[Federal Register Volume 68, Number 223 (Wednesday, November 19, 2003)]
[Rules and Regulations]
[Pages 65348-65373]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-28643]
[[Page 65347]]
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Part II
Postal Rate Commission
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39 CFR Part 3001
Periodic Reporting Rule; Final Rule
Federal Register / Vol. 68, No. 223 / Wednesday, November 19, 2003 /
Rules and Regulations
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POSTAL RATE COMMISSION
39 CFR Part 3001
[Docket No. RM2003-3; Order No. 1386]
Periodic Reporting Rule
AGENCY: Postal Rate Commission.
ACTION: Final rule.
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SUMMARY: The Commission is adopting a final rule that updates the
periodic reporting regulations. These regulations identify the data and
information the Postal Service is to file with the Commission on a
regular, ongoing basis. The final rule differs from the proposed rule
in several important respects. The Commission has narrowed or
eliminated some filing requirements and has incorporated some
flexibility in meeting other requirements. Adoption of these changes
should facilitate the public's ability to more readily grasp the
quantitative basis and support for Postal Service proposals.
DATES: Effective December 19, 2003.
FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, General Counsel,
202-789-6820.
SUPPLEMENTARY INFORMATION:
Regulatory History
68 FR 2272 (Thursday, January 16, 2003)
Executive Summary
When the Postal Service requests a general rate increase it
supports the request with estimates of how much each of its products
costs, and how much revenue it needs. The validity of these estimates
are central issues in the hearings that the Commission holds to review
the request. Tens of thousands of pages of economic testimony and
documentation, most of it highly technical, are offered to support
raising almost $70 billion in annual revenue from over 200 postal
products.
The Postal Service and interested members of the public have the
right to present a case in support of the rates that they advocate, and
the right to challenge the cases presented by others. The Commission
must develop recommended rates based on the record within a ten-month
statutory deadline. Most participants agree that this severely
compressed process strains their resources to the limit. The Commission
also reviews Postal Service requests for experimental rates or
classifications in even more compressed time frames.
The Commission has a Periodic Reporting Rule to facilitate this
process. It requires the Postal Service to provide certain relevant
financial and operating reports prepared for Postal Service management.
The process will be further streamlined by promptly providing the
Commission and the interested public with access to the standard,
routinely prepared cost and revenue data that serve as the basis for
rate and classification requests.
One of the key reports that the Postal Service currently submits
each year is the Cost and Revenue Analysis (CRA). It contains the
Postal Service's cost, volume, and revenue estimates for the most
recently completed fiscal year, both in total, and by individual
product. Because the postal system has a high proportion of shared
costs, it is difficult to estimate the costs that each product causes.
The CRA that the Postal Service submits under the current rule
estimates unit costs caused by each product, but does not provide
documentation showing how those estimates were derived. Consequently,
it is of limited value in identifying trends in product costs, or in
analyzing their causes, which are core issues in rate and
classification cases.
Under the existing Periodic Reporting Rule, the Postal Service has
been providing some information about how it derives unit product costs
(primarily in the mail processing and transportation areas.) The
updated Periodic Reporting Rule adopted in this order asks the Postal
Service to do this for all of its 20 cost segments.
For each cost segment, the updated Periodic Reporting Rule asks the
Postal Service to provide the basic datasets that it uses to estimate
unit product costs, and identify any new estimating technique it
applies to those data to derive the unit cost estimates in the CRA.
Having this information filed each year, rather than waiting for the
Postal Service to provide it in a general rate case, should produce the
following benefits:
[sbull] When the Postal Service files a general rate case,
litigants and the Commission will already be familiar with the standard
cost and revenue reports on which much of the case is based. This
should reduce the need for discovery, and make it possible to shorten
hearings.
[sbull] When the Postal Service files requests for experimental
classifications, market tests, or negotiated service agreements,
litigants and the Commission should be able to evaluate them more
quickly.
[sbull] Between general rate cases, the Commission and the public
will be able to analyze the accuracy of the cost, volume, and revenue
projections on which current rates are based.
[sbull] Between general rate cases, if the CRA shows that cross-
subsidy or other rate inequity exists, affected parties will have a
basis for asking the Commission to hold a hearing to investigate the
matter and fashion a remedy under Sec. 3662.
[sbull] Between general rate cases, if the CRA shows that costs are
shifting in ways that call current classifications into question, the
Commission will have a basis for initiating a classification hearing to
investigate the matter and fashion a remedy under Sec. 3623.
[sbull] Between general rate cases, parties looking to propose
alternative models of postal cost behavior in future rate cases will be
able to analyze data that reflects current postal operations.
Seven parties filed comments in response to the Commission's
proposal to update the Periodic Reporting Rule. All but the Postal
Service support the rule. They note that a general rate filing
typically consists of thousands of pages of highly technical testimony
and computer material. They complain that the Postal Service takes
whatever ``lead time'' it needs to prepare such filings, whereas they
have no lead time to react to it and prepare alternatives. They argue
that this makes it extremely difficult for them to comprehend the
Postal Service's case and to present alternatives in the brief hearing
time available. They argue that having access to a more thoroughly
documented CRA will help to ``level the playing field'' in rate
litigation.
The Postal Service objects that by requiring it to provide some
supporting documentation for the CRA reports that it issues between
rate cases, the updated Periodic Reporting Rule would impose a burden
equivalent to a rate case presentation every year. It also argues that
by requiring it to disclose the costs of its various products each
year, the updated Rule would jeopardize the competitiveness of its
products.
The update is consistent with the main purpose of the current rule,
which has always been to expedite the processing of general rate cases,
and to allow research into postal cost, volume, and revenue behavior to
continue between rate cases. The information required by the updated
rule also will facilitate the Commission's statutory duties to hear
complaint cases and to initiate classification cases, regardless of
whether a Postal Service rate request is pending.
The Commission finds that complying with the updated rule should
not add significantly to the Postal Service's regulatory burden, since
the Postal Service annually prepares almost all of this material for
its own purposes. The
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Postal Service's own estimates indicate that under normal circumstances
complying with the updated rule would involve only a tiny fraction of
the resources that it devotes to preparing a general rate filing.
With respect to potential competitive harm, the Commission believes
that history shows that there is little cause for concern. The Postal
Service annually disclosed the information required by the updated rule
for six years (FY 1995 though FY 2000) with no indication that
competitive harm resulted.
The revised rule also is consistent with recent reports by the
President's Commission on the Postal Service and the General Accounting
Office that conclude that greater Postal Service financial transparency
is necessary.
I. Introduction
On January 8, 2003, the Commission issued a notice of proposed
rulemaking (NPR) in this docket proposing to update its Periodic
Reporting Rule (39 CFR Sec. 3001.102). PRC Order No. 1358; 68 FR 2272-
2275, Thursday, January 16, 2003. Rule 102 contains a list of reports
and documentation that the Postal Service is required to provide on an
ongoing basis to the Commission on its financial condition and
operating results. Since its inception in 1976, the objective of the
Periodic Reporting Rule has been to ensure that the Commission and the
interested public have access to current financial data and operating
results that are routinely reported to Postal Service management. This
brings a number of important benefits to the ratemaking process. These
benefits were mentioned briefly in the NPR, and are discussed in more
depth in this notice.
The NPR observed that the list of financial reports covered by the
Periodic Reporting Rule has not changed since the mid-1980s, even
though the nature of the reports that the Postal Service routinely
produces to inform management of its financial and operating results
have evolved substantially over that time. This final rule updates the
list of required periodic reports and documentation to reflect the
increasingly sophisticated financial information \1\ regularly produced
by the Postal Service and the improved ability of the Commission and
the public to understand and benefit from such reporting. The final
rule is consistent with the goal of greater financial transparency for
the Postal Service that has recently been recommended by the General
Accounting Office and the President's Commission on the Postal Service.
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\1\ Throughout this order references to ``financial
information'' include cost, volume, and revenue information in
aggregate, and for individual products, unless a narrower meaning is
indicated.
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Joint comments on the NPR were received from the American Bankers
Association and the National Association of Presort Mailers (ABA/NAPM).
Comments were also received from American Business Media (ABM), the
Greeting Card Association (GCA), the Office of the Consumer Advocate
(OCA), United Parcel Service (UPS) and the Postal Service. The OCA and
UPS proposed additional changes that the Commission has decided not to
include in the final rule.
The Purposes of the Final Rule
The final rule calls for the periodic submission of financial
information that is routinely prepared for postal management between
omnibus rate cases. This information does not relate directly to a
particular revenue requirement or set of proposed rates, and none of
the information that it seeks about the Postal Service's financial
estimation process relates to the justification for or merits of that
process. The data and the estimation-process information that the rule
requires shed light on the ratemaking process in a generic sense, and
will improve the ability of the Commission to process future rate,
classification, and complaint cases within the tight deadlines imposed
by the Postal Reorganization Act and the Commission's own
administrative rules. The information sought will also help the
affected public to participate more meaningfully in such cases. The
rule seeks routinely generated reports that disclose the Postal
Service's current financial condition, allow operating and financial
trends to be identified as they unfold, and allow the Commission and
the public to test the validity of methods by which the Commission
estimated the costs, volumes, and revenues upon which current rates are
based. If the Commission and the affected public have evaluated this
financial background information prior to the filing of a case, it is
likely that they will not have to spend a substantial part of the brief
time allotted for litigating the case trying to ``get up to speed'' on
the issues related to the Postal Service's routine financial reports.
The rule also seeks to permit the Commission to stay informed on
the ``state of the art'' procedures by which the Postal Service
currently attributes costs. Under the current regulatory scheme, the
Commission is the expert body with the ultimate say on what methods
should be used to attribute postal costs to classes of mail. See
National Association of Greeting Card Publishers v. USPS (NAGCP IV),
462 U.S. 810, 833 (1983). As a practical matter, however, most of the
methods used to attribute postal costs to the classes of mail originate
with the Postal Service. This is because it controls the cost, volume,
and revenue data and determines for itself what estimating techniques
it will use to compile its periodic financial reports. It also controls
almost all of the data that will be used in rate, classification, and
complaint cases. Between cases it decides for itself what techniques
will be applied to the data and incorporated into its Cost and Revenue
Analysis (CRA) report. Its CRA has become a massively intricate,
partially documented, automated cost attribution engine that most
interested participants cannot fathom, duplicate, or develop realistic
alternatives to, in the narrow litigation window available to them. The
difficulty in deciphering the CRA in the time allotted has profound due
process implications, since the CRA inevitably provides the
methodological baseline for Postal Service rate and classification
requests.
Because the data sources and estimating techniques that the Postal
Service incorporates into its CRA change unpredictably, the ``state of
the art'' is a moving target to the outside world. Neither the
Commission nor the interested public can competently interpret the
results presented in the Postal Service's routine financial reports,
because they have no way to distinguish between what appear to be
changes in cost, volume, and revenue behavior, from changes in the
methods that the Postal Service uses to measure that behavior. Changes
in data sources, or changes in estimation technique can have large
impacts on the attributable cost estimates in the CRA, as the recent
history of carrier street time attribution demonstrates. The
Commission's rules require the Postal Service to provide detailed
documentation in rate cases of the changes that it proposes in cost
estimating procedures, and allows for discovery. Between rate cases,
however, there is no way for the outside world to know what the state
of the art in cost attribution is.
To overcome this problem, the Periodic Reporting Rule will now
require the Postal Service to identify all changes made since its most
recent omnibus rate request to the data sources and estimation
techniques used to produce the CRA, and to provide enough supporting
material to allow the Commission and the affected public to understand
these changes. This provides at least some basis for
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understanding and evaluating the estimates summarized in the CRA, and
provides some insight into the likely causes of the trends discerned in
these summary figures.
The Commission will be able to use the information contained in
adequately documented periodic reports to decide whether it should
institute a classification case. Likewise, a customer or a competitor
will be able to use information gained from adequately documented
periodic reports to determine whether rates are in violation of the
policies of the Act and whether a complaint should be filed with the
Commission. Both are functions that the Act authorizes the Commission
and the public to perform whether or not the Postal Service is
litigating an omnibus rate request. The Commission, customers, and
competitors of the Postal Service cannot make adequately informed
decisions to invoke these provisions of the Act between omnibus rate
cases if they cannot competently interpret or evaluate the Postal
Service's routine financial reports.
More important, the partial documentation of periodic reports that
the rule requires facilitates the processing of future rate,
classification, or complaint cases because it gives the Commission and
the affected public some hope of keeping current with the ``state of
the art'' by which the Postal Service attributes costs to the classes
of mail. The rule does not require the Postal Service to explain or
justify the changes that it has made to its cost attribution engine,
but it requires the Postal Service to disclose changes to the
mechanical process by which that engine attributes costs. This will
allow the Commission and the interested public to identify what the
Postal Service's current CRA does, if not why it does it. By staying
informed of what the Postal Service's current cost attribution engine
actually does, the Commission and the interested public will be able to
respond more quickly to an omnibus rate request, or to a case filed by
the Postal Service under expedited rules, because they will not have to
spend a substantial portion of the available litigation window
reacquiring this necessary expertise.
The Periodic Reporting Rule requires the Postal Service to provide
the basic datasets that it uses to produce its financial estimates in
the CRA between cases. Public access to current datasets between rate
cases is needed because they are the raw material that others must have
if they are to develop their own cost attribution, volume forecasting,
or revenue forecasting techniques that reflect current operations.
Providing these datasets between omnibus rate cases facilitates the
functioning of the Act because it allows potential intervenors
sufficient time to develop alternative techniques.
In omnibus rate cases, and in the various proceedings that are
litigated under the Commission's expedited rules, intervenors are
generally unable to develop alternative models of postal cost or volume
behavior within the compressed litigation window provided. Because the
Postal Service has custody of virtually all of the relevant data, it
has an unlimited opportunity to develop such models. This imbalance is
a basic flaw in the functioning of the Act, which presumes that all
interested parties to a hearing will be afforded adequate due process
and procedural fairness. If intervenors do not have the basic data with
which to develop models between rate or classification cases, their
right to present an opposing case in a rate hearing is unnecessarily
limited and more theoretical than real. By requiring that the basic
datasets used to produce the Postal Service's routine financial reports
be made available to others between rate cases, the updated rule helps
restore basic due process rights to intervenors who wish to develop
alternative cost, volume, and revenue estimating procedures on which to
base rates.
Differences Between the Proposed Rule and the Final Rule
The Postal Service argues that releasing enough information between
omnibus rate cases to allow its routine financial reports to be
evaluated, or enough data to allow others to develop alternative models
of cost or volume behavior, subverts, rather than facilitates the
intended functioning of the Act. It seems to interpret the Postal
Reorganization Act to grant it immunity from such activity between
omnibus rate cases. The Postal Service is primarily concerned about
documenting its annual CRA report, complaining that the rule would
require it to provide as much supporting documentation for it as it
provides in support of an omnibus rate case. In order to meet the
Postal Service objections to the additional burden that the updated
rule would impose, the Commission has pared back its requirements to
the minimum that will still serve the basic purposes of the rule. The
Commission has also incorporated some additional flexibility in meeting
the requirements of the rule.
