be followed from that point on differed from that of the PRC in view of the congressional intent. This is not the only context in which a concern for equal or fair treatment yields results different from those obtainable if economic efficiency in the allocation of resources were the exclusive or even the dominant goal. The choice of goals and objectives is a policy choice of the legislature, and the court's function is to ascertain the legislature's choice and to apply it, including the assurance of faithful application by agencies which make decisions subject to judicial review. III. SERVICE RELATED COSTS
It is to the credit of USPS and the PRC that they have departed from their initial approach to postal ratemaking and have sought with reasonable fidelity to apply the legislative intent as delineated by this court. The task that confronted them in this ratemaking proceeding was formidable. Yet at the present juncture the primary dispute over cost allocation revolves about the allocation of only 7.14 percent of the Postal Service's total revenue requirement.30 That is the percentage the PRC found "reasonably assignable" to certain classes of mail as "service related costs" calculated as the fixed delivery costs incurred in maintaining a six-day-a-week, as opposed to a three-day-a-week, delivery schedule. The parties raise numerous challenges to the rationality of this assignment pattern. With the deference we accord the PRC's expert judgment in developing cost allocation methods, we find this method of allocation to be reasoned, non-arbitrary, and congruent with the legislature's objective.
there is at least some showing of volume variability over the long run. If costs do not vary with volume over either the short or long run, there is still the possibility of cost assignment under , but we see no basis for attribution, if we are to maintain any distinction between attribution and assignment.36
In view of USPS's improved data on long run variable costs, the Commission found NAGCP I "s requirement of "extended attribution" satisfied. The PRC called for further improvements in data to lessen the need for reliance on "mere inferences of causation."37
Two witnesses provided the main evidence before the Commission. Postal Service witness Jellison, the Assistant Postmaster General for Mail Processing, testified on the differences in service standards. Jellison first ranked the priorities of treatment given the various classes of mail, in order of decreasing significance: (1) first-class mail, including priority mail and post or postal cards; (2) newspapers or red tag mail; (3) parcels (both third- and fourth-class); (4) ordinary papers (all second-class not entitled to red tag service and controlled circulation); and (5) circulars (fourth-class bound printed matter and all third-class except single piece parcels). Jellison then characterized first-class and newspapers as "preferential" because of the requirement of immediate delivery upon receipt at the distribution facility; parcels as "borderline" preferential; and the other classes as "nonpreferential" or "deferrable" because of the ability to defer delivery of that mail for two days after it reached the distribution facility. The witness differentiated the levels of service afforded preferential and nonpreferential mail at each stage of the mail process between receipt and delivery. He asserted that while preferential and nonpreferential mail were often delivered together, deferrability of some classes permitted workload levelling, and avoidance of the need for overtime or part-time employees, at peak periods, with resultant efficiencies. Jellison concluded that because of the deferrability feature, nonpreferential service standards could be met by delivery every other day, as opposed to the current six-day delivery schedule. In his view, were it not for the existence of preferential mail, a three-day delivery system with recipients receiving mail every other work day would be feasible.48
In considering the various challenges to the assignment of service related costs, we recall that we judge a particular ratemaking methodology by whether it is reasoned, non-arbitrary and congruent with the statutory mandate. We do not insist on mathematical precision in developing new ratemaking methods; mere articulation of imperfections in a new scheme will not alone defeat it. This is especially true in cost Assignment, where, as NAGCP I recognized, there is a wide scope for the exercise of judgment and discretion by the PRC. With this overview, we conclude that the service related cost method reflects a reasonable inference of causation, and despite the imperfections identified by the parties, represents an acceptable first effort at meeting the strictures of NAGCP I. Our conclusion is supported by PRC's avowed intention to require refinement of the service related cost method in future rate proceedings.
The newspaper publishers, joined by the first-class mail users,61 make a further argument. For this purpose they assume, in effect, the reasonableness of the PRC model in determining costs that are caused by the need to maintain a six-day delivery schedule. Although the non-preferential classes may not require six-day delivery, in practice they are often delivered without deferral, and so receive the benefit of six-day delivery capacity. By assigning "capacity" costs entirely to the preferential classes, they argue, the PRC gives the nonpreferential classes a "free ride." These parties contend that such a "free ride" is contrary to legal precedent and sound economics. They point to Colorado Interstate Gas Co. v. FPC, 324 U.S. 581, 65 S. Ct. 829, 89 L. Ed. 1206 (1945), as prohibiting such a "free ride" by theoretically "interruptible" customers who get the benefit of capacity provided to serve peakload customers. While Colorado Interstate does lean against free riders, it does not establish a legal prohibition against assigning all capacity costs to peakload customers. That case rather affirmed the FPC's discretion to require interruptible customers to bear some portion of capacity costs.
