Opinion ID: 370472
Heading Depth: 2
Heading Rank: 2

Heading: Attribution of Variable Costs

Text: 61 As its first step, the PRC determined USPS's revenue requirement by projecting its costs for each of 20 cost segments 33 based on estimates of the volume of mail that would be generated at the proposed rates. 34 The PRC determined the revenue requirement to be $17,585 million, 35 modifying USPS's calculation slightly. 62 Within each cost segment, the PRC then determined the percentage of costs that could be said to vary with volume over either the short or long run. This percentage was then available for attribution to the various classes by application of an appropriate distribution key. In the PRC's opinion, cost variability with volume remained the key to attribution. It stated that it could not have reasonable confidence that costs were in fact the consequence of providing the service unless 63 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 (NAGCP I ), but we see no basis for attribution, if we are to maintain any distinction between attribution and assignment. 36 64 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 65 The PRC apparently takes the position that mere inferences of causation beyond volume variability are not an appropriate basis for attribution. 38 This is not entirely congruent with that part of the language of the NAGCP I opinion that prescribed Attribution of costs through variability theory as well as through other reasonable inferences of causation. 39 Since no party has challenged the PRC decision on this point, we do not pass on it. 40 We do observe, however, that the PRC was struggling with the NAGCP I court's rather murky distinction between attribution (for reasons other than volume variability) and assignment, both of which were to proceed from inferences of causation. 41 Taking into account the PRC's expansion of the scope of attributable costs based on variability, its relegation of costs derived from inferences of causation to the assignable category alone may well have been an appropriate application of NAGCP I. The context is one in which USPS's enhanced ability to attribute costs on the basis of volume variability resulted in the attribution, after PRC modification, of almost 65 percent of total costs. 42