The proposed rule required the Postal Service to provide three
general classes of files used to produce the current year's CRA--(1)
all input datasets, (2) all processing programs used to attribute mail
processing costs, and (3) all other processing programs that have
changed since the most recently completed omnibus rate case. See
proposed Rule 102(a), Attachment to the NPR, at page 1 of 4. The final
rule narrows the first general class of files to input datasets that
have changed since the last general rate case. It deletes the second
general category of files, and retains the third general category.
Under the final rule, datasets that have not changed, such as those
from already-documented special studies, need not be provided.
Similarly, under the final rule, processing programs used to attribute
mail processing costs that have not changed need not be provided. See
final Rule 102(a)(1).
The final rule is more flexible than the proposed rule with respect
to datasets and processing programs that have been used for the first
time to produce the CRA. If the Postal Service uses an estimation
technique based on a new special study, the Postal Service may, under
the final rule, choose to provide the Commission and the interested
public with a short written narrative, or an oral briefing on that
technique. The narrative or briefing should describe the data, the
variables, and the analytical method used (such as the regression
equation used). The purpose of the presentation would be to explain how
the method was applied. The Postal Service may reserve its right to
discuss the merits of its new method relative to alternative methods in
the context of a formal hearing. After the written or oral
presentation, the Postal Service may request a waiver of the
requirement that input data and processing programs used to apply the
new method be provided. If the presentation is sufficient to allow
others to understand how the estimates affected by the new method were
obtained, the requirement that the Postal Service provide the input
data and processing programs used may be waived. See final Rule
102(a)(1)(ii).\2\
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\2\ The Postal Service did not analyze specific language of the
proposed rule in its substantive comments. It complained generally,
however, that the proposed rule is ``broadly worded,'' and cited
this as one ground for concluding that it would require it to
provide documentation that is comparable to an omnibus rate case in
its ``scale and scope.'' Substantive Comments of the United States
Postal Service (July 2, 2003) at 4, 22. Presumably it was referring
to proposed paragraph 102(a)(1), since the remaining language in the
rule is quite specific.
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In its NPR, the Commission noted that there are significant
differences between the methods used by the Commission and the Postal
Service to attribute mail processing costs to subclasses of mail. It
also noted that the methods that the
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Postal Service uses to attribute mail processing costs are in greater
flux than in other segments. The Commission felt that this made it
harder to determine whether the Postal Service has correctly applied
PRC-approved methods in updating the Cost and Revenue Analysis-PRC
Version. Accordingly, in its NPR, the Commission proposed that the
Postal Service include with the CRA all of the processing programs that
it used to attribute mail processing costs. NPR at 4-5. Despite these
complicating factors, the Commission has decided not to require more
complete documentation of the attribution of mail processing costs than
of other costs, in order to reduce the Postal Service's burden in
complying with the Periodic Reporting Rule.
In addition to requiring the Postal Service to provide input data
and processing programs that have changed since the most recently
completed general rate case, the final rule requires that the Postal
Service provide the spreadsheet workpapers (the ``B workpapers'') that
show how the CRA was developed. See final Rule 102(a)(1)(i). There are
so many links and interactions built into these spreadsheets that an
effort to separately identify portions that have changed from portions
that have not is impractical. They are so essential to understanding
how the summary estimates in the CRA were obtained that they need to be
provided as an integrated whole.
Therefore, under the final rule, given current costing methods,
documentation of the CRA should include the following:
(1) Spreadsheets supporting the CRA. (The ``B'' workpapers. In
Docket No. R2001-1 these were found in USPS-LR-J-57. These should
include the workpapers for Segment 14, and the Alaska Air Adjustment,
that have customarily been provided under the rule.)
(2) The CRA model. This should include the files usually provided
during an omnibus rate case to allow for the replication of all of the
operations used by the Postal Service's COBOL CRA/Rollforward programs.
These include the Manual Input Matrix, the ``A'' report matrix, and the
``C'' report matrix. The files that contain the operating ``control
strings,'' that is, the instructions to the computer model that
distribute the indirect costs to classes and subclasses of mail, should
be included. These files are usually named ``A,'' ``B,'' ``C,'' ``D,''
and ``F.'' They represent the instructions to the model for the
development of the ``A'' report and the ``B'' report (Factor
Development Report). Title files containing the categories of mail and
special services that are reported in the CRA, and the titles of all
1,600 components in the USPS CRA cost matrix, should be provided. (All
of this material was provided in just eight of the over 100 files that
made up USPS-LR-J-6 in Docket No. R2001-1.) The printouts of the CRA
and the Cost Segment and Components report should be included, as has
been customary under the rule.
(3) The output data file for the In-Office Cost System (IOCS).
(This was found in file PRC00.SD2 in USPS-LR-J-10 in Docket No. R2001-
1).
(4) The Segment 3 accrued cost pools. (These were found in USPS-LR-
J-55, Table 1, in Docket No. R2001-1).
(5) Equipment and facility-related cost spreadsheets. These three
spreadsheets show the equipment variabilities for equipment maintenance
labor costs, equipment parts and supplies, and capital interest costs
by type of mechanized operation. The spreadsheets also develop the
inputs for the components that determine the space and space-related
separations for some facility-related costs, such as custodial, fuel
and utilities, and rents. The inputs are data from the special facility
studies and other maintenance databases. (In Docket No. R2001-1, these
files were identified as FY00equip.xls, Facilt.xls, and equipvar.xls,
and were sponsored by witness Smith.)
(6) Output data file for the City Carrier Cost System (CCCS). (This
was identified as ``cityz.sd2'' in USPS-LR-J-12 in Docket No. R2001-1.)
(7) Output data file for the Rural Carrier Cost System (RCCS).
(This was provided as the ``z'' folder in USPS-LR-J-13 in Docket No.
R2001-1).
(8) The National Mail Count for rural carriers.
Procedural History of the Rule
This rulemaking has had an unusual procedural history. The NPR was
issued on January 8, 2003. It allowed approximately a month for filing
public comments and two weeks to file reply comments--the standard
period for these procedures. The NPR proposed that part of the required
information be provided in a PC-compatible format, and suggested that
an informal technical conference be held if the Postal Service
anticipated problems complying with this requirement. At the Postal
Service's request, a technical conference was held on March 11, 2003.
Afterward, the Postal Service was given three weeks to file substantive
comments on the proposed update that reflected the information gained
at the technical conference. See PRC Order No. 1363. At the end of that
period, the Postal Service then requested an additional five weeks to
file its substantive comments so that its staff could confer with its
Board of Governors.
Toward the end of that period, the Postal Service urged that it not
be required to file its comments until well after July 31, 2003, the
date on which the report of the President's Commission on the Postal
Service was due. It asserted that the proposed update had major
ramifications for the Postal Service and Commission, its prerogatives
as a litigant in rate cases, and the confidentiality of its
commercially sensitive information. It argued that these issues should
not be addressed until after the recommendations of the President's
Commission were made public. The report of the President's Commission,
it said, would provide the appropriate context for discussing these
issues. Motion of the United States Postal Service for Further
Extension of Time to File Comments, June 6, 2003, at 2-3.
General Views of the Commenters
Apart from the Postal Service, all of those commenting on the NPR
have participated as intervenors in omnibus rate cases. They agree that
the proposed updates would improve their ability to understand and
respond to an omnibus rate filing in the time allotted. They argue that
with the increasing complexity of the Postal Service's omnibus rate
filings, the ``playing field'' has become tilted heavily in favor of
the Postal Service. They argue that they have so little time to
understand and react to the tens of thousands pages of data and
documentation that support the Postal Service's rate filing that they
cannot digest it all and respond to it in the time allowed. They say
that by having access to enough data and documentation to understand
how the Postal Service's routine financial reports are put together
each year, they will be less likely to be overwhelmed when the Postal
Service files an omnibus rate request that employs similar types of
information. The intervenors also point out that under the regulatory
structure of the Postal Reorganization Act, the Commission is required
to make independent recommendations on postal rates under the severe
time pressures imposed by the Act. To be adequately prepared to process
an omnibus postal service rate filing under these difficult conditions,
they argue, the Commission must maintain its expertise on postal cost
systems and financial forecasting between rate cases. In order to do
this, they say, the
[[Page 65352]]
Commission must have enough information to determine what data and
methods the Postal Service is currently using to produce its routine
financial reports.
The Postal Service does not deny that providing the routinely
compiled financial information called for by the updated rule would
give the Commission and the intervenors the ability to respond to
Postal Service rate filings more quickly and more competently. In fact,
this appears to be its main objection to the updated rule. It contends
that this would upset the statutory ``balance'' between it and the
remaining players in the postal regulatory scheme.
The Postal Service understands that when it withholds this
information until it files a rate case, participants must spend so much
of the 10-month period that is available to litigate a rate case
reading and comprehending it that they have little time to prepare
alternative rate proposals in response. The Postal Service does not
consider this to be inconsistent with the Act. It emphasizes that the
Act makes it the sole initiator of rate cases. In its view, this allows
it to take all the time that it needs to prepare for litigation, and
allows the Commission and the intervenors none. It insists that this
procedural advantage is intended by the Act, and that it may withhold
whatever financial information it wishes between rate cases in order to
preserve it. It denies that it has any obligation to provide
information between cases that would facilitate the Commission's
performance of its functions during those cases, or would make it
easier for intervenors or the public to comprehend or respond to its
filings within the time constraints imposed by the statute. Substantive
Comments at 15-17, 33-36.
The Postal Service argues that since the Act does not give the
Commission any meaningful function to perform between rate cases, the
Commission has no legitimate need for financial information during
these interim periods. Therefore, it reasons, the Commission has no
legitimate motive for seeking access to financial information between
rate cases. It concludes that the Commission can only have ulterior
motives for seeking information between rate cases, e.g., to conduct
annual audits and investigations of the Postal Service, to gain
``oversight responsibility,'' and to indulge in ``day-to-day monitoring
of [its] detailed operations and finances.'' Id. at 7, 11, 19, 22.
Besides serving ulterior motives, the Postal Service complains that
the updated rule would force it to prepare rate-case style
documentation between rate cases. It argues that this will infringe
upon management's statutory right not to concern itself with rate
issues between rate cases, and will infringe on management's duty to
manage. Id. at 21-23. It contends that most of the CRA documentation
required by the rule has commercial value which the Commission would be
unwilling or unable to protect from public disclosure. Id. at 31-32.
Finally, it argues, by seeking basic information needed to understand
and analyze the CRA, the Commission is seeking to preempt the
legislative reform process that the President entrusted to the
Commission on the Postal Service. Id. at 20.
As the Postal Service now interprets the Act, between the rate
cases that it files, the intervenors must avoid actions or thoughts
that might relate to future rate or classification cases. Otherwise,
the argument goes, they will nullify the litigation advantages that the
Postal Service enjoys under the Act. Similarly, the Postal Service
argues, the Commission must refrain from actions and thoughts that
might help it prepare for future rate or classification cases.
Otherwise, its collective mind will become contaminated. The updated
rule, the Postal Service contends, seeks to circumvent these
constraints that it infers from the structure of the Act. Id. at 15-17.
The Postal Service's portrayal of the updated rule as a newly-
hatched plot by the Commission to circumvent the Act disregards the
history of the Periodic Reporting Rule. As explained in more detail
below, the updated rule meets the same standards, and is designed to
accomplish the same objectives, as the original rule adopted 27 years
ago by the Commission. At that time, the Commission explained that the
rule had two main objectives: (1) to accelerate the discovery process
during future rate and classification hearings, and (2) to enable all
those in the postal regulatory arena, including the Commission and the
intervenors, to study postal cost behavior between rate cases in order
to improve the attribution of costs during rate cases.
What is novel with this rulemaking is the Postal Service's
interpretation of the Act as mandating that the flow of financial
information cease between rate cases. This runs counter to the Postal
Service's historic view that periodic reporting of financial data
between rate cases, while not mandated by the Act, is a legitimate way
to make the processing of future cases more efficient by reducing the
need for discovery. Docket No. RM76-5, Postal Service Response to PRC
Order No. 141 (December 7, 1976) at 2. For 27 years, the Postal Service
supplied the type of information called for by the rule without
suggesting that its objectives were in violation of the Act.
The vast majority of the information previously required by the
Periodic Reporting Rule has been willingly provided by the Postal
Service. It accepted the modest additional burden of providing such
information if it was likely to provide useful background information
for processing future cases. It raised objections to only a few items,
sometimes arguing that an item should not be included in the rule
because it was not information ``which could be employed for rate
purposes.'' Id. at 4. The views that the Postal Service has expressed
in this rulemaking are the converse of its traditional view of the
rule. Where it had traditionally considered items to be appropriate for
inclusion in the rule only if they ``could be employed for rate
purposes,'' it now considers items to be inappropriate for inclusion in
the rule precisely because they ``could be employed for rate
purposes.''
The Commission did not include an elaborate justification for the
update of the Periodic Reporting Rule in its NPR because it did not
think that one would be necessary. The Commission assumed that the
additional burden on the Postal Service of complying with the rule
would be minor because the updated rule asks for only a small fraction
of the information that the Postal Service provides with an omnibus
rate filing. Of that small fraction, most is prepared each year by the
Postal Service anyway, either to produce its own CRA, or to comply with
rule 103. The Postal Service's right to litigate the merits of its
procedures in a formal hearing is not infringed by the rule because the
information required by the updated rule does not address the merits
of, or justification for, the procedures that the Postal Service uses
to produce its CRA. The Commission assumed that the commercial
sensitivity of the information would not be a significant issue because
the updated rule would require the types of information that the Postal
Service has, in the past, freely disclosed to the public, both during
and between omnibus rate cases. Because the Postal Service now
challenges these assumptions, and misinterprets the Commission's
motives for proposing these updates, the Commission will provide a
detailed justification of the updated rule.
[[Page 65353]]
II. The Relationship of the Updated Periodic Reporting Rule to
Legislative Reform
The Relevance of the President's Commission on Postal Service
The Postal Service has chosen to depict the update to the
Commission's Periodic Reporting Rule as an attempt to fundamentally
alter the ``balance of power'' that the Act strikes between the Postal
Service and the Commission, focusing almost all of its arguments on the
CRA documentation that the rule requires. Substantive Comments at 20.
The other commenters share the Commission's view that the updated
Periodic Reporting Rule is a legitimate, restrained exercise of its
Sec. 3603 authority under the Act whose effect is to only modestly
increase the regularity with which the Postal Service would otherwise
disclose this information.
Based on the false premise that the rule attempts to rewrite the
Act, the Postal Service criticizes the Commission's decision to go
ahead with the update, rather than wait for the dust from the
President's Commission on Postal Service to settle. The President's
Commission was organized in December, 2002, and was charged with
recommending a solution to what appeared to be the Postal Service's
stagnating volumes and mounting losses. The Postal Rate Commission
proposed to update its rule in January 2003, one month after the
President's Commission began its work. At that time, nothing was known
about the direction that the recommendations of the President's
Commission might take.