Various parties attack the PRC for failing to justify fully the operational feasibility of its hypothetical three-day delivery schedule. They also assert that the PRC erred in assuming that all other aspects of postal operations would remain relatively constant under a three-day system and in failing to consider the effects on costs of distortions in the postal system that would result from three-day delivery. The PRC did provide a discussion of the feasibility of the three-day system.63 While some of its assumptions are, to put it mildly, optimistic, we cannot say that the system is so unrealistic a model as to call into question the rationality of the conception underlying service related costs. A model may be useful for purposes of analysis, though it premises a condition that has not been and indeed cannot be exactly duplicated in real life. A familiar instance is the model of Newton's laws of motion with its (unrealistic) premise of a world without friction.
In a similar vein, the magazine publishers and mailers of third- and fourth-class parcels69 contend that it was arbitrary to assign costs on an all-or-nothing basis depending on whether a class was designated preferential or nonpreferential, when the service priorities as described by witness Jellison form not a simple dichotomy but rather a hierarchical array with first-class taking precedence over all other classes. The result, these parties contend, is discrimination the assignment of equal cost responsibility for unequal degrees of service. While there is some merit to this objection, we do not find it fatal in the context of this ratemaking proceeding. USPS and the PRC, in developing the service related cost method, endeavored to meet this court's mandate in NAGCP I. In the initial implementation of a new ratemaking approach, some leeway for approximation and estimation must remain. The courts often uphold regulatory actions on the premise that the approximations will be subject to refinement.70 The rough categorization of service priorities into preferential and nonpreferential was a reasonable first approximation in tracing the costs of providing the various levels of service. That this dichotomy may not suffice in future proceedings is highlighted by the PRC's exhortation to USPS to develop data and methodologies that will reflect more accurately the hierarchy of service priorities. We prefer to leave such efforts at refinement of methodologies in the hands of the PRC.
Finally, we do find substance to the claim of American Business Press, Inc. , an association of publishers of specialized business publications. Despite the fact that preferential or "red tag" second-class mail makes up only 40 percent of all second-class mail, the PRC assigned to all second-class, both preferential and nonpreferential, the service related costs caused by providing preferential service to red tag. We agree with ABP that assignment of service related costs to mail not receiving preferential service raises serious concerns of discrimination.71 In our preceding discussion, we have accepted, at least for this case, the PRC's adoption of a model based on a dichotomy between preferential and nonpreferential mail, even though that distinction may not entirely reflect actual service priorities. But the failure to distinguish in the assignment of costs between preferential and nonpreferential mail goes contrary to the PRC's own model.
Despite our concern, we decline to disturb the PRC's decision at this time. There is some doubt whether the issue was fully ventilated in the proceedings before the PRC.72 In any event, the Commission has chosen to deal with the issue as a classification matter, rather than in the context of a ratemaking proceeding. In Docket No. MC76-2, the Commission recently rejected a proposed surcharge on red tag mail, as well as a proposal to eliminate the current restriction on the availability of red tag to periodicals with a frequency of once a week or more.73 The Governors affirmed this aspect of the Commission's recommended decision, but rejected a recommendation that red tag be incorporated into the Domestic Mail Classification Schedule as a separate subclass of second-class.74 Both decisions indicated that a reexamination of the question would be appropriate in light of the adoption subsequent to the development of the record in that proceeding of the service related cost methodology.75 The PRC has recently initiated a proceeding, Docket No. MC79-3, to undertake that reexamination.76 Although, as this discussion reveals, mail classification and postal rate issues are often intertwined, the Act establishes separate, though parallel, procedures for considering each of them.77 While it is feasible, and perhaps desirable, to consolidate the consideration of classification and rate issues where appropriate,78 the PRC did not act arbitrarily in choosing to explore this matter in the context of classification proceedings. We therefore defer to the PRC's pending proceeding where the issue will receive further analysis, with this court's concern in mind.79 IV. FIRST-CLASS USERS' CLAIMS
Several petitioner and intervenor states, large users of first-class mail, mount a generalized attack on both the rate schedule adopted by the Board of Governors in approving the PRC decision, and the cost allocations underlying that rate schedule. The cornerstone of their position is a comparison of the rates charged for allegedly similar pieces of first- and second-class mail receiving identical service. Thus, the rate for mailing a piece of presorted first-class mail weighing four ounces would be 52 cents, while the rate for a piece of second-class red tag mail weighing four ounces would 10.8 cents or less, depending on the degree of presortation.80 The States point to portions of Postal Service witness Jellison's testimony supposedly proving that first-class and red tag receive identical service.81
Nothing in NAGCP I requires such a result. The court condemned the overt use of "value of service criteria," I. e., assigning almost half of the costs of the Postal Service on the basis of the relative inelasticities of demand of the mail classes.92 The court commended the use of cost-of-service principles. But whether the costs so ascertained, and rates based thereon, will suffice to cover revenue needs naturally requires volume projections, even though these involve some ascertainments of demand elasticity. This is inherent in any rational scheme of cost allocation. V. SECOND-CLASS USERS CLAIMS
American Business Press attacks the limitation on eligibility for the presort discount as discriminatory against smaller publications that cannot fill one-third sacks when the presorting is to five digit zip codes, either because of low circulation or wide geographic dispersion. Record evidence suggested that only a small percentage of all publications would be eligible for the discounts,96 although approximately 77 percent of regular rate mail, by volume, would be eligible.97 ABP argued before the Commission that the proper measure of eligibility for the presort discounts should be the six-copy bundle, the standard prescribed by postal regulations for separating bulk mailing from individual mailings.