Due to a series of Postal Service requests for extensions of time
to comment on the proposed updates, the rulemaking was still pending in
June of this year. At that time, the Postal Service asked the
Commission to suspend this rulemaking until after the report of the
President's Commission was due to be issued, apparently so that the
recommendations in that report could guide the deliberations of this
rulemaking. With the unanimous support of all of the other commenters,
the Commission declined the Postal Service's request for such a
lengthy, additional delay, and ordered the Postal Service to file its
substantive comments. The Postal Service responded with some
indignation, accusing the Commission of, in effect, attempting to trump
the legislative reform effort. Id. at 19-20.
One of the dominant themes in the report of the President's
Commission is the need for greater transparency of Postal Service
operations and finances. Its proposed regulatory scheme would allow the
Postal Service to retain its monopoly over letter mail, at least
initially, and give it great flexibility to set rates for competitive
products. The President's Commission, however, made it clear that the
price for combining monopoly power with pricing discretion over
competitive products would be greatly strengthened regulatory oversight
and accountability, entrusted to a new Postal Regulatory Board. First
on the list of duties entrusted to the new Board would be the duty to
``ensure the financial transparency of the Postal Service.'' Report of
the President's Commission on Postal Service, issued July 31, 2003, at
53. The report elaborates, at page 66:
The Commission believes that the Postal Service has a
responsibility to the public to be transparent in its financial
reporting. Given its important public mission and central role in
the nation's economy, changes in Postal Service economic health
should not come as a surprise to those responsible for or impacted
by its performance.
* * * * *
As a unifying force in American commerce and society, and as a
customer-financed government endeavor, the Postal Service should be
setting the standard for financial transparency by which all other
Federal entities are judged. While the Postal Service does, in many
respects, conduct financial reporting over and above what is
required of Federal agencies, it remains behind the level of
disclosure offered by its corporate peers. [Emphasis in original.]
And at page 68:
In addition to SEC-like reporting, the Commission recommends
that the Board of Directors be required to submit annually a
detailed report to the Postal Regulatory Board on the financial
viability of the institution, providing both significant financial
insights as well as adequate explanation of related trends. The
report should adhere to the 'no surprises' rule, ensuring that any
major changes to the fiscal health of the institution are widely
understood in advance, so appropriate responses can be anticipated
and generated. The Commission further recommends that this report be
made available to the public.
The new Postal Regulatory Board would be empowered to set baseline
rates and price caps for non-competitive services, and empowered to
review rates for competitive products to ensure that they are not
cross-subsidized by non-competitive products. The Board would complete
reviews of competitive product prices in 60 days. In order to make this
streamlined rate regulation possible, the report recommends, at page
69:
For the Postal Regulatory Board to ensure financial transparency
and make fully informed determinations on issues from rate ceilings
to cross-subsidies, it must have access to the most reliable and
current information possible. For this reason, the Commission
recommends that the Postal Regulatory Board have the authority to
request accurate and complete financial information from the Postal
Service, including through the use of subpoena powers, if necessary,
to obtain a thorough and reliable snapshot of Postal Service
operations.
At page 67, the report concludes:
Where the Postal Service participates in markets also served by
private industry, effective oversight is essential to ensure that
monopoly revenues are not manipulated to the benefit of the Postal
Service's competitive offerings. For this reason, the Commission
recommends that the Postal Service periodically report on the
allocation of costs among all products and services in accordance
with form, content and timing requirements determined by the Postal
Regulatory Board. [Emphasis added.]
The guidance provided by the President's Commission could hardly be
more direct in its support of the approach taken by the updated
Periodic Reporting Rule. Indeed, the report of the President's
Commission recommends going much further in mandating transparency both
in general, and in the area of rate regulation. The Commission,
however, is aware that the report of the President's Commission is only
relevant to the extent that its recommendations are enacted into law.
This may never happen, or may take years to accomplish. The Postal Rate
Commission's proposal to update its Periodic Reporting Rule was
conceived independently of the President's Commission, whose
recommendations had not yet been formulated. The Commission's motive in
persevering with its proposal was not to steer the legislative reform
effort in any particular direction, or to trump it. The Commission
motive was, and is, to make the existing regulatory regime more
effective in achieving the objectives Congress set out for it.
The Report of the General Accounting Office
On November 13, 2002, the General Accounting Office issued a report
entitled ``U.S. Postal Service Actions to Improve Its Financial
Reporting.'' GAO-03-26R Postal Financial Reporting. The report found
that the Postal Service's financial reporting lacked the necessary
transparency in general, and that its periodic reporting, in
particular, was inadequate. At page 12 of the report, it states:
* * * it is clear from recently publicized problems in financial
reporting that more detailed information and transparency are called
for by both Congress and the public. Such transparency is critical
for the Service because of the importance of its financial situation
and the implications for
[[Page 65354]]
stakeholders in making their own financial plans. These factors help
support stakeholders' need for timely, accurate, and complete
financial information that is provided on a consistent basis.
At page 14, it continues:
We acknowledge that the Postal Service provides a significant
amount of information in its rate case filings; however, this
information is provided only for rate-setting purposes, and rate
cases are not filed on a regular cycle. Thus, rate case information
does not provide stakeholders timely information about the Service's
current financial condition and changes to its expected outlook.
* * * * *
As we noted, however, these periodic financial reports do not
clearly explain changes in its financial condition, outlook, and
results of operations, and have not always been readily available to
the public.
Apart from the Postal Service, there appears to be a public
consensus on the need for more complete periodic financial disclosure.
III. The Need for Updating the Periodic Reporting Rule
A. The History of the Rule
Historically, during omnibus rate cases, the Postal Service has
attempted to support its rate requests with input data, spreadsheets,
and documentation that is sufficiently detailed and complete to allow
the behavior of postal costs, revenues, and volumes to be evaluated and
understood by the interested public. Typically, several years elapse
between rate cases. During those intervals, the Postal Service has
provided the Commission and the public with summary financial reports
that it generates at regular intervals for use by postal management. It
has included documentation of significant portions of those reports in
response to the Periodic Reporting Rule. The portion provided has been
a small subset of the kind of documentation that the Postal Service
provides during an omnibus rate case.
As noted, most of the Postal Service's objections to the updated
rule are to the requirement that the Postal Service provide the input
data and documentation that it uses to prepare its annual CRA report.
Substantive Comments at 2. Each year this report summarizes, at the
most general level, the results of the Postal Service's procedures that
estimate the amount of costs caused by each subclass of mail, and the
amount of revenue that each subclass earned. The process that produces
the estimates in the CRA takes dollars from hundreds of subaccounts in
the Postal Service's Books of Account and assigns them to one of
hundreds of ``functional'' cost components. (Functional costs are
viewed as economic costs). Costs in the various functional components
are analyzed to see how they vary with mail volume. The volume variable
part is then distributed to subclasses according to piece counts or
other ``distribution keys'' that imply subclass causation.
The Postal Service's estimates of the costs and revenues generated
by each subclass of mail are derived from the intricate rules that it
uses to convert its accounting costs to functional costs, apply
variability percentages to functional costs, and distribute the
variable portion to subclasses. When submitted in rate cases, these are
the baseline estimates underlying the rate proposals made by the Postal
Service. With some adjustments, CRA estimates also provide the basis of
the rate proposals of the intervenors, and the rate recommendations of
the Commission.
When the Postal Service files an omnibus rate request, it includes
spreadsheets and computer programs that contain the CRA's conversion,
attribution, and distribution rules. This is its ``cost attribution
engine'' described earlier in this order. These rules and their
interactions are exceedingly complex. The input data, and the
processing programs and spreadsheets showing how such rules are applied
to the data, occupy the equivalent of tens of thousands of printed
pages. Documentation of the myriad component parts of the process by
which the CRA is produced is fragmentary. There is no single, coherent
narrative explanation of the process to which an outside analyst could
turn to understand, evaluate, and offer alternatives to the Postal
Service's CRA. An outside analyst must rely primarily on a detailed
study of processing program code and spreadsheet algorithms in order to
discover how the CRA is developed. The analyst must make test runs
replicating this largely automated process to confirm that his or her
preliminary understanding of it is correct. The expertise necessary to
evaluate the methods by which the Postal Service produces the CRA, or
to develop alternatives to it, must be accumulated over many years.
Despite attempts over the more than 30 years that the Commission has
been processing omnibus rate requests, no outside party has been able
to replicate the full CRA upon which the Postal Service bases its rate
requests, or develop a comprehensive alternative to it, within the 10-
month window that the Act provides for litigating a rate case. Under
these circumstances, even with the voluminous documentation provided by
the Postal Service during omnibus rate cases, much of the process by
which it produces its CRA has, of necessity, been accepted on faith by
intervenors and the Commission.
Since the methods that the Postal Service uses to produce the CRA
continually evolve in minor, and sometimes major, ways, the CRA
presents a ``moving target'' for outside analysts. Each time an omnibus
rate request is filed, those on the outside of the CRA development
process (the Commission and affected public) struggle to grasp these
procedures and track their evolution. Even though this task can consume
a majority of the 10-month period that the Act allots for processing a
rate case, it must be completed before the intervenors and the
Commission can effectively evaluate or respond to the Postal Service's
rate proposals.
To mitigate this problem, the Commission implemented its Periodic
Reporting Rule in 1976. At that time it explained the purposes of the
rule and the policies underlying its decision about what the rule
should contain as follows:
Currently, a majority of the data which the Commission receives
from the United States Postal Service (Postal Service) is obtained
only when a rate request is pending before the Commission. The
present requirements of rule 54 (39 CFR 3001.54) and the
Commission's regulations relating to interrogatory procedures and
the discovery process have enabled the Commission and the
participants in rate proceedings to obtain much of the data required
to evaluate a request for increased postage rates and fees. However,
the existing method of obtaining data, especially as regards
discovery and the interrogatory process, is necessarily conducted on
an ad hoc basis and is subject to all the pressures and exigencies
of a rate case environment. If the Commission is to better fulfill
its statutory responsibilities-particularly with respect to the
Postal Reorganization Act's directive that we expedite our
proceedings consistent with procedural fairness to the parties
appearing in them [39 U.S.C. 3624(b)]--it must be continually and
fully familiar with these data. To do this the Commission believes
that it must improve the present method of obtaining data from the
Service.
At the present time, the Commission is aware of the existence of
a number of reports routinely compiled by the Postal Service. The
Postal Service also compiles manuals and handbooks which are
necessary to understanding and analyzing such reports. It would
appear that these documents would be useful for the purpose of
evaluating Postal Service operations which are the subject of cost
analyses presented in proceedings before the Commission. If these
documents were to be obtained by the Commission as they were
[[Page 65355]]
completed (and were made publicly available at the Commission's
offices) it is anticipated that the Commission and the numerous
interested parties appearing in our formal proceedings would then
have an opportunity to evaluate the data contained in the documents
on an ongoing basis rather than solely during a rate proceeding.
In addition to providing the Commission with a better
opportunity for keeping abreast of the changing factors which will
affect the execution of its regulatory functions, other benefits are
likely to result if these reports were to be made available to the
Commission. Since these data are necessary for evaluating a rate
request, their early accessibility may aid in expediting rate
proceedings. Relying solely on interrogatories and the discovery
process to obtain information consumes time, both because data must
initially be requested of the Service and, thereafter, additional
time is expended while the Service responds. If the data which are
the subject of this rulemaking were on file with the Commission, the
time needed by the Commission and the parties would likely be
reduced because of the ready availability of information.
Notice of Proposed Rulemaking issued April 5, 1976, in Docket No.
RM76-5 at 2-4.
If the data currently made available to the Commission and
interested persons were made available on an ongoing basis, rather
than solely during the course of a rate proceeding, substantial
benefits would inure to the Commission and the parties. The proposed
rules will provide current data which will assist the Commission in
keeping fully apprized of developing circumstances having an effect
on its regulatory functions. Additionally, continued access to the
data will assist interested members of the public in more thoroughly
evaluating a filing of the Service and making alternative
presentations within the time constraints imposed by the statutory
directive that Commission proceedings be conducted with the ``utmost
expedition consistent with procedural fairness to the parties.'' (39
U.S.C. Sec. 3624). The reports, documents, and other data sources
which are being made a part of the Commission's periodic reporting
system will aid in achieving these objectives.
The data sources which the Commission is now including in this
amendment to the rules of practice have been evaluated on the basis
of (1) the demonstrated utility of the data source, and (2) the
burden imposed on the Service in filing the particular information.
Although the information sources covered by our new rules do not
include all the reports and documents proposed by the parties, the
Commission is not foreclosing the possibility of the later inclusion
of some or all of these items. As additional information is
demonstrated to be useful, the underlying sources of information
will be included in the data reporting system except where inclusion
would impose an undue burden on the Service. So that interested
parties may have the opportunity to analyze and experiment with
additional information, even when there is no case in progress, the
Service should provide access to these additional information
sources. The Commission believes that where the information is
available, its use on an experimental basis will be very helpful in
determining its utility. [Footnote omitted.]
PRC Order No. 141 (October 21, 1976) at 3-4.
The initial version of the Periodic Reporting Rule emphasized
accounting and other types of financial information that were likely to
be useful in analyzing the behavior of the Postal Service's revenue
requirement over time. It did not emphasize information on attributing
costs to mail classes because analysis of Postal Service costs was
still in its infancy. The process for attributing accounting costs to
mail classes did not approach the complexity of the current CRA. Cost
data collection systems and models of postal cost behavior were in
considerable flux. Most of them were being developed on an arcane data
processing platform that made it technically difficult for the
Commission and the affected public to decipher and analyze. Primarily
because attribution analysis was considered to be inadequate, the
Postal Service, the Commission, and the affected public were all
exploring ways to improve attribution methods. Facilitating such
research with a view to speeding up the resolution of cost attribution
issues in rate cases was among the primary goals of the Periodic
Reporting Rule. Id. at 3-4, 15.
In contrast to its current attitude, the Postal Service's response
was accommodating. It did not challenge the legitimacy of providing
basic financial data and documentation to facilitate independent
research of postal cost behavior between rate cases. It did not assert
the commercial sensitivity of the cost data that the Commission or the
intervenors proposed to include in the rule, except where data were
facility-specific or customer-specific. (The Commission readily
accommodated this concern in its initial version of the rule.)
From the beginning, the Commission's explicit policy has been to
minimize the burden of the Periodic Reporting Rule on the Postal
Service by limiting it to information that the Commission or the
affected public was likely to use. With respect to cost information,
the initial version of the rule asked primarily for summary-level cost
reports [the precursors of the Cost and Revenue Analysis (CRA) and the
Cost Segments and Components (CSC) reports] \3\ since the technical
obstacles referred to above made it difficult for the Commission or the
public to use the input data and documentation underlying the Postal
Service's standard cost attribution reports.
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\3\ See PRC Order No. 141 (October 21, 1976) at 6-8.
---------------------------------------------------------------------------
By the mid-1980s, some Postal Service cost data collection systems
had matured, and cost attribution analysis had grown more complex,
notably in the method by which attributable costs were distributed to
mail classes in the mail processing and transportation areas. Adjusting
to these developments, the Commission updated its Periodic Reporting
Rule to require supporting documentation of these methods (the LIOCATT
in mail processing and workpapers 31 and 57 in transportation). See PRC
Order No. 697 (June 27, 1986) at 7. The rule did not seek input data in
these costing areas because technical problems still prevented the
Commission from using input data in the form in which it was reported.
In other major cost centers, such as carrier street time costs, ongoing
data collection systems had not yet stabilized. Attribution of these
costs depended primarily on ad hoc studies that had already been
publicly documented in the course of rate hearings, rather than on the
analysis of regularly-collected data. Because regularly-collected data
on carrier street time cost played a lesser role in modeling carrier
costs, the rule did not require that carrier cost data be periodically
reported.
The Periodic Reporting Rule has not been modified in 17 years. Over
that time, the Postal Service's financial reporting systems have
undergone major changes. Updating of the Periodic Reporting Rule to
reflect those changes is long overdue. The sophistication of cost
attribution methods has grown dramatically since the rule was last
modified. The Postal Service has introduced elaborate cost variability
models in the mail processing, transportation, and carrier cost areas.
Also in each area, it has developed new, more complex methods of
distributing attributable costs to subclasses. The ongoing data
collection systems that the Postal Service used to develop these new
attribution models and distribution methods were not used for these
purposes, or did not exist, when the rule was last updated. These
include ``MODS'' in the area of mail processing costs, ``TRACS'' in the
area of transportation costs, and ``CCCS'' and ``RCCS'' in the area of
delivery carrier costs. As the complexity of the Postal Service's cost
attribution methods has grown, the need to document them in order to
competently interpret them has
[[Page 65356]]
grown.\4\ Because these new models and methods use new data collection
systems, the rule must be updated to include the new data systems if
the Commission and the affected public are to understand how they are
used to produce the CRA.
---------------------------------------------------------------------------
\4\ In 1997, the Postal Service discarded the LIOCATT-based
method of distributing mail processing costs in favor of the much
more complex MODS-based method. In its recent submissions under the
Periodic Reporting Rule it provides much less documentation of its
new, complex method than it had been providing for the older,
simpler method.
---------------------------------------------------------------------------
A primary reason that the Commission was slow to update its
Periodic Reporting Rule to include this new cost data was that the
capability to use this information only became available gradually. For
much of this time, the Commission wrestled with Postal Service datasets
and programs developed on a mainframe COBOL platform. Despite hiring a
series of service bureaus and consultants who specialized in this data
processing platform, the Commission and participants in rate hearings
were generally not successful in reading, understanding, and using the
datasets and programs that the Postal Service developed on this
platform. It was not until the mid-1990s, when the Postal Service began
providing some of this information in the mainframe SAS language, that
the Commission's staff and some hearing participants were able to
convert such information to PC-compatible versions that they could
read, understand, and use.
Although the Commission, by the mid-1990s, was beginning to acquire
the technical capacity to use the data and programs that underlie the
Postal Service's periodic cost reports, it did not update the Periodic
Reporting Rule to reflect its technical progress. This is because the
Postal Service had been providing the information needed on an annual
basis anyway, apart from the rule. It provided the basic data and
documentation underlying the CRA each year from FY 1995 through FY
2000. Sometimes it provided this information in support of a rate or
classification request. Other times it provided it voluntarily, simply
to be helpful.\5\
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\5\ For example, in 1998, the Postal Service voluntarily
provided a fully documented CRA reflecting Commission-approved
attribution methods for FY 1997.
---------------------------------------------------------------------------
Since the most recent omnibus rate case was settled, however, the
prospect for continuing to get an adequately documented CRA each year
has dimmed. Passage of Pub. L. 108-18, which dramatically reduces the
Postal Service's contribution to the Civil Service Retirement Fund, led
to a Postal Service promise not to increase rates until 2006.
Consequently, the Postal Service is unlikely to file a documented
version of the CRA in support of an omnibus rate request for four
years--from FY 2001 through FY 2004. The Postal Service is signaling
that it will not voluntarily submit such information in the future.
Unless the Periodic Reporting Rule is updated to seek a moderate level
of documentation of the Postal Service's CRA each year, the outside
world will not be able to competently interpret the CRA for up to four
years. The Commission and the intervenors do not believe that the
regulatory scheme established by the Postal Reorganization Act can
function as Congress intended if they are to be kept in the dark for up
to four years. By updating its Periodic Reporting Rule, the Commission
will eliminate long blackout periods of this kind.
B. The Postal Service's Scope and Burden Objections
The preceding discussion of the history of the Periodic Reporting
Rule and the considerations that shaped the update to the rule respond
to the Postal Service's speculations that the update was prompted by an
array of improper motives. As the preceding discussion makes clear, the
Commission's objective in adopting the rule has remained the same over
the 27-year life of the rule--to help the Commission perform its
statutory functions more quickly and efficiently.
To do that, the rule directs the Postal Service to provide current-
year financial reports summarizing the Postal Service's financial
results, with enough mid-level documentation to allow the Commission
and the affected public to competently interpret them. The rule also
directs the Postal Service to provide intermediate-level datasets that
will allow outside analysis of postal cost and volume behavior to
continue between omnibus rate cases. While the information sought is
not case-specific, it facilitates the processing of future rate and
classification cases by providing essential technical background for
evaluating the kind of issues that typically arise in such cases.
The information provided under the rule makes the Commission and
the interested public better prepared to process rate and
classification cases. As explained above, the rule needs to be updated
because the Postal Service has made major changes to the way it
estimates its costs and revenues over the past 17 years, and the
Commission and the public have developed the technical capability to
interpret and use the information supplied. The rule strikes a
reasonable balance between these benefits and the added burden on the
Postal Service of providing this additional information. As in the
past, the Commission is willing to make appropriate arrangements to
protect information that the Postal Service believes to be commercially
sensitive.
The Postal Service expresses concern that the Commission has
ulterior motives for seeking to update the rule. These include a desire
to change its institutional relationship with the Postal Service, to
arrogate to itself auditing, supervisory, and managing functions
reserved to others under the Postal Reorganization Act, and to hijack
the legislative reform process. Substantive Comments at 2-3. This
questioning of the Commission's motives proceeds from the premise that
the amount of data that the updated rule would require the Postal
Service to provide is far out of proportion to its needs. This premise
reflects two beliefs--that the updated rule requires documentation of
the CRA equivalent to that required in an omnibus rate case, and that
the Commission has no need for financial information unless it is
actively processing an omnibus rate request.
Scope Arguments Based on the Wording of the Rule
When the Postal Service asserts that the updated rule requires CRA
documentation on the same scale and scope as it provides in an omnibus
rate case it grossly mischaracterizes the requirements of the rule. It
finds support for its assertion in the ``very broad'' wording of the
rule, quoting the preamble to proposed rule 102(a)(1):
All input data, all processing programs that have changed since
the most recently completed general rate proceeding, and all
computer programs used to attribute mail processing costs to
subclasses, if they are used to produce the Cost and Revenue
Analysis Report (CRA).
Without analyzing this language, it asserts that the proposed
rule could
potentially call for production of virtually all information used in
the production of the CRA report, from secondary, tertiary, and
lower inputs to the CRA model and its inputs to raw data collected
by the Postal Service's data collection systems.
Substantive Comments at 3.
It should be made clear at the outset that the CRA deals with only
half of the costing issues that are addressed in detail in an omnibus
rate case. The CRA summarizes the Postal Service's estimates of
attributable costs by cost segment and by subclass. Equally important
to recommending a comprehensive set of rates, and equally
[[Page 65357]]
detailed, are the Postal Service's cost avoidance estimates upon which
hundreds of worksharing discounts are based. The Commission's Periodic
Reporting Rule does not require any reports or documentation that
relate to this half of the Postal Service's cost presentation in an
omnibus rate case.
Focusing on the various levels of inputs into the CRA model, as the
Postal Service has done, helps demonstrate how it has exaggerated the
scope of the proposed rule compared to the costing documentation
provided in omnibus rate cases. To organize the discussion, the
Commission will characterize the Postal Service's CRA documentation as
consisting of the following six layers, or levels:
Level One--the programs that derive distribution keys for
indirectly attributable costs and distributes them to subclasses
Level Two--the spreadsheets that calculate directly attributable
costs and distributes them to subclasses
Level Three--cost attribution models
Level Four--input datasets
Level Five--data assembling, editing, and structuring techniques
Level Six--raw data
Omnibus rate cases involve formal hearings governed by the rules of
evidence. Under those rules, the Postal Service is required to ``lay a
foundation'' for the results of statistical or scientific studies that
it wants to use to support its proposed rates. To lay the required
foundation, it must start with the raw data it used and describe how
that information was collected, edited, and structured before an
estimating technique was applied to it.
For sake of discussion, the Commission will label raw data as Level
Six documentation and the various manipulations that convert raw data
into input data as Level Five documentation. The Commission will label
``input data'' as Level Four documentation. Input data are generally
understood to mean data to which an estimating technique or model has
been applied, which is its intended definition in the Periodic
Reporting Rule. By specifying ``input data,'' the rule eliminates
foundational information of the kind described above (Level Six and
Level Five documentation) from its scope. The final rule is further
narrowed to input data that have changed since the most recent omnibus
rate case was completed. This eliminates input data collected as part
of special studies that have already been reviewed in an omnibus rate
case.
Because Level Five and Level Six documentation are not required by
the rule, it is substantially narrower in scope than full rate case CRA
documentation. Level Five and Six documentation can make up a large
part of the burden of documenting the CRA in an omnibus case.\6\
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\6\ For example, the Postal Service spent a major portion of the
most recent fully-litigated omnibus rate case (Docket No. R2000-1)
producing and defending Level Five and Level Six documentation for
the Engineered Standards data on which the Postal Service based its
attribution of carrier street time labor costs.
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In the development of the CRA, input data are fed into spreadsheet,
statistical, or econometric models of postal cost behavior to identify
costs that are caused by particular classes of mail. The models
themselves, including the theories upon which they are based, the
definitions of the variables, the equations or other analytical
techniques used, and the results, may be labeled Level Three
documentation for purposes of this discussion. Typically, these models
attempt to find the degree to which particular segment or component
costs vary with volume, estimating a volume variability percentage or
``factor'' for those costs. Variable costs are distributed to
subclasses of mail in proportion to their relative piece volume, cubic
volume, or other cost-driving characteristic. The Postal Service calls
the relative subclass shares of a given cost characteristic a
``distribution key.'' Level Three documentation sometimes shows how
distribution keys were applied to volume variable costs to distribute
them to subclasses. The updated rule requires the Postal Service to
provide only a small subset of the Level Three documentation that it
would provide in an omnibus rate case, i.e., the processing programs
that have changed since the last general rate case.
In an omnibus rate case, Level Three documentation is by far the
most burdensome and time-consuming kind to produce. It usually requires
a narrative explanation and defense of the theory, the variables, the
equation specification, the research of alternative estimation
procedures and the reasons for rejecting them, and the validity of the
results. The fact that the Periodic Reporting Rule requires only input
data and processing programs means that it altogether avoids the need
to justify and defend any aspect of the CRA development process.
Furthermore, because the final rule applies only to processing programs
that have changed since the most recently completed general rate case,
most Level Three documentation is eliminated from the scope of the
rule. This is because most attribution models and distribution
techniques do not change from one rate case to the next. These two
considerations are the most important reasons that, with respect to
documenting the CRA, the burden of complying with the rule is a small
fraction of the burden that the Postal Service bears in an omnibus rate
case.\7\
---------------------------------------------------------------------------
\7\ Historically, the Postal Service has rarely incorporated
major new attribution models or distribution techniques into its
interim-year CRAs, because they have not been scrutinized in an
omnibus rate case. In its FY 2002 CRA, the Postal Service apparently
has departed from this traditional practice by incorporating major
new attribution models in the areas of carrier street time labor and
in facilities costs in the FY 2002 CRA before they have been
presented in an omnibus rate case. This coincides with significant
shifts in subclass attributable cost shares of the effected cost
components. There is no way for the outside world to interpret these
shifts, however, because the undocumented FY 2002 CRA provides no
way of distinguishing between shifts in attributable costs, and
shifts in the techniques that the Postal Service uses to measure
attributable costs. If the outside world had the ability to
replicate the Postal Service's cost attribution model, it could run
the model with FY 2002 data using the established method, and again
using the new method. This would provide a reasonable basis for
separating changes in underlying economic activity from changes in
the methods by which they are measured.
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Level Two documentation consists of a workbook called ``I-Forms''
and Excel spreadsheets called the ``B workpapers.'' In Level Three
documentation, component costs are modeled to see what portion varies
directly with volume.\8\ The Postal Service typically collects these
variability factors in a workbook known as ``I-Forms.'' Excel
spreadsheets known as the ``B workpapers'' take variability factors
from the ``I-Forms'' and apply them, in proper sequence, to the accrued
costs of the appropriate components to obtain attributable costs for
those components. Typically, the B workpapers also distribute a
component's attributable costs to subclasses of mail, according to
subclass shares of piece volume or some other cost-causing factor.
---------------------------------------------------------------------------
\8\ Sometimes this is a two-step process where component costs
are modeled to see what portion varies with an intermediate cost
driver, then that portion is modeled to see how much of it varies
with volume.
---------------------------------------------------------------------------
The development steps documented in Level Two are key steps in
producing the CRA. The rules that the B workpaper spreadsheets apply
summarize the Postal Service's cost attribution methods, and provide
insight into the causes of trends in postal cost behavior. These rules
are exceedingly intricate, and are continuing to evolve. This makes it
difficult for an outside analyst to remain expert on this phase of the
production of the CRA without current Level Two documentation. The
Postal Service prepares Level Two CRA documentation each year when it
produces the CRA-USPS Version. It
[[Page 65358]]
prepares the same Level Two documentation when it produces the CRA-PRC
Version as part of its obligation to facilitate production of the
international mail study. Because it prepares Level Two documentation
for both versions anyway, and preparing it can be done automatically
with little effort, providing Level Two documentation for the Periodic
Reporting Rule should not impose an additional burden on the Postal
Service of any significance. For these reasons, the Periodic Reporting
Rule requires the Postal Service to provide essentially the same Level
Two documentation of the CRA each year that it provides in an omnibus
rate case. See Rule 102(a)(1)(i).
Level Two documentation shows primarily how the Postal Service
estimates subclass shares of costs that vary directly with volume.
These estimates become direct inputs (what the Postal Service calls the
``Manual Inputs'') into the ``CRA model.'' The CRA model is a mainframe
COBOL program that distributes indirectly attributable costs to
subclasses in the same proportions as the Manual Inputs to which they
relate.\9\ The Level One CRA documentation shows how the CRA model does
this.
---------------------------------------------------------------------------
\9\ This may be described as ``piggybacking'' the indirect costs
on the direct costs. For example, the CRA model spreads the costs of
supervising city carriers to subclasses in the same proportion as
the B workpapers distribute the cost of city carrier direct labor to
subclasses. It does this separately for each of the numerous in-
office and street time components of city carrier direct labor
costs.