We read the PRC's opinion as reflecting a full consideration of the pertinent factors. The Commission expressly took into account the interests of small publications though not to the degree ABP desires by modifying the presort discount, limited to mailers using five digit zip codes, so as to be available as well to those using three-digit city zip codes (though still subject to the one-third sack restriction).104 The Commission also rejected a zoned editorial charge, because small publications are least able to avoid the highest zone charges through the device of multiple points of entry.105
The magazine publishers attack as contrary to the evidence the PRC's adoption of the Postal Service's estimate that the average weight of a second-class regular rate publication in the test year would be 6.1 ounces.106 They assert that this figure represents an unjustified extrapolation from a recent downward trend in the average weight of second-class publications. Invoking a survey of Magazine Publishers Association members, the publishers argue that the downward trend has been reversed, and that average weight has actually increased. The result is a $29 million underestimation of the revenues that will be generated by the two poundage charges, which together account for 52 percent of second-class regular rate revenues.107
Despite some misgivings, we are not inclined to remand on this point alone, in view of its relative lack of consequence and the fact that the PRC has insisted upon improved data in future proceedings. Postal ratemaking continues to evolve and we cannot yet expect USPS and PRC to have gleaned every bit of data and developed every model to perfection. Considering the PRC's immense task in digesting huge quantities of data and meeting the requirements of the Act, we believe it a sound approach to forgive such minor transgressions. VI. HOLDING
We are called upon to review decisions of the Governors of the United States Postal Service (Governors)1a approving the Postal Rate Commission's recommended decision2a in docket no. R77-1, a ratemaking proceeding.3a The petition for review gives rise to numerous issues involving the Postal Reorganization Act of 1970 (Act)4a and interpretations thereof.5a We have considered challenges to postal cost methodology6a and certain additional claims7a in the companion opinion penned by Judge Leventhal. We now turn to three final areas of the PRC's and Governors' actions which are questioned on review: (1) the rejection of the citizens' rate mail proposal; (2) the provision in the revenue requirement for recovery of accumulated losses; and (3) the imposition of constraints on fourth-class mail rates found to be cost-justified. We treat these challenges Seriatim. I. CITIZENS' RATE MAIL
The Board of Governors initiated the CRM proposal by authorizing8a the United States Postal Service (Postal Service) to request a recommended decision on a change in the classification schedule that would lead to the adoption of a new subclass for citizens' rate mail, with appropriate rates.9a CRM, as proposed by the Postal Service, would be a separate first-class service to be used by individuals for the mailing of their personal correspondence. Users of CRM would be entitled to a lower rate of thirteen cents in exchange for service inferior, to some degree, to regular first-class service, which would be available at a higher rate of sixteen cents. CRM would have to comply with standard size restrictions and be fully ZIP-coded, and would be denoted by a special stamp.
According to the Postal Service's proposal, all first-class mail would be treated alike prior to the delivery stage of the mail process. However, CRM would be "deferrable" in the delivery function.10a If exigencies required, mail carriers would separate the CRM mail from the first-class mail at the delivery unit, and set aside sufficient CRM to alleviate the immediate delivery problem.11a While delivery of the remaining regular first-class mail would be accomplished on the first delivery trip, delivery of the segregated CRM would be deferred until the second delivery trip.
The PRC held prolonged hearings on the CRM proposal, and considered briefs, comments filed, and oral argument by the parties to the proceedings and numerous intervenors.12a The PRC concluded that the evidentiary record did not support the implementation of a CRM service,13a as requested by the Postal Service, and did not establish that the CRM proposal would meet the service, ratemaking and classification requirements14a of the Act. As a result, the PRC recommended to the Governors that the CRM proposal not be adopted, and that the regular first-class mail rate be increased only to fifteen cents rather than sixteen cents, as proposed. One week later, the Governors approved the PRC's recommended decision.15a
The National Association of Greeting Card Publishers 16a makes a multi-pronged attack on the administrative decisions declining to adopt the CRM proposal. NAGCP contends that the Governors abused their discretion in approving the PRC's recommended decision after finding it not fully acceptable. NAGCP also directly challenges the PRC decision on narrower grounds. NAGCP alleges the PRC erred in determining that: (1) the proposed separate citizens' classification was not justified on the record before the agency; and (2) CRM must bear service-related costs, and the revenue and cost estimates before the PRC were too uncertain.
NAGCP bases its general objection to the Governors' ratification of the PRC rejection of the CRM proposal on qualifying language employed in the Governors' decision. Although the Governors found that the Commissioner's various opinions did not "add up . . . to a fully acceptable analysis"17a and that the PRC was "less than wholly persuasive,"18a the Governors nevertheless approved the PRC decision "with reservations on part of the Commission's analysis."19a According to NAGCP, the Governors abused their discretion by approving an unacceptable decision.
However, contrary to NAGCP's assertion, the Governors did not approve a decision they found unacceptable. The mere fact that the Governors found the PRC decision to be not "totally acceptable" or "less than wholly persuasive" does not vitiate the Governors' approval. Adherence to NAGCP's line of argument would mandate the Governors' rejection of any PRC decision with which the Governors were not totally satisfied. Such a mandate is unsupported by logic or by statute. The statutory provision applicable to the Governors' action, 39 U.S.C. § 3625 (1976), specifically allows for varying degrees of acceptance or rejection of a PRC recommended decision.20a The Governors were not forced to choose between total acceptance or total rejection of the PRC decision. They could have, under protest, allowed the recommended decision to take effect and either sought judicial review or returned the recommended decision to the PRC for reconsideration.21a The Governors alternatively could have chosen to modify the PRC decision themselves. The Governors obviously were not sufficiently dissatisfied with the PRC decision to reject it, allow it under protest, or modify it. We decline to add the judicial veneer of a non-statutory requirement that the Governors find a PRC decision "wholly acceptable" in order to approve it.22a
NAGCP attacks the PRC's rejection of the CRM proposal as violative of the classification23a and ratemaking24a provisions of the Act. The Governors' order, which is the subject of our review, interprets the PRC rejection of the CRM proposal as resting on two basic grounds, only one of which they question as less than wholly persuasive. The Governors read the PRC decision as boiling down to a "recommendation that (1) the record does not support a finding that "individuals' is a proper grouping for Classification purposes, and therefore, the proposal violates (39 U.S.C.) § 403(c), and (2) the proposed Rates for citizens' rate mail do not meet the requirements of (39 U.S.C. s) 3622(b)(3)."25a
The PRC's conclusion that the CRM proposal creates an impermissible classification under section 403(c) is based on two findings: (1) the record reveals no material service distinctions from regular first-class mail justifying a separate classification; and (2) even assuming Arguendo that a material service distinction exists, the record does not support a finding that household users are a special group qualified for separate classification.26a
The PRC split over the question whether deferrability of CRM justified a separate classification.27a The Governors found that the deferrable feature of the CRM proposal distinguished it from regular first-class mail for classification purposes.28a The Governors therefore considered the alternate PRC ground for its determination that CRM may not be separately classified, I. e., a subclass for use only by individuals is unjustified.29a
According to the Governors, the PRC inappropriately phrased the crucial classification question as whether 39 U.S.C. § 101(a) (1976)30a accords a "special status" to "personal correspondence from individuals."31a Rather, the issue is whether a distinction might be drawn between business originated mail and mail sent by individuals. The Governors found that section 101 was hospitable to such a distinction.32a
After reviewing the PRC classification decision, the Governors considered the remainder of the issues that attended the CRM rate proposal issues concerning the assignment of service related costs to CRM and the record's uncertainties in the subclass' volume, revenue, and effect on postal operations.33a
In determining the unit costs for CRM, the Postal Service did not assign to CRM any service related costs.34a The PRC decided that exemption of CRM from SRC assignment would be proper only if "CRM could be deferred on an operational basis to meet Postal Service needs should appropriate occasion therefore arise."35a Based on the evidence, the PRC concluded that CRM is not easily separable from "preferential mail," which requires immediate delivery,36a and thus, not readily susceptible to actually being deferred at any point in the mailstream.37a The PRC decided that insufficient operational diminution in first-class service for CRM existed, due to the likely infrequency of deferral of CRM38a and the resultant minimal delay in delivery, to warrant the total exemption of CRM from SRC.39a
NAGCP claims that the same material service differences which persuaded the PRC to endorse assignment of SRC to preferential mail and nonassignment of SRC to nonpreferential mail40a support assignment of SRC to regular first-class mail and nonassignment of SRC to deferrable CRM. Therefore, NAGCP asserts, the PRC discriminatorily assigned SRC across the board to all first-class mail, while drawing finer and more accurate distinctions in its assignment of SRC to preferential as opposed to nonpreferential mail.41a
The PRC determined that uncertainties in the record on CRM's volume, revenue, and effect on postal operations, factors which go to the heart of a rate decision under 39 U.S.C. § 3622(b)(3) and (4),42a made informed consideration of the CRM proposal impossible. For example, the PRC determined that there was insufficient evidence in the record to estimate CRM volume; and, therefore, it could not estimate the loss in regular first-class mail revenues that would result from CRM, or the revenue that would be produced by CRM itself.43a The PRC also determined that the Postal Service's cost estimates for CRM were questionable.44a In general, the PRC concluded that the evidence revealed an extreme range of unlimited uncertainty as to revenue and cost estimates.45a
It is the court's function, at this juncture, to determine whether substantial evidence in the record justifies the PRC's rejection of the CRM proposal on the basis of uncertainties in volume, revenue and cost estimates which would render application of the ratemaking criteria in section 3622(b) a futile exercise. It is clear that the PRC did not create an insuperable barrier of certainty for the CRM proposal. It merely concluded that adequate information was not available in the record by which a reasonable estimate could be made. The lack of information is understandable in light of the late stage at which CRM was introduced.46a The PRC concluded that the Postal Service's revenue estimates were based on questionable studies,47a and that questions concerning assignment of SRC to CRM eroded the Postal Service's cost estimates. In light of these uncertainties in the record, we conclude that the PRC's rejection of CRM was based on substantial evidence.