---------------------------------------------------------------------------
The subclass shares of directly attributable costs embodied in the
Manual Inputs are fed into the CRA model to estimate total attributable
costs and cost coverages by subclass. If outside analysts do not have
access to the B workpapers that show how the Manual Inputs were
calculated, they are unable to interpret or analyze the Postal
Service's estimates of subclass attributable costs and cost coverages.
They must simply take these summary estimates ``on faith.''
In the Level One CRA documentation, the Manual Inputs perform
roughly the same function that the ``I-Forms'' perform in Level Two. In
Level One CRA documentation, ``control strings'' perform roughly the
same function that the spreadsheets perform in Level Two. The control
strings apply intricate relationship rules to the Manual Inputs to
construct hundreds of distinct keys for distributing indirectly
attributable costs to subclasses. The CRA model then aggregates these
subclass shares of directly attributable, and indirectly attributable
costs.
With respect to space-related costs, such as rent, fuel, and
utilities, the CRA model does more comprehensive calculations,
calculating subclass shares of directly attributable, as well as
indirectly attributable costs. Directly attributable space-related
costs are not calculated in the B workpaper spreadsheets. There are
distinct variability factors for many finely disaggregated activities
that drive space costs, and there are many keys constructed from other
keys that are used to distribute these costs. Because of this
complexity, the Postal Service has used computer programs, rather than
spreadsheets, to perform these calculations.
Like the B workpaper spreadsheets in Level Two, the CRA model is
essential to understanding how the Postal Service arrived at its
estimated subclass shares of attributable costs. Because of the
numerous links and interrelationships embodied in its control strings,
the CRA model needs to be provided as an integrated whole. Like the B
workpaper spreadsheets, the intricate rules that the CRA model applies
are continually being refined. These rules are exceedingly intricate,
and evolve continually in minor, and sometimes major ways. For example,
in its comments, the Postal Service announced that it has incorporated
the results of a special facilities cost study into the FY 2002 CRA
that would take it a year to document. Substantive Comments at 22. For
an outside analyst to remain expert on the CRA model, current-year
Level One (and Level Two) documentation of the model must be provided.
Each year, the Postal Service produces Level One documentation (the
Manual Inputs and the Control Strings) for its own purposes when it
produces the CRA-USPS Version. Each year, it produces Level One
documentation for the CRA-PRC Version as part of its obligation to
facilitate the international mail study. The CRA model is almost
entirely automated. Because it prepares Level One documentation for
both versions anyway, and preparing it can be done automatically with
little effort, providing Level One documentation for the Periodic
Reporting Rule should not impose an additional burden on the Postal
Service of any significance. For these reasons, the rule requires the
Postal Service to provide Level One CRA documentation each year that is
comparable to that provided for the base year in an omnibus rate case.
Of the six levels of CRA documentation that the Postal Service
provides in an omnibus rate case, the Periodic Reporting Rule will, in
a typical year, require Level One, Level Two, and Level Four
documentation, almost exclusively. Level One and Level Two
documentation is not burdensome for the Postal Service to provide,
since its production is almost entirely automated, and the Postal
Service produces it each year anyway, for reasons apart from the rule.
The burden of providing Level Four documentation should be minor, too.
The input databases have already been produced, since they are an
indispensable step in producing the CRA, and their production is
automated. In providing some Level Four data, the Postal Service faces
the extra task of masking the identifying label for data that are
facility specific or customer specific. This, however, should not be
significant, since it, too, is easily automated.
The only significant burden of complying with the rule that the
Postal Service would not otherwise bear is that involved in providing
Level Three documentation (the processing programs used in its
component cost variability models). But it only needs to provide a
minority of those programs used to produce the CRA (those that have
changed since the last rate case), and it need not provide narrative
explanations or justifications. The Postal Service thereby avoids most
of the burden that it would encounter providing Level Three
documentation in an omnibus rate case.
For all of the above reasons, the Postal Service grossly
mischaracterizes the Periodic Reporting Rule when it asserts that it
will require CRA documentation on the ``scale and scope'' of an omnibus
rate case. Id. at 4.
Scope Arguments Based on the List in the NPR
As noted earlier, the Postal Service's principal support for this
gross mischaracterization is an entirely non-analytical reference to
the ``very broad'' language of the rule. It also cites a list of
information at page 5 of the NPR, apparently to prove that the rule
would require CRA documentation equal to that submitted in an omnibus
rate case. Ibid. Here, too, it offers no analysis that explains how the
contents of the list might support this assertion.
The 11 items on the list do not support the Postal Service's
assertions that the requirements of the rule are open ended and
comparable to an omnibus rate case in scope and scale. The list
illustrates the Level One documentation required by the proposed rule
(the ``CRA Model'' itself) with item 2. It illustrates the Level Two
documentation required by the proposed rule (B workpaper
[[Page 65359]]
spreadsheets and their equivalent) with items 1, 5, 10 and 11. It
illustrates the Level Four documentation required by the proposed rule
(input datasets) with items 3, 6 and 9. As noted above, the Postal
Service would have to produce all of these items anyway for reasons
apart from the rule, and their production is almost entirely automated,
and therefore not a significant burden to provide.
The Level Three documentation required by the rule (analytical
studies supporting variability estimates or distribution techniques)
potentially would require some significant additional burden in the
rare case that a special study was used to produce the CRA before being
vetted in an omnibus rate case. Even then, the documentation would be
much less burdensome to provide than the documentation required in an
omnibus rate case because the Postal Service need not include a
narrative explanation and defense of the study, such as that which it
would submit as sponsoring testimony in an omnibus rate case. The final
version of the rule gives the Postal Service additional flexibility
that it would not have in the context of an omnibus rate case. The
Postal Service may provide an abbreviated written or oral description
of the study, which should include a description of the theory, the
data, and estimation technique used. It may then ask for a waiver of
the requirement that it provide the underlying dataset and processing
programs. If the description is sufficient to allow others to evaluate
the resulting estimate at a general level, the Commission could grant a
waiver. If the Postal Service concludes that an abbreviated narrative
description would be burdensome to provide, it may provide the input
data and the processing programs, and let them speak for themselves. In
its length and its scope, the narrative presentation might resemble the
kind of informal technical conference that is occasionally used in a
rate case to acquaint litigants with the basic outlines of a complex
new study. It would not, however, involve testimony, discovery, or
cross-examination, which are the significant burdens associated with
litigating a rate case. It should be borne in mind that the additional
burden of documenting a special study this way for the Periodic
Reporting Rule would be zero, since the study would eventually have to
be fully explained in an omnibus rate case.
Three items on the list on page 5 of the NPR (items 4, 7 and 8)
illustrate the kind of Level Three CRA documentation that the proposed
rule would require. These are special studies whose theory, variable
definitions, and estimating techniques haven't changed from the most
recent general rate case, but the accuracy of their results requires
the use of updated input from routine data collection systems.\10\
Therefore, the Commission needs documentation related to these special
studies that allows it to determine whether current data have, in fact,
been used to produce the current-year CRA. This need relates primarily
to the CRA-PRC Version, since the Postal Service does not audit that
version as carefully as it audits the CRA-USPS Version. The Service's
outside auditors do not review this document.
---------------------------------------------------------------------------
\10\ The Van-Ty-Smith SAS programs that construct mail
processing labor cost distribution keys from current-year IOCS tally
data, stop coverage in the CAT/FAT study of coverage variability,
and pieces-per-delivery in the Load Time Variability study are
examples of studies whose accuracy depends upon using updated input
data.
---------------------------------------------------------------------------
Item 7 on the list indicates that under current circumstances,
where Docket No. R2000-1 serves as the most recent fully-litigated rate
case, the proposed rule would extend to the spreadsheets and programs
used to estimate load-time variabilities in the CRA. To get accurate
estimates of variable load-time costs, it is necessary to calibrate the
Load Time Variability model with current-year data from the City
Carrier Cost System (CCCS). The Postal Service purported to estimate
variable load time costs according to Commission-approved methods in
the FY 2001 International CRA-PRC Version, which it provided to help
the Commission produce its FY 2001 international mail report. (In such
reports, the Commission must determine if the Postal Service's
attributable cost estimates for international mail categories
accurately reflect Commission-approved methods.) Because the Commission
could not replicate the estimates using the methods approved in the
last full rate case, it asked for the processing programs to see if it
could determine why. The Postal Service provided new spreadsheets in
place of the SAS programs it had been using in prior rate proceedings.
The Commission could not decipher the undocumented spreadsheets.
Because the Commission did not have access to current-year CCCS data,
it could not run the established programs to diagnose the problem
itself.\11\ Consequently, the Commission could not determine whether
the Postal Service had used current-year data to produce the current-
year CRA. Later, through cumbersome trial and error procedures, the
Commission was able to decipher the Postal Service's new spreadsheets,
and determine that the Postal Service had simply plugged in an obsolete
variability factor instead of using current data to update the load
time variability model. This illustrates why the Commission needs
access to input data and processing programs that have changed since
the most recently completed rate case, if it is to be able to evaluate
the CRA.
---------------------------------------------------------------------------
\11\ One way to diagnose a failure to update a special study is
to compare the Postal Service's results to those obtained by
rerunning the program with old data. This diagnostic tool is
available to an outside analyst only if he or she is able to
replicate the program.
---------------------------------------------------------------------------
Item 8 on the list indicates that the Postal Service should provide
``the underlying route-type data'' needed to produce the in-office
worksheets in the B workpapers. In the past, the Postal Service used
the IOCS tally information compiled in the LIOCATT to distribute mixed
mail sorting costs incurred at delivery units to subclasses. Because
the Postal Service changed the processing programs that it uses to
perform this task, this item was included in the list. The Commission
recognizes, however, that the changes were documented in the most
recently completed rate proceeding. As a result, the Periodic Reporting
Rule need not extend to this item. If the Commission receives the IOCS
input data, it will not need these processing programs to competently
evaluate the distribution of in-office mail sorting costs to
subclasses.
Item 4 on the list would require the Postal Service to provide the
MODS-based costing spreadsheets needed to produce output for the B
workpapers. While the processing programs used to attribute mail
processing costs to subclasses were specifically required under
proposed Rule 102(a)(1), they are not included in the final version of
the rule. Many of those programs, however, change from year to year due
to additions or deletions of activity codes or finance numbers. Also,
because some programs use hard-coded numbers to compute distribution
keys, they need to be updated each year. Consequently, the final rule
would still require the Postal Service to provide many of the MODS-
based programs in item 4. It may be more practical for the Postal
Service to submit them all, rather than to attempt to segregate out the
ones that have changed. The final rule allows the Postal Service this
option.
The relatively recent switch from the LIOCATT-based system to the
MODS-based system is a fundamental shift of methods governing a major
portion of the Postal Service's overall operations. The Postal Service
is apparently still making adjustments to the estimation methods that
it uses to produce the CRA
[[Page 65360]]
in related areas to bring them into conformity with the fundamental
shift. For these reasons, the Commission is likely to need the programs
implementing the MODS-based method for distributing mail processing
costs to subclasses if it is to stay abreast of these developments in
cost attribution, and retain its ability to competently interpret the
CRA.
Scope Arguments That Assume Improper Commission Motives
The Postal Service seems to be aware that neither the wording of
the Periodic Reporting Rule, nor the list of examples of what it would
cover, supports its assertion that it would require as much CRA
documentation as would be required in a full-blown rate case. The main
support that it offers for this assertion is its hypothesis that the
Commission has an array of improper motives for updating the rule
(e.g., to supplant the Postal Service's auditors, to take day-to-day
monitoring away from postal management, to conduct rate cases off the
record, to upset the legislative balance, etc.). Given such motives, it
claims, it is ``inevitable'' that the Commission will ignore the limits
of its rule and seek the full-blown rate case documentation.
Substantive Comments at 22.
As an example of the full-blown rate case documentation the Postal
Service says the rule will require, it cites two special studies that
it says it has relied on to develop the CRA, neither of which has been
publicly disclosed. One estimates attributable carrier costs, the other
facility-related attributable costs. It argues that ``[u]nder the
proposed rule, any such study would need to be extensively documented
in order for its new data and methods to be understandable to, and
usable by the Commission.'' Id. at 22. It estimates that it would take
6 person-months to adequately document the carrier cost study, and 12
person-months to adequately document the facility costs study. Ibid.
The Postal Service does not attempt to explain why it would take
this much additional time to document such studies, and no plausible
explanation is readily apparent. These studies, presumably, have
already been documented sufficiently by their authors to convince upper
management that they provide a sound basis for one of its most
important routine financial reports. The rule, however, only requires
that the Postal Service provide the input data and processing programs
used to perform the study. It is not plausible that a study could have
received this level of scrutiny and acceptance unless there was already
in existence a set of input data and processing programs that the
author could locate and provide in less than six (or twelve) months.
Similarly, it is not plausible that it would take six (or twelve)
months for the author of the study to prepare a morning's briefing on
the study for interested parties, if the Postal Service were to choose
that option.
In order to have any credibility, these burden estimates have to
assume that the Commission will ignore the limits of the rule and seek
full rate case documentation of the study, including detailed narrative
testimony that establishes a foundation for study results and defends
the theory, the estimating techniques, and the robustness of the
results. It can be seen that, with respect to Level Three CRA
documentation especially, there is an enormous gap between the
relatively insignificant additional burden of complying with the rule
and what the Postal Service spends its time and energy opposing.
The Postal Service contends that if it did not use any new special
studies in the CRA, complying with the rule would require 78\1/2\
additional person-days. It does not explain why it would take this much
effort, since it already prepares this documentation for reasons apart
from the rule, and its preparation is (or could be) almost entirely
automated.
Even if this estimate were accurate, however, it should be kept in
perspective. When the Postal Service prepares an omnibus rate request,
by its own account, it produces tens of thousands of pages of
documentation, data, and testimony, most of which is devoted to
explanation of its cost, revenue, and volume estimates. The burden of
producing this information is so heavy, according to the Postal
Service, that it must begin its preparation approximately six months in
advance in order to file by its target date. Substantive Comments at
21. Over that period, the Postal Service assigns a host of consultants
and its own professional staff to this task. The hours that the Postal
Service says it needs to comply with the CRA documentation requirements
of the Periodic Reporting Rule (in the normal circumstance where it is
not based on new special studies) is a tiny fraction of the burden of
documenting an omnibus rate filing.\12\
---------------------------------------------------------------------------
\12\ It should be borne in mind that the burden of documenting
new cost studies is not increased by the Periodic Reporting Rule,
since it is part of the burden of preparing an omnibus rate request.
---------------------------------------------------------------------------
Yet the Postal Service's comments are replete with assertions
designed to leave the impression that the rule would impose a burden
that is comparable to the burden of preparing additional omnibus rate
filings. Id. at 4, 7, 15, 21. The Postal Service's arguments about the
balance of powers between the Postal Service and the Commission being
``fundamentally altered'' due to a massive increase in the Postal
Service's ``regulatory overhead,'' interference with postal
management's ability to focus, conducting rate cases off the record,
etc., evaporate when its gross mischaracterization of the burden of
complying with the rule is exposed.
The Postal Service becomes particularly apocalyptic about the
prospect of answering informal questions about the way it produces the
CRA. It asserts that comments were made at the technical conference
held on April 3, 2003, indicating that the Commission staff
``envisioned the establishment of a process'' whereby the Commission,
and others, could direct questions to the Postal Service concerning the
documentation that it provides under the rule. Id. at 7. According to
the Postal Service, this raises ``the possibility of an open-ended,
`perpetual' rate-case.'' Id. at 15. In the Postal Service's mind, this
possibility then morphs into the specter of
year-round rate-making style data-production, documentation, and
perhaps more significantly, ongoing inquiries by the Commission,
Postal Service competitors, and any other interested party with the
time and resources necessary to pursue such activities.
Id. at 18. This leads the Postal Service to warn
[i]f such pseudo-discovery were similar to that encountered by
the Postal Service in omnibus rate cases, one would expect the
burden associated with responding to questions on new cost studies
to be very large indeed. The very open-endedness of such extra-
record questioning not only raises serious concerns regarding the
potential burden involved, but reinforces the fundamental objection
that the Postal Service and the Commission should not be spending
their time and resources devising ratemaking procedures that not
only are unsupported by our governing statue, but actually conflict
with that statute.
Id. at 23-24.
Never, in recent memory, has the Postal Service tried to make such
a grandiose mountain out of such an insignificant molehill. The
Commission's staff entered the technical conference without having
discussed, let alone taken a position, on the question of whether there
should be informal questioning of the Postal Service staff under the
rule. In the
[[Page 65361]]
memory of the Commission's staff, it was another attendee who asked
whether such questioning would be compatible with the rule, and the
response of the Commission staff was that it saw no incompatibility
with the rule, and it had no objection.
The Commission sees no problem with continuing the same helpful
practice that has been followed for decades by the staffs of both the
Postal Service and the Commission. Between rate cases, on rare
occasion, a member of one staff, for example, would spot what appears
to be error in a spreadsheet, make a call to the other staff, and ask
if it was, in fact, an error. Someone on the other staff would
typically investigate and respond informally with a corrected
spreadsheet, or some brief explanation of the apparent error. The
Postal Service staff occasionally does this after reviewing the
workpapers that the Commission provides to explain the technical
aspects of its Recommended Decisions. The Commission's staff
occasionally does this after the Postal Service provides a periodic
report. The Commission's staff saw no reason not to continue this
practice. The Commission has never suggested launching general
``procedures'' for ``pseudo discovery'' between rate cases under the
auspices of the Periodic Reporting Rule. The option of providing a
public briefing on special studies that the final rule provides in
paragraph 102(a)(1)(ii) is one that the Postal Service is free to
decline if it wishes.
C. The Need for Mid-Level Documentation of the CRA
Recognizing When There Are Grounds for Initiating Sec. Sec. 3623 and
3662 Hearings
The Postal Service devotes the majority of its comments to
impressionistic descriptions of the CRA documentation that the rule
would require, followed by conclusory statements that the documentation
``far exceeds'' the Commission's ``legitimate'' needs. The Postal
Service's conclusion that the CRA documentation required by the rule
exceeds the Commission's needs rests heavily on the Postal Service's
mischaracterizations of the documentation required as all information
that the Postal Service uses to develop the CRA from raw data on up.
Substantive Comments at 3, 21.
As explained above, the rule does not extend to raw data, the
design of Postal Service data collection systems, or the processing
programs that edit and structure data into input datasets (``Level
Five'' and ``Level Six'' documentation). As the most recent fully-
litigated rate case demonstrates, the design of data collection systems
and the structure and editing of raw data into input datasets can be of
fundamental importance in evaluating the soundness of a study. Even
with the updated rule, analysts in interim years would have to assume
that these aspects of the CRA are valid, and wait for an omnibus rate
case for an opportunity to investigate them.
With respect to Level Four documentation, the revised rule requires
that only input datasets that have changed since the last general rate
case be provided. More significantly, the rule only requires minimal
Level Three documentation (the input data and processing programs that
implement new analytical models). The rule, therefore, is a balanced
compromise, falling well short of everything that would help the
Commission understand and evaluate the CRA results.
Narrative explanations of new studies are not required, so it may
be difficult for the Commission and the affected public to evaluate
their soundness. With the input datasets and the processing programs,
however, the Commission and the interested public at least can run the
CRA model with the established method, and then with new study inputs,
to see the impact that the new study has on estimates of subclass
attributable costs. Having the Level One and Level Two documentation
required by the rule makes this crude level of diagnosis possible, as
they are necessary to run the CRA model. Level One and Level Two
documentation also make it possible to gain some insight into why the
new study has the effect that it has on subclass attributable costs,
because its effect on other inputs, and its effect on intermediate
outputs, can be observed.
The Level One, Two, Four, and partial Level Three documentation
that the rule requires falls well short of what will be needed in a
rate case to fully evaluate the merits of a new study. But without it,
the Commission and the affected public would have to simply accept the
estimates of total subclass attributable costs reported in an interim-
year CRA on faith. There would be no way to know if shifts in subclass
attributable costs reflect true underlying economic effects, changes in
data sources, or changes in estimation techniques. Similarly, if costs
have not shifted, there is no way to tell if this reflects underlying
economic stability, or the failure to update Level Three models with
current-year data.
The Postal Service apparently believes that the regulatory scheme
established under the Postal Reorganization Act functions perfectly
well when this level of public ignorance prevails between rate cases.
But the Act clearly anticipated that the hearings that the Commission
conducts when the Postal Service files a rate case are not, by
themselves, enough to ensure that the policies of the Act are carried
out. That is why Sec. 3623 of the Act authorizes the Commission to
initiate classification hearings on its own. That is also why Sec.
3662 of the Act empowers the Commission to review public complaints
that current rates or classifications are in violation of the policies
of the Act, in order to determine whether they warrant a hearing.
The CRA is the Postal Service's most important and fundamental
report on subclass attributable costs, volumes, and revenues. Without
any documentation, its estimates are effectively unreviewable. Under
these circumstances, the Commission's ability to make an informed
decision on the need to initiate classification reform or to hold a
hearing on a complaint that current rates or classifications violate
the Act is severely circumscribed. If, in the period between rate
cases, the Commission cannot thoroughly interpret and understand the
Postal Service's routine financial reports that bear on ratemaking,
these remedies that the Act provides are undermined.
The following may help illustrate this point. In its comments, the
Postal Service mentions the need for flexibility to respond to the
``fast moving markets in which it competes.'' Id. at 19. Over four
years, the volume patterns and cost structure of these markets might
change enough to invalidate the assumptions upon which current rates
were based. If the affected public has access to the partial CRA
documentation required by the rule, it would have a way to identify
when key assumptions underlying rates are no longer valid, and a
greatly improved opportunity to learn whether a petition for relief is
warranted. If the public were to go four years without documented CRA
estimates, and therefore could not learn how they were estimated or
what influences they reflect, it might seriously misestimate the basis
for a petition for adjusted rates or classifications.
An example of how key assumptions underlying a set of rates could
become invalid over time without detection would be in Standard Mail.
In the Enhanced Carrier Route (ECR) subclass of Standard Mail, seven
IOCS-dependent discounts are offered. The size of the discounts is
determined by IOCS tally data. There are instances in the past where
appropriate cost-based
[[Page 65362]]
discounts, based on IOCS tally data, have abruptly and substantially
increased or decreased in some of these presort levels but not others.
If these abrupt, substantial shifts were sustained over several years,
the disparity between the cost differences among density levels on
which the discounts were based, and the cost differences reflected in
current data, could become large, making the actual passthroughs of
avoided costs so disparate that it might violate the fairness and
equity criteria of the Act. See 39 U.S.C. Sec. 3622(b)(1).
A mailer of presorted Enhanced Carrier Route mail could not know of
the passthrough disparities that had emerged unless it had access to
the kind of CRA documentation required by the rule. It could not make
effective use of its right to ask for a hearing under Sec. 3662 to
show that ECR rates violate the policies of the Act, because it could
not demonstrate to the Commission that the cost assumptions underlying
these discounts were no longer valid. Although the Act provides the
public with this alternative way to secure its rights under the Act,
this alternative is of little value when facts that are basic to
ratemaking and classification are unavailable to the public.
Being Adequately Prepared To Process Rate Requests
Beyond indicating when there are grounds for initiating Sec. 3623
and Sec. 3662 hearings, the Commission and the public need mid-level
documentation of the CRA to be adequately prepared to process cases
brought by the Postal Service. These include omnibus rate cases under
Sec. 3622, which must be processed within the severely compressed 10-
month window allowed by the Act. They also include ``experimental,''
``market test,'' ``negotiated service agreement'' and other special
kinds of rate and classification cases for which the Commission has
created even more compressed hearing procedures, at the Postal
Service's request.
The reasons that such documentation is needed for these kinds of
cases were previously explained in describing the history of the
Periodic Reporting Rule. The first of these reasons is the fact that
the Postal Service's CRA, which is the starting point for analyzing any
set of proposed rates, is exceedingly complex, continually changing,
and has proved to be extremely difficult to comprehend in the few
months allotted for discovery in a general rate case. Providing partial
documentation of the most recent versions of the CRA between rate cases
is the minimum necessary to make this task feasible in the hearing time
allotted.
In addition to keeping its technical expertise current in order to
quickly process a rate case brought by the Postal Service, the
Commission described a second reason that partial documentation of the
CRA is needed between rate cases. See Docket No. RM76-5, Notice of
Proposed Rulemaking, issued April 6, 1976, at 2-3. This is to narrow
the scope of discovery and Presiding Officer's Information Requests
needed in rate cases, and shorten this phase of the proceeding. The
objective is to avoid, as far as possible, inquiries into technical
costing issues that are background, or generic in nature, rather than
tied to a specific set of proposed rates. This objective has not
changed since the Periodic Reporting Rule was first issued 27 years
ago.
Researching Cost Behavior Between Omnibus Rate Cases
A third reason that partial documentation of the CRA is needed
between rate cases is to gain access to the basic datasets needed to
develop models of cost behavior that can be presented in an omnibus
rate case, so that less of the litigation window is consumed with such
development work. See PRC Order No. 141 at 3. This objective, also, has
not changed since the Periodic Reporting Rule was first issued. What
has changed since the Periodic Reporting Rule was last updated are the
new sources of data that the Postal Service uses to develop the CRA,
and the increased capability of the Commission and the intervenors to
work with those data.
To develop models of postal cost behavior, it is necessary to have
two things--relevant data, and the time and resources to analyze the
data. The Postal Service is in a unique position among all stakeholders
in postal ratemaking in this regard. It has exclusive control of almost
all of the data that could be used to model postal cost behavior. When
it decides to study a particular area of postal cost behavior, it has
well over 100 in-house analysts and consultants whose time and
expertise can be enlisted in the effort. As the only initiator of rate
cases, it has exclusive control over the timing of rate cases.
Consequently, when the Postal Service wants to develop a model of
postal cost behavior, it can decide for itself what data to access or
what new data to collect, how long to spend developing its model, and
when to initiate a hearing to present it.
Currently, a mailer or competitor that would like to develop an
alternative model of cost behavior has little chance of doing so.
Between omnibus rate cases it cannot get access to data that reflect
current postal operations. When the Postal Service files an omnibus
rate case, an intervenor will have about two months to digest the
mammoth filing and determine what to investigate, and perhaps three
months to find analysts, request relevant data, develop a model, and
defend the results. It might have only a few weeks to do this in more
abbreviated hearings, such as hearings on experimental services. It is
almost impossible for intervenors in rate cases to plan, complete, and
defend models of postal cost behavior in the narrow litigation window
allowed. As a result, in over 30 years of Commission hearings,
intervenors have almost never succeeded in developing significant
alternative cost attribution models. During rate cases, intervenors are
confined almost entirely to reacting to and criticizing the models
developed by the Postal Service.
Due Process and the Need for Data
The Commission has explained why relevant data are an indispensable
tool for researching, analyzing, or modeling postal cost, volume, or
revenue behavior. In its comments, the Postal Service takes the
position that, under the Act, no entity other than itself may possess
this tool between omnibus rate cases. Substantive Comments at 6. It
asserts that if the Commission or the intervenors make any use of the
datasets or the programs underlying an interim-year CRA, they would be
conducting a ``de facto rate case'' outside the confines of a formal
hearing. Id. at 16-17. According to the Postal Service's logic, any
activity that others do during a rate case--such as studying postal
cost, volume, or revenue behavior--may not be done outside of a rate
case; otherwise, the 10-month time limit on rate cases is violated. The
Postal Service does not extend this logic to itself, however. It may
devote whatever time it wants to studying and preparing for rate cases
without violating the 10-month time limit for rate hearings under the
Act. Bearing in mind that significant new studies of postal cost
behavior almost never can be started, completed, and defended within
the allotted portion of a 10-month rate case, the Postal Service's view
of the Act means that only it has any realistic chance to develop
analytical models for ratemaking, since only it may possess the
required data between omnibus rate cases.
The Postal Service insists that if it is to have due process during
rate cases, it must be able to withhold basic financial data between
rate cases. Otherwise, it argues, it would lose what it believes to
[[Page 65363]]
be its statutory prerogative to surprise opponents with every element
of its rate filing. It insists that its prerogative extends to the
generic, background financial data summarized in its standard financial
reports. Substantive Comments at 36. Its view that the statute grants
it an unlimited right of surprise ignores the due process needs of the
affected public that participates in rate cases.
When the Postal Service eventually decides to file a rate case, it
may present numerous new models that it has had ample time to prepare.
Since alternative models can rarely be developed and defended in the
time available, the only effective alternatives to the Postal Service's
new models are the Postal Service's old models on which existing rates
are based. The Postal Service's models, new and old, are typically the
only ones eligible for adoption, because they are typically the only
ones that have been presented on the record.
The Postal Service thinks that the due process objectives of the
Act are well served under these circumstances. But if intervenors are
to ever have a realistic chance to develop alternative cost attribution
models for consideration in an omnibus rate case, they will, at a
minimum, need access between rate cases to the current Level Four
datasets that are used to produce the CRA.
Expertise and the Need To Replicate the CRA
The Commission and the public also need Level Four datasets in
order to replicate the various attribution and distribution techniques
that the Postal Service uses to produce the CRA. The Postal Service
doesn't appear to object to the Commission replicating its Base Year
CRA model, and the various cost component analyses used to produce it,
in the context of a rate case. As a practical matter, for reasons
explained earlier, the Commission must use the Postal Service's ``state
of the art'' attribution engine as the starting point for estimating
the subclass attributable costs that will support the Commission's rate
recommendations. The Commission must first replicate the Postal
Service's CRA model in order to confirm that it understands how the
model estimates subclass attributable costs, and that it can accurately
reproduce the result that the Postal Service's version of the CRA
produced. The Commission must then adapt the Postal Service's CRA model
to produce Base Year subclass cost estimates that are consistent with
the Commission's recommended attribution methods. Because developing a
CRA model for a given year is a mammoth undertaking, even for the
Postal Service, errors and inconsistencies are inevitable. Before it
bases rate recommendations on the Postal Service's CRA, the Commission
must ensure that errors and inconsistencies have been identified and
corrected. To do this, the Commission issues Presiding Officer's
Information Requests asking the Postal Service to explain or resolve
apparent errors.