The issue whether Vel non CRM should bear SRC further obfuscates the uncertain CRM cost estimates. We are unpersuaded by NAGCP's attempt to analogize nonassignment of SRC to nonpreferential mail, with that of nonassignment of SRC to CRM. The overall level of service received by nonpreferential mail justifies disparate SRC assignments,48a but there are no comparable differences in overall levels of service between the proposed CRM and regular49a first-class mail. In contrast to its finding on nonpreferential mail, the PRC found that the infrequency of deferral of CRM and the resultant minimal delay, did not support the necessary finding that CRM could be deferred on an operational basis. Thus, it concluded that CRM as proposed should bear at least a portion of SRC. This is not to say that an across-the-board assignment of SRC to all first-class mail, both to CRM and regular first-class, is warranted. We have noted our concern, in the context of the treatment of "red tag" mail and other regular rate second-class, that the assignment of SRC reflect service priorities within a class.50a
In sum, we affirm the Governors' order which accepts the PRC recommendation to reject the CRM proposal. However, we, like the Governors, do not rest our decision on the PRC classification conclusion. Rather, we agree with the Governors and the PRC that the wide range of uncertainties in the record surrounding the CRM proposal rendered rational and informed application of the ratemaking provision51a a near impossibility. However, we emphasize that our decision is strictly limited to the CRM proposal and the record in this ratemaking proceeding. Our affirmation of the PRC's rejection of this CRM proposal does not imply that future CRM proposals, supported by a fuller, more substantial record, should be rejected. By contrast, we echo Chairman DuPont's encouragement to the Postal Service to restudy the CRM concept and offer a new proposal in future proceedings.52a II. PRIOR YEARS' LOSSES
We now turn to the question whether the Postal Service may include a provision for the recovery of prior years' operating losses in its revenue requirement under 39 U.S.C. § 3621 (1976).53a The PRC54a and the Governors55a first approved this practice in the 1976 ratemaking proceeding (docket no. R76-1), review of which was dismissed as moot.56a The PRC's and Governors' decisions in the proceedings now under review approved the recovery of this item in the revenue requirement, relying almost entirely on their 1976 decisions. We hold that the language of 39 U.S.C. § 3621 and the legislative intent underlying the Act57a allow the Postal Service, in the exercise of its sound economic judgment, to recover these accumulated operating deficits through the revenue requirement in these proceedings.
The PRC decision before us states "that the requested provision for recovery of prior year losses is reasonable and in accord with precedent established in Docket No. R76-1."58a Due to the relatively cursory treatment of this issue in the PRC decision now under review, we have looked to the PRC decision in docket no. R76-1 for the explanation of this item and the rationale supporting its inclusion in the revenue requirement.59a Our scope of review is limited to whether a fair reading of section 3621 and the legislative intent of the Act provide authority for the Postal Service's election to recoup prior years' losses through the revenue requirement, rather than through borrowing or appropriations.
C. Computation of Prior Years' Losses
Operating deficits have plagued the Postal Service for decades.60a The Act was passed to solve this problem, but unfortunately the Act's goals have failed to reach fruition. The Postal Service has continued to incur operating losses.61a It has attempted to offset these losses by drawing down working capital,62a incurring debt,63a reducing services, and increasing rates.64a The Postal Service has also turned to Congress seeking appropriations. See Postal Reorganization Act Amendments of 1976 (1976 Amendments).65a
In the proceeding now under review, the Postal Service computed the total amount of unrecovered prior years' losses at $2.336 billion,66a which is the excess of net operating losses and deficits from 1971 to 1978 over the $1 billion subsidy appropriated by Congress in the 1976 Amendments.67a The PRC proposes to recover the $2.336 billion over a seven year period, from 1978 to 1985, thus yielding an annual recovery of $334 million.68a It is the inclusion of this $334 million in the revenue requirement as recovery of prior years' losses which petitioners challenge.