No thorough and coherent statement of the mechanics of producing
the CRA has ever been provided by the Postal Service. Narrative
descriptions of something as complex as the CRA, such as the Service
provides in rate cases, are unlikely ever to be adequate to enable an
analyst to thoroughly understand it. Therefore, replication is the
primary tool available to the Commission and the public to diagnose
errors in the Postal Service's CRA model, and isolate their sources.
Running the model is also the only way that the Commission can test the
forecasts on which its recommended rates were based to see if its
forecasting assumptions are holding up in interim years, and if not,
which ones are failing. The ability to undertake this exercise should
significantly improve the Commission's forecasting expertise.
Replication makes diagnostic tests of various kinds possible. For
example, to test whether the data that the Postal Service used in its
CRA model were properly updated, this year's model could be run with
this year's data, and then with last year's data, and the results
compared. To test whether a processing program has changed, this year's
data could be input into this year's CRA model, and then into last
year's CRA model, and the results compared. Replication can also be
done in stages, allowing intermediate outputs to be examined, to better
isolate errors, or inconsistencies with earlier versions. And
replication can be used to do sensitivity analyses, changing only
selected inputs, or selected processing steps, to try to find reasons
for unexpected results. To replicate the CRA model, or its components,
the Commission and the public need the relevant input datasets and
processing programs.
The Postal Service is skeptical that the Commission and the public
have a need for partial documentation of the CRA. It comments that
``[t]he Commission has been carrying out [its] duties for decades
without having routine and frequent access to such information.''
Substantive Comments at 11. In recounting the history of the Periodic
Reporting Rule, the Commission has already described some of the
compromises that it has been making during rate cases for decades. For
decades, it has been unable to decipher and work with CRA-related
databases and models that the Postal Service maintains on its mainframe
COBOL computer platform. The Commission ultimately gave up this pursuit
and developed its own PC-based CRA model that mimics the Postal
Service's inaccessible model. During omnibus rate cases, the Commission
most closely analyzes the Postal Service's ever-changing CRA model in
areas that are in substantial dispute. Because so much of the available
time is spent determining how the Postal Service arrived at its
disputed estimates of attributable cost, the Commission's evaluation of
undisputed estimation techniques is sometimes less thorough than is
desirable. The Commission may not address less significant changes that
the Postal Service makes in other costing areas, because there isn't
sufficient time in a 10-month hearing to analyze it all.
Intervenors in omnibus rate cases, of course, have, for decades,
had similar problems. To quote American Business Media:
With data available on an on-going basis, not only would the
Commission be better prepared for a rate filing, but the Postal
Service's customers would not bear the burden of having the ten or
twelve feet of papers, plus computer materials, dropped on them with
the expectation that they can review, understand, question and
refute those portions that are relevant in time for the Commission
to issue a recommended decision in ten months.
ABM Reply Comments at 2. The OCA adds:
As a participant in rate cases, the OCA has watched the
complexity and sophistication of Postal Service presentations rise
exponentially. The ``lead'' time required by the OCA (or any other
participant) to match the level of the Service's evidence has also
increased exponentially. But the Postal Service seeks to preserve
its lead-time advantage of `six months' while denying any lead time
to participants. At some point (already passed, as far as the OCA is
concerned), the advantage to the Postal Service becomes
overwhelming, and due process evaporates.
OCA Reply Comments at 4-5 [footnote omitted]. The need for the
updated Periodic Reporting Rule seems to be clear to everyone in the
postal community except the Postal Service itself.
Replication and Bias
While the Postal Service does not deny that the Commission may use
replication of its CRA as a legitimate diagnostic tool in the context
of a rate
[[Page 65364]]
case, it recoils at the thought that this tool might apply to an
interim-year CRA. It warns:
as the Commission's staff confirmed, the new requirements are
designed to allow the Commission to completely re-run the most
recent, updated CRA model based on new or alternative inputs, and
thereby give the Commission the capacity to develop anticipatory
rate recommendations without any formal request or policy guidance
from the Postal Service.
Substantive Comments at 10.
If the very staff that are replicating, validating, and
otherwise manipulating the fundamental financial and operating
information sought in this rulemaking are inevitably forming
impressions and conclusions from their investigations, what is to
prevent those impressions and conclusions from influencing the
outcome before anyone has had their opportunity to persuade? No
safeguards exist which would prevent such contamination of the
hearing process, and it is difficult to imagine how such safeguards
could be implemented in a practical manner. The Governors are
entitled to a recommended decision free from any hint of extra-
record determinations, and which gives appropriate recognition to
the respective statutory roles of the Governors, the Board of
Governors, and the Commission.
Id. at 17 [footnote omitted].
It is important to understand what the Postal Service is expressing
fear of in these comments. The CRA is the Postal Service's routine
financial report that is most relevant to ratemaking because it
estimates subclass attribution costs, volumes, and revenues each year.
It has been examined by outside auditors, and undergone multiple layers
of review by the Postal Service's staff to the point that it is
accepted as the most reliable data that it can provide to postal
management to guide it in matters of classification and pricing. In the
Postal Service view, if the outside world understands little or nothing
about how it obtains these estimates, it will not misinterpret them, or
be biased, or be misled regarding the relative responsibility of the
various subclasses for the Postal Service's financial condition. The
Postal Service evidently believes that the more accurate an
understanding the outside world gains about the data and estimation
methods that produce the CRA results, the more likely that it will be
misled, biased, and prejudiced by them.
As the OCA commented, knowledge is a lot less likely than ignorance
to produce bias. OCA Comments at 2-3. This is especially true where
competence to form an opinion is presumed to require a great deal of
industry-specific statistical and economic expertise. GCA points out in
its comments that Congress's primary objective in creating the Postal
Rate Commission was to ensure that rates would be based on these kinds
of expertise. GCA Comments at 4. Congress intended that issues of cost
attribution, in particular, should be resolved by application of the
Commission's expertise. National Association of Greeting Card
Publishers v. USPS, 462 U.S. 810, 823 (1983). The Commission, however,
is in a difficult position when it comes to maintaining that expertise.
As explained previously, the Postal Service controls all of the
data, has almost exclusive access to field experts, and employs almost
all of the analytical resources that are devoted to estimating postal
cost, volume, and revenue behavior. For these reasons, when it comes to
cost attribution, the Postal Service's cost attribution engine (the
CRA) is the starting point for all analysis. Its most current CRA
apparently is based on two major new studies of attributable carrier
costs and facilities costs. Each study is a ``black box'' as far as the
outside world is concerned, and is likely to remain so for several more
years without an updated Periodic Reporting Rule. By imposing a 10-
month time limit on the Commission for processing rate requests, the
Postal Reorganization Act assumes that the Commission can process such
requests with extreme expedition and still base its recommendations on
a thorough understanding of all aspects of the record.
Once an omnibus rate request is filed, there isn't sufficient time
in the 10-month statutory period to search and resolve issues relating
to the mechanics of producing the CRA, and still address the major
analytical and policy issues that are raised by a Postal Service
omnibus rate request. The mechanics of producing the CRA are generic,
background issues, that do not ordinarily depend on a particular time
period, a particular revenue requirement, or a particular set of
proposed rates. Therefore, documenting this aspect of the CRA should
not compromise the right of participants to litigate rate-case-specific
issues when a specific rate request is filed. Replication is the
primary tool for understanding the technical aspects of estimates found
in the CRA.\13\
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\13\ The Commission has restricted the Periodic Reporting Rule
to documentation of the mechanics by which the CRA is produced
(datasets, processing programs, spreadsheets, etc.) rather than
justifications of theories or policies that are likely to be
contested in a rate case. In this respect, the documentation
performs a function similar to an informal technical conference held
off the record during a rate case. The purpose of such conferences
is to gain an understanding of what was done mechanically to
implement a particular analysis, and avoids questions touching on
the merits of the analysis. Restricted in this way, the Periodic
Reporting Rule strikes a reasonable balance among the Postal
Service's right to ``surprise'' intervenors with every aspect of its
support of proposed rates, the intervenors rights to comprehend the
Postal Service's rate request and respond to it with alternatives in
the brief time allotted, and the Commission's need to enter a rate
case already understanding how the Postal Service prepares its
routine financial reports. If the Postal Service believes that its
reasons for making changes to the CRA should be explained in order
to eliminate misconceptions, it is free to provide them. The
Commission does not require such explanations, in order to minimize
the burden of complying with the rule.
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The Postal Service suggests that at the technical conference held
on March 11, 2003, the Commission's staff somehow signaled its
intention to use the documentation required by the Periodic Reporting
Rule to develop ``anticipatory rate recommendations''' outside of a
rate case. Substantive Comments at 10. The Commission does not
contemplate going to the considerable trouble to develop rate
recommendations that have nothing to do with a particular rate case.
This isn't because there would be anything wrong with it. It is because
such an exercise wouldn't be very informative if it were not tied to a
particular rate request, revenue requirement, and time period.\14\
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\14\ The Commission disagrees that the rule seeks enough
documentation to make it feasible to develop anticipatory rate
recommendations. For example, two categories of inputs that would be
needed to develop a realistic alternative rate schedule (if a test
year and revenue requirement were known) are the appropriate DRI
inflation factors, and details about the magnitude and timing of the
Postal Service's cost reduction programs. Neither is required by the
Periodic Reporting Rule.
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With respect to any tendency of replicating the CRA to produce bias
in the replicating party, the salient point is that the Periodic
Reporting Rule requires only input datasets and the processing steps
applied to those datasets--the minimum documentation that will disclose
the mechanical process by which CRA estimates were obtained. The data
used and the processing steps applied are facts that speak for
themselves, devoid of argument, interpretation, spin, or nuance. Making
facts available for analysis risks bias only to the extent that the
facts made available are selective, or one-sided. If facts disclosed in
the documentation of an interim-year CRA were to resemble facts
included in the Base Year documentation in a future rate case, the
Postal Service's opponents might be able to argue that the Commission
was swayed by having an early look at the Postal Service's version of
the facts without any alternative version to counterbalance it. If this
is a potential source of bias, it works for, not against the Postal
Service.
[[Page 65365]]
The Postal Service has suggested that it should not have to
disclose a set of facts similar to those that it might present in a
future rate case without having an opportunity to persuade the outside
world of the merits of the procedures that those facts reflect. Id. at
17. If the Postal Service would like to add to the documentation that
is required by the rule a discussion of the merits of the procedures
that it has used to produce an interim-year CRA, nothing in the rule
would prevent it from doing so. Any bias that might result from this
opportunity to persuade should benefit the Postal Service.
The Postal Service's main argument, however, is that if the
Commission has an opportunity to view facts in an interim year that
might resemble those that will be submitted in a future rate case, it
will have more time to form opinions about them than it would otherwise
have. Ibid. Contrary to conventional wisdom, the Postal Service
apparently believes that the less time a staff has to think about a
subject, the less likely its thoughts are to be biased. As the Greeting
Card Publishers point out, the solution to bias in exercising a
judicial function is not to obtain less knowledge, but to exercise the
appropriate caution in the use of the knowledge obtained. GCA Comments
at 2-3, n.1.
For example, the Postal Service expresses concern that an analyst
that obtains an input dataset from the Postal Service could model it
differently than the Postal Service modeled it. But this is not a
reason to withhold the data. If an intervenor were to model the data
differently, it would not affect the Postal Service unless the
intervenor subsequently presented it for consideration in a formal
hearing. In this way, the right of the Postal Service to debate or
oppose it before it had an impact on recommended rates would be
preserved. By the same token, if the Commission were to model data
differently, it would not affect the Postal Service unless the
Commission subsequently asked the participants in a formal hearing to
comment on it in a Notice of Inquiry. The Commission could not
affirmatively rely on any such model unless it were presented on the
record. Here too, the right of the Postal Service to debate it or
oppose it before it had an impact on recommended rates would be
preserved.\15\
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\15\ In its Substantive Comments, at 12-13, the Postal Service
mentions two instances in the Commission's 30 year history in which
a reviewing court remanded a Commission Recommended Decision on the
ground that it had employed an analytical technique without
observing the full range of procedural safeguards required in formal
hearings. This frequency of remand is probably among the lowest of
any Federal regulatory body, and does not offer legitimate grounds
for presuming that the Commission will ignore procedural safeguards
that accompany formal hearings.
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IV. The Legal Basis for the Periodic Reporting Rule
A. The Periodic Reporting Requirement Is Authorized by the Act
In discussing the legal basis for the Periodic Reporting Rule, the
Postal Service argues that the Commission does not need the information
required by the rule to perform any statutory function. It also argues
that it conflicts with its right to decide when to file a rate case
under Sec. 3622, its implied right to decide when to reveal its
evidence and argument in support of its proposed rates, and its implied
right to have all analytical activity concerning postal rates confined
to the 10-month litigation window allowed by the Act for rate cases.
Substantive Comments at 15-17, 36.
The Postal Service asserts that the Postal Reorganization Act does
not authorize the Commission to adopt periodic reporting requirements.
It recognizes that Sec. 3603 of the Act authorizes the Commission to
``promulgate rules and regulations and establish procedures * * * and
take any other action they deem necessary and proper to carry out their
functions and obligations * * *.'' In its view, the Commission's only
role under the Act is to process a Postal Service request for changes
in rates within the 10 months allotted by the Act. Outside of that 10-
month litigation window, it reasons, the Postal Rate Commission has no
functions or obligations, and therefore Sec. 3603 does not imply any
authority to carry them out. Id. at 8-14.
The Scope of Sec. 3603 Is as Broad as Its Language
The Postal Service argues that the scope of Sec. 3603 is much
narrower than its broad language suggests. It contends that the
following language in Sec. 3624(b) of the Act, which deals with the
conduct of formal Commission proceedings, ``specifies the type of rules
that were contemplated'' by Sec. 3603. It quotes:
In order to conduct its proceedings with utmost expedition
consistent with procedural fairness to the parties, the Commission may
(without limitation) adopt rules which provide for--
(1) The advance submission of written direct testimony;
(2) The conduct of prehearing conferences to define issues, and for
other purposes to insure orderly and expeditious proceedings;
(3) Discovery both from the Postal Service and the parties to the
proceedings;
(4) Limitation of testimony; and the conduct of entire proceedings
off the record with the consent of the parties.
It then comments:
[b]y the very nature of the examples enumerated, the Commission's
rulemaking authority is shown to be simply that necessary to
implement its limited statutory role: The efficient administration
of a hearing after it has been appropriately initiated under
sections 3622, and 3623. The rules now contemplated go far beyond
this intended role.
Id. at 14.