Although the PRC decision under review fails to provide us with a detailed breakdown of the composition of the $334 million, it is apparent that these losses have a hybrid nature: (1) a portion of the prior years' losses are represented by operating debt; (2) the remaining segment is not represented by debt obligations, but was incurred by drawing down working capital.69a
Under 39 U.S.C. § 2005(a) (1976),70a the Postal Service is authorized to borrow money to meet operating expenses and to issue obligations therefor. "The Postal Service may . . . pledge and use its revenues and receipts for the payment of the principal of or interest on such obligations." 39 U.S.C. § 2005(b) (1976). The resultant debt obligations, according to the PRC, are includible in the revenue requirements under section 3621, as "debt service (including . . . provision for sinking funds or other Retirements of obligations to the extent that such provision exceeds applicable depreciation charges) . . . ."71a
The PRC decision in docket no. R76-1, upon which the PRC and the Governors relied in this case, considered sections 2005 and 3621 together and interpreted section 3621 as permitting recovery of an amount for payment of obligations issued pursuant to section 2005.72a The PRC decision also rejected the "capital debt" argument that petitioners advance in this court. The PRC explained that the limitation on recovery of debts "to the extent that such provision exceeds applicable depreciation charges" merely prevents double recovery in the revenue requirement, once through depreciation charges and again through charges for debt service.73a
We find that the plain language of section 3621 clearly supports the recovery, through the revenue requirement, of prior years' losses represented by debt. A common-sense reading of the statute refutes the restriction of "estimated costs" to costs that are incurred in the future.74a The statutory language permitting recovery of an amount for "retirement of debt obligations" clearly denotes recovery for costs (debt obligations) incurred in prior years.75a
We also conclude that the language of section 3621 does not support a narrow reading of "debt service" that would restrict it to debt incurred for capital expenses. Congress specifically provided that the Postal Service could incur debt both for capital improvements and for operating expenses. It differentiated between the two outlays in section 2005(a) solely for the purpose of setting a debt ceiling in connection with operating expenses. Congress declined to distinguish between the capital or non-capital purposes for which debt had been incurred when it provided for the inclusion of debt service in the revenue requirement under section 3621. The fact that depreciation charges must be deducted when including a provision for capital debt in the revenue requirement does not mean that a provision for non-capital debt cannot be included in the revenue requirement at all.
As a broad challenge to the recovery of prior years' losses, whether Vel non represented by debt, petitioners also cite the conventional public utility rule which eschews recovery of past losses in current rates. Galveston Electric Co. v. Galveston, 258 U.S. 388, 393, 42 S. Ct. 351, 66 L. Ed. 678 (1922). Recognizing that its interpretation may represent a departure from this conventional rule of regulatory practice, the PRC questioned the rule's applicability to a nonprofit organization, such as the Postal Service, which operates on a statutory break-even standard and may not recoup prior years' losses through later profits.76a
We do not find that the recovery of prior years' losses is barred by a public utility rule barring recovery of prior losses in current rates. See Galveston Electric Co. v. Galveston, 258 U.S. at 388, 42 S. Ct. 351, 66 L. Ed. 678; Communications Satellite Corp. v. FCC, No. 75-2193, slip op. at 22 n. 19 (D.C. Cir. Oct. 14, 1977). Even if the Postal Service were treated as a conventional utility, the rule might be inapplicable in view of the restrictive circumstances surrounding the Postal Service's financial decline.77a In any event, it would be incongruous for us to clamp the shackles of a narrow rule onto the Postmaster General's attempt to return the Postal Service to financial stability, especially in light of the congressional intent to provide the Postal Service with the "unfettered authority and freedom it has been denied for years to maintain and operate an efficient service."78a Therefore, section 3621 statutorily authorizes the recovery of prior years' operating losses represented by debt through inclusion in the revenue requirement.
The issue whether the Postal Service is authorized to recover prior years' losses not represented by debt obligations through inclusion in the revenue requirement is not as easily decided. The PRC relied primarily on congressional intent and the policy of the Act to justify inclusion of these losses under section 3621. The PRC pointed out that one of the major policy determinations of the Act was to give postal management the flexibility to operate an efficient and economical postal system.79a It would be inconsistent with this policy, the PRC reasoned, to limit recovery of losses only to those represented by debt, because this would compel the Postal Service to borrow, and thereby incur attendant interest expense, when the cash needs of the Postal Service would permit drawing down existing funds.80a The PRC concluded that " "the general principles of postal self-sufficiency which underlie the Postal Reorganization Act contemplate the recovery of prior year losses through rates and fees,' to an extent not limited to those losses represented by debt."81a
The Postal Service points out in this court that Congress, in directing that " "total estimated costs' shall Include (without limitation) operating expenses, depreciation . . ., debt service . . ., and a reasonable provision for contingencies,"82a clearly created a nonexclusive list of costs to be included in the revenue requirement. The Postal Service also asserts that principles of statutory interpretation accord weight to the PRC's application of a broad statutory term83a and that the PRC's decision was within the range of permissible choices contemplated by statute.84a The Postal Service contends that congressional intent justifies the inclusion in the revenue requirement of losses not represented by debt because these prior years' losses were incurred as an alternative to borrowing, and allowing their inclusion in the revenue requirement would serve a purpose similar to the provision for retirement of debt obligations.