In drawing this narrowing inference, the Postal Service makes no
effort to account for the broad wording of Sec. 3603, which authorizes
the Commission not only to ``promulgate rules'' but to ``establish
procedures'' and to ``take any other action'' it deems to be necessary
and proper to carry out its functions and obligations. If Sec. 3603
were meant to authorize only rules governing formal hearings, one
wonders why Congress saw any need to include Sec. 3603 in the Act,
since the Act already specifies the kind of rules the Commission may
adopt for that purpose in Sec. 3624(b). The Postal Service's
interpretation of Sec. 3603 renders the section entirely unnecessary.
It is a basic canon of statutory construction that statutory language
will not be construed in such a way as to make another section of the
same statute ``superfluous, void, or insignificant.''\16\
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\16\ Public Citizen Health Research Group v. FDA, 704 F.2d 1280,
1285 (D.C. Cir. 1983) quoting 2A C. Sands, Statutes and Statutory
Construction Sec. 46.06 (4th ed. 1973).
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Section 3603 Extends to Commission Initiated Proceedings Under
Sec. Sec. 3623 and 3622
By authorizing the Commission not just to promulgate rules, but to
``establish procedures'' and to ``take any other action'' it is clear
that Sec. 3603 authorizes the Commission to do more than promulgate
rules of only one narrow type. In characterizing the Commission's
authority as ``the efficient administration of a hearing after it has
been appropriately initiated'' the Postal Service glosses over the fact
that Chapter 36 of the Act gives the Commission discretion to initiate
classification hearings under Sec. 3623, and complaint cases under
Sec. 3662. The Act authorizes the Commission to exercise its
discretion and judgment as to whether there are good grounds for
initiating such hearings. In doing so, the Act contemplates that the
Commission will have access to relevant, reasonably
[[Page 65366]]
current financial data--before hearings are held--that would allow the
Commission to make informed decisions as to whether such hearings were
warranted.
The Commission's duty to determine if hearings are warranted
potentially extends to hearings to reclassify rate categories as
subclasses, or vice versa, depending, in part, whether they have enough
common cost-driving characteristics. The Commission's duty to determine
if hearings are warranted also potentially extends to complaints that
certain rates or discounts are unfair because there have been major
shifts in relative cost savings since rates were last approved.
Determining whether such hearings are warranted requires the Commission
to make informed judgements about subclass and rate category
attributable costs. To exercise the discretion that the Act calls for,
the Commission needs access to attributable cost estimates about which
it can make some judgments, not just unreviewable, bottom-line
estimates based on unknown data sources and estimation methods. The
partial CRA documentation required by the Periodic Reporting Rule can
fulfill this need.
Section 3603 Authorizes Measures That Make Processing Postal Service
Requests More Efficient and More Fair
The more important need that partial documentation of the CRA
fulfills relates to the omnibus rate cases that the Postal Service
files, and the myriad minor rate and classification cases that it files
under abbreviated hearing schedules. The ``efficient administration''
of those hearings, to quote the Postal Service, is not the Commission's
only function. Its function is not just to conduct those hearings
``efficiently'' in a severely compressed time frame, but to conduct
them fairly.
In order to conduct omnibus rate hearings initiated by the Postal
Service efficiently, the Commission has to be able to read, comprehend,
and in some respects, repair, the Postal Service's ``cost attribution
engine'' before it can address the analytical and policy issues raised
by a rate request. For this process not to swallow up the majority of
the available hearing time, the Commission needs to begin the process
with an understanding of the current CRA. This requires reasonable
familiarity with the mechanics of the Postal Service's current cost
attribution methods. If it has to devote a major portion of the
litigation window to acquiring this familiarity, it may have to give
the merits of the Postal Service's cost attribution methods, as well as
basic volume and revenue estimation issues, short shrift. All of these
considerations apply equally to intervenors in Commission proceedings.
For them to have meaningful due process, they not only need a
reasonable chance to understand and respond to the Postal Service's
entire case in the time allotted, which they cannot do without the
documentation required by the Periodic Reporting Rule, they need a
reasonable chance to develop, propose, and defend alternative cost
estimation techniques in the time allotted. This they cannot do without
the datasets required by the Periodic Reporting Rule.
Section 3603 Authorizes Measures Designed To Expedite Minor Cases
Between omnibus rate cases, the Postal Service often files requests
for changes in rates for individual mail categories. When it does, it
usually seeks to expedite the case by seeking a waiver of the
Commission's normal documentation requirements for rate and
classification cases found in rules 54 and 64. These require the Postal
Service to provide full documentation of its base year attributable
cost, volume, and revenue estimates. The Postal Service usually files
these requests under Commission rules that drastically shorten the 10-
month period that the statute makes available to intervenors to
litigate a rate case. These range from ``experimental'' cases, which
have a 150-day litigation schedule, to Negotiated Service Agreements,
for which a 60-day litigation schedule has been proposed.
These rules allow expedition when intervenors raise only issues of
limited scope and complexity. The ability of the Commission and the
intervenors to process such cases within severely compressed schedules
also depends on their ability to do without a fully documented request.
If a partially-documented CRA has been filed under the Periodic
Reporting Rule for an interim year, the intervenors are much more
likely to be able to do without a fully documented base year CRA, and
the Commission is much more likely to grant the waivers that expedition
requires, and allow cases to proceed under its expedited rules.
The abbreviated hearing schedules provided for by the Commission's
expedited rules are Commission attempts to implement the ratemaking
provisions of the Act in a manner consistent with modern needs of the
Postal Service. The concept behind them is that there is not a need in
every case to litigate every issue--including the mechanical structure
of the CRA--from scratch. The Periodic Reporting Rule is based on that
concept as well.\17\
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\17\ The Commission's expedited rules of practice incorporating
abbreviated hearing schedules were adopted at the request of the
Postal Service. They strain the due process protections that the Act
provides to intervenors to the limit. So far, the intervenors have
cooperated in this attempt to accommodate the Postal Service's need
for speed and flexibility in ratemaking and classification
procedures. The Commission's expedited rules ask the intervenors to
assert all of the formal rights that they have under highly
abbreviated record hearing procedures in order to meet the Postal
Service's need for flexible ratesetting. It is ironic that after
receiving the voluntary cooperation of the intervenors in foregoing
some of rigidities of the statutory hearing process that benefit
them, the Postal Service so adamantly seeks to retain all of the
rigidities of the formal hearing process that benefit the Postal
Service. These include its perceived right to surprise intervenors
with all aspects of its rate requests, thereby maximizing the time
pressure under which they must litigate, and minimizing their access
to meaningful due process. See Substantive Comments at 36.
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Section 3603 Is Not Restricted to Measures Whose Need Is ``Compelling''
The Postal Service comments that certain information required by
the Periodic Reporting Rule is not ``strictly needed to conduct rate
and classification proceedings'' and ``not required by a compelling and
legitimate function.'' Substantive Comments at 11, 13. It thereby
implies that the statutory threshold for invoking the authority of
Sec. 3603 is that a regulation be an indispensable means of achieving
a statutory purpose. This is a gloss on Sec. 3603 that cannot be found
in the legislative history or inferred from the structure of the Act.
The provision authorizes actions that the Commission deems to be
``necessary and proper to carry out their functions and obligations * *
*.''
As the Commission has explained, it has an obligation to
competently address the full range of issues presented by a rate
request in the short time allotted by statute or the even shorter time
allotted by special rule. To help do this it must maintain a certain
level of expertise in current methods of attributable cost, volume, and
revenue estimation. The partial documentation of the CRA required by
the Periodic Reporting Rule will help it to maintain this expertise.
Maintaining the requisite expertise to do the Commission's job
effectively is not a minor consideration in making sure that the Postal
Reorganization Act functions as Congress intended. As the Supreme
Court, in National Greeting Card Publishers v. USPS, observed:
Congress recognized that the increasing economic, accounting,
and engineering complexity of ratemaking issues had caused Members
of Congress, ``lacking the time,
[[Page 65367]]
training and staff support for thorough analysis,'' to place too
much reliance on lobbyists. House Report, at 18. Consequently, it
attempted to remove undue price discrimination and political
influence by placing ratesetting in the hands of a Rate Commission,
composed of ``professional economists, trained rate analysts, and
the like,'' id., at 5, independent of Postal service management,
id., at 13, and subject only to Congress' ``broad policy
guidelines,'' id., at 12.
462 U.S. 810, at 822. [Emphasis added.] In its comment, the Greeting
Card Association points out that--
Since [the Commission's] duties centrally include acting as an
expert decisionmaker on matters arising under ch. 36 of title 39, it
seems clear that obtaining the information covered by this docket
regularly and systematically, in usable form, and in a timeframe
allowing it to be given mature consideration is a legitimate need.
GCA Comments at 4. UPS agrees. See UPS Comments at 2,4.
Similarly, the Commission is obligated to afford intervenors
meaningful due process in its rate hearings. Making the information
required by the rule available to prospective intervenors will help
them comprehend the prodigious amount of technical information
presented in an omnibus rate request, and to develop and present
alternative estimation techniques, within the short time allotted by
statute. As the OCA points out, ``providing due process to all
participants within a ten-month time period is `a compelling and
legitimate Commission function.' '' OCA Reply Comments at 3-4 [footnote
omitted].
The information required by the rule might not ``make or break''
the achievement of the legitimate statutory goals of maintaining the
Commission's ratemaking expertise, and affording prospective
intervenors due process, but it will greatly improve the odds. That is
all that is required to come within the authority of Sec. 3603.
Illegitimate Purposes Hypothesized for the Periodic Reporting Rule
Having identified the legitimate statutory functions that the
Periodic Reporting Rule facilitates, it is helpful to identify what
functions the rule is not designed to serve. The Postal Service
suggests that the purpose of the rule is to allow the Commission to
conduct ``day-to-day monitoring of [the Postal Service's] detailed
operations and finances'' [Substantive Comments at 7], ``auditing of
the Postal Service's books on a regular basis'' [Id. at 11] and obtain
``oversight,'' ``data collection,'' and ``investigatory powers.'' Id.
at 19.
As UPS points out, the updated Periodic Reporting Rule does none of
these things. UPS Comments at 1. The rule does not require the Postal
Service to provide any backup data with which to audit its books of
account, any documentation of its data collection activities, or any
data that would make possible daily monitoring of operations or
finances. No oversight is involved, and no investigation is involved.
Nor does it involve any hearings, or any comments from the public. The
rule simply requires the Postal Service to file some of the routinely
prepared documentation that support its periodic financial reports that
bear on ratemaking.\18\
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\18\ It is worth noting that when outside auditors review the
Postal Service's CRA, they perform a ``process audit'' that is
designed only to confirm that the processing steps that are intended
to be performed are in fact performed. It does not involve a
conceptual audit that addresses the suitability of the estimation
methods used or the reasonableness of the results obtained. Review
of the CRA by the Office of the Inspector General, or by GAO, are
generally not conceptual audits either. There does not appear to be
any provision in the current regulatory regime for regular
conceptual audits of the Postal Service's cost, volume, and revenue
estimates like the ones that the Commission performs intermittently
during omnibus rate cases.
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In discussing the legal basis for the Periodic Reporting Rule, the
Postal Service argues that the rule conflicts with its right to decide
when to file a rate case under Sec. 3622, and what it considers to be
two corollary rights--the right to decide when to reveal its evidence
and argument in support of its proposed rates, and the right to have
all analytical activity concerning postal rates confined to the 10-
month litigation window allowed by the Act. Substantive Comments at 15-
17, 36.
The Rule Does Not Affect the Timing of Rate Filings
When the Postal Service files a rate request under Sec. 3622 of
the Act, a complex set of legal consequences attach. These include the
right to receive a recommended decision on proposed rates from the
Commission, the right to receive it within ten months, and a complex
set of options that the Governors have to respond to the Commission's
recommended decision, including acceptance, rejection, modification,
and the right to appeal that recommended decision. The public's right
to intervene, to present evidence, and to appeal the result, also
attach when the Postal Service files a rate request.
No legal consequences that affect the Postal Service or the rates
that it may charge attach to the filing of information under the
Periodic Reporting Rule. When it complies with the rule, the Postal
Service has no further legal obligation to do anything. Its complaints,
therefore, can only be based on the effects that the rule might have,
if any, on the way that its request is handled during a rate case.\19\
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\19\ The existing Periodic Reporting Rule contains a long list
of routinely gathered financial and operating information that is
prepared for the benefit of postal management, but also gives the
Commission and the interested public useful background information
that will help them process a rate case when it is eventually filed.
Almost any of the categories of information covered by the rule are
the kind that could be expected to eventually be discussed and
analyzed in a rate case. For example, for decades, the rule has
included accounting period financial reports, reports on revenue,
pieces, and weight for groups of mail (RPW), various management
plans, and the CRA and the Cost Segments and Components report, with
partial documentation. For decades the rationale for including these
reports in the rule was that they help the Commission and the
affected public understand the kind of information, but not the
specific information, that will be used to support rates when a case
is eventually filed. This helps the Commission process a rate case
more efficiently and more fairly. This is the principal effect that
the rule has on the way that a Postal Service rate request is
handled.
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Section 410(c)(4) Is Not Relevant to the Rule
Section 410(c)(4) of the Act exempts ``[i]nformation prepared for
use in connection with proceedings under Chapter 36 of this title''
from mandatory disclosure under the Freedom of Information Act. The
Postal Service argues Sec. 410(c)(4) protects information required by
the Periodic Reporting Rule from public disclosure not just through
Freedom of Information Act requests, but through any other mechanism,
including Commission rules adopted under Sec. 3603 of the Act. Id. at
26.
Whether Sec. 410(c)(4) provides a general shield of protection for
materials prepared for Chapter 36 litigation is not a question that
needs to be decided as part of this rulemaking. There is a crucial
distinction between standard financial reports that are routinely
prepared for the benefit of management, and financial reports that have
been adapted to support a specific proposed revenue requirement and a
specific set of proposed new rates, to be implemented in a specific
test period. The former class of reports are normal business records
not prepared primarily for litigation. The Periodic Reporting Rule
requires that some standard business records be provided. The principal
effect of providing them is to allow the interested public to learn
enough about the way that the Postal Service routinely estimates costs
and revenues to comprehend an enormously complex omnibus rate filing in
the narrow litigation window provided. Only the latter class of reports
are prepared primarily for litigation purposes. The Periodic Reporting
Rule
[[Page 65368]]
does not apply to them. See GCA Comments at 5, n. 6. Therefore, the
rule does not infringe on the Postal Service's right under Sec.
410(c)(4) not to disclose attorney work product intended for Chapter 36
litigation, even if that provision were to apply outside of the context
of Freedom of Information Act requests.
There Is No Statutory Ban on Evaluating Rate-Related Matters Between
Sec. 3622 Proceedings
Section 3624(c)(1) of the Act requires the Commission to transmit a
recommended decision on the Postal Service's request for new rates
within 10 months after receiving the request. The Postal Service argues
that this provision entitles it to a respite from litigating rate-
related matters outside of this 10-month period.\20\ But the Postal
Service goes further, and argues that this respite includes a right not
to have to think about rate-related matters, and a respite from having
others think about rate-related matters. The Postal Service argues that
the Periodic