In opposition, petitioners maintain that only an "open-ended, virtually unlimited construction" of the "without limitation" language in section 3621 would justify the inclusion in the revenue requirement of prior years' losses not represented by debt.85a Finally, opposing parties make the economic policy arguments that blanket recovery of prior years' losses through rates is a strong disincentive to the efficient and economical management mandated by the Act, and that inclusion of prior years' losses will permit rates to be set at levels resulting in a statutorily impermissible profit.
Upon consideration of the parties' numerous arguments, and after examination of the legislative history of the Act, we hold that the Postal Service's election in these proceedings to recover prior years' losses not represented by debt through inclusion in the revenue requirement under section 3621 comports with the legislative intent of the Act and is statutorily permissible. Although losses not represented by debt are not explicitly enumerated as includible in the revenue requirement under section 3621, we do not find this to be a bar. The plain language of the statute provides that " "total estimated costs' shall Include (Without limitation )"86a the enumerated items. We are hard-pressed to envision language less restrictive than this.87a
This is not to say, however, that the term "total estimated costs" is so broad as to be without meaning, or that the phrase "without limitation" grants the Postal Service Carte blanche to include any amount as costs in the revenue requirement. The question whether a particular cost is includible "is one of specific application of a broad statutory term in a proceeding in which the agency administering the statute must determine it initially." NLRB v. Hearst Publications, Inc., 322 U.S. 111, 131, 88 L. Ed. 1170, 64 S. Ct. 851 (1944) 64 S. Ct. 851, 860, 88 L. Ed. 1170. Its determination "is entitled to acceptance unless it lies outside the range of permissible choices contemplated by the statute." Hardin v. Kentucky Utilities Co., 390 U.S. 1, 8, 88 S. Ct. 651, 656, 19 L. Ed. 2d 787 (1968).
In specifying items as "costs" within the meaning of section 3621, the "range of permissible choices contemplated by the statute" includes costs which are demonstrably related to those specifically enumerated in section 3621. The prior years' losses in question are demonstrably related to operating expenses, which are enumerated in section 3621, because they were incurred to pay for operating expenses. Moreover, prior years' losses not represented by debt are of the same character as those losses represented by debt, which the plain language of the statute clearly authorizes,88a because the former were incurred as an alternative to the latter. To hold that the recovery of the losses in question is barred because they are not represented by formal debt would be unduly formalistic and in contravention of the specific statutory purpose of maintaining a financially stable enterprise that operates on a "break-even" basis.
Consideration of the legislative history of the Act convinces us that the Postal Service's determination has "reasonable support in relation to the statutory purpose." Hardin v. Kentucky Utilities Co., 390 U.S. at 9, 88 S. Ct. at 656. In enacting the legislation in question, Congress responded to the severe and imminently catastrophic financial crisis with which this nation's postal system was faced.89a Prior to the Act, the postal system was caught in a seemingly hopeless situation of chronic debt and disorganization. Its descent into bankruptcy and financial chaos appeared inevitable, and the then restrictive laws and archaic postal organization made relief unlikely.90a
Congress then moved affirmatively to rescue the system from impending disaster. It reorganized the postal system and created an independent United States Postal Service. Recognizing this country's need for a viable system of communication by mail, and acknowledging the cumbersome shackles of existing postal regulation, Congress approved the new statutory scheme to meet "the obvious requirement that postal management . . . be given the unfettered authority and freedom it has been denied for years to maintain and operate an efficient service."91a This freedom included giving the Postal Service control over costs as well as the tools with which to exercise that control.92a The tools include the power to borrow,93a to raise revenues from ratemaking,94a and to seek appropriations.95a
When continually mounting deficits and the sluggish movement of ratemaking proceedings96a prompted the Postal Service to seek relief from its losses through appropriations in 1976, the congressional spirit of optimism and revitalization which had accompanied the 1970 Act was tempered with the realization that the Postal Service's struggle with operating deficits would continue.97a To alleviate part of this pressure, Congress enacted the 1976 Amendments,98a thereby appropriating $1 billion to be applied to the operating losses for 1976 and 1977. Congress left intact the remaining amount of loss, recovery of which the Postal Service has determined essential to achieve the goal of a financially stable enterprise.99a
The Postal Service has selected, as its method of financing in this ratemaking proceeding, the inclusion of these losses in the revenue requirement. We do not find its choice an impermissible one in this proceeding, nor do we find it inconsistent with the "central purpose of the (Act) to place the Postal Service on a self-sufficient basis." Direct Mail Advertising Association v. USPS, 147 U.S.App.D.C. 394, 400, 458 F.2d 813, 817, Cert. denied, 409 U.S. 843, 93 S. Ct. 43, 34 L. Ed. 2d 83 (1972). Upon consideration of the legislative history of the Act, we agree that recovery of prior losses not represented by debt in this proceeding has reasonable support in relation to the statutory purpose. See Hardin v. Kentucky Utilities Co., 390 U.S. at 9, 64 S. Ct. 851.
We find the broad economic policy arguments raised by those challenging the recovery of prior years' losses unpersuasive. The various economic stratagems and their effects are matters entrusted to the wise discretion and expertise of the Postal Service.100a We will not substitute our judgment concerning the economic wisdom of its decision to recoup these past operating losses through section 3621, because its decision is consistent with the statutory purposes of the Act the Postal Service should be financially self-sufficient101a and should "break even."102a
The recovery of past losses in the revenue requirement is not to be construed as a mechanism for the approval of costs imprudently incurred.103a In its recovery of prior years' losses in general, the Postal Service must comply not only with the statutory policy of financial self-sufficiency, but also with the congressional mandate of honesty, efficiency, and economical management.104a In the context of these ratemaking proceedings, we find that the language and purpose of the Act support the Postal Service's, the PRC's, and the Governors' decisions to allow the recovery of the past operating expenses not represented by debt through inclusion in the revenue requirement under section 3621. III. FOURTH-CLASS PARCEL POST MAIL RATES
A final challenge to the PRC's and Governors' decisions focuses on whether the PRC's imposition of "constraints" on fourth-class parcel post rates found to be cost-justified is arbitrary and in violation of 39 U.S.C. § 3622(b) (1976).105a We affirm the constrained rate schedule for parcel post in this ratemaking proceeding, because the constraints temper the possibly deleterious impact of restructured parcel post rates and advance the statutory goals of the Act. We rely on the PRC's assurance that this interim path of moderation, which is the product of considering the best available evidence in light of section 3622(b), is not a dead-end but will inevitably lead to a finer tuned compliance with the statutory mandates for ratemaking.106a
Parcel post rates have traditionally rested on weight and distance factors. Eight distance-based categories and sixty-nine weight categories107a intersect to form a matrix of 552 zones for computing parcel post rates. Within each zone, the rate is based on a discrete per piece and per pound charge. In the past, parcel post rate increases have consisted of across-the-board escalations for all of the 552 weight-distance rate cells.
In an attempt to comply with NAGCP I, the Postal Service proposed a new methodology of rate design, which would recover all transportation costs for parcel post through the per pound charge and all remaining costs through the per piece charge.108a One of the basic assumptions underlying this proposal is that all costs, with the exception of transportation costs,109a are insensitive to changes in weight up to thirty pounds, and again from thirty pounds to the seventy pound limit.110a
The PRC was not convinced that the Postal Service's rate design had been verified by empirical methods. It was concerned, moreover, that the drastic rate increases and decreases that would be caused by the proposal would have a harmful effect on users, competitors, and the Postal Service. The PRC thus undertook an independent analysis of the rate design.111a
The PRC's analysis revealed that insufficient evidence supported the proposal's premise that non-transportation costs were insensitive to weight112a and that the Postal Service incorrectly applied the proposed rate component for transportation costs.113a The PRC therefore proposed a modified cost-based rate design based on data from the record.114a The rates that resulted from the PRC's cost-based development would have effectuated dramatic increases and decreases in the current rates in many rate cells. To diminish the potentially deleterious effects of such drastic changes, the PRC placed the following restrictions on its recommended rates: (1) increases in each rate cell are not to exceed fifty percent of the former rate; and (2) no rate cell may decrease to a rate lower than the old rate.115a The PRC expressed its hope that the constrained rates would "move (the PRC) and the Postal Service in the direction of more closely cost-based rates."116a For the interim period, the PRC believed that its constrained rates would more closely reflect costs than the old rates, without creating radical market disturbances.
Petitioners Growers and Shippers League of Florida and Florida Gift Fruit Shippers Association (Fruit Shippers) argue that the PRC should have adopted a cost-based rate schedule without constraints.117 They assert that the imposition of arbitrary constraints, which preclude a decrease below former rates, disregards 39 U.S.C. § 3622(b)(3) and is therefore not "fair and equitable," in violation of 39 U.S.C. 3622(b)(1). Moreover, they allege that using the old rates as a reference point for the constraints is fatal error, because those former rates are unsupported by the evidence and are not tied to cost incurrence. According to the Fruit Shippers, the arbitrary constraints coerce intraclass subsidization, in direct contravention of the mandates of NAGCP I.
United Parcel Service of America, Inc. intervened to oppose the Fruit Shippers' attack on the PRC's and Governors' decisions.118 UPS argues that the imposition of constraints is essential to mitigate the potentially deleterious impact of the recommended rate structure, impacts which have not been sufficiently studied and which may result in a radical tilting of the entire parcel post rate structure to the detriment of users, competitors, and the Postal Service alike. Furthermore, UPS argues, the focusing of the constraints on former rates is not unreasonable or arbitrary when one considers the cost-basis underlying the old rates.
* For convenience the court will refer to this case hereafter as National Association of Greeting Card Publishers v. USPS [Fourth Postal Ratemaking].
* Sitting by designation pursuant to 28 U.S.C. § 292(a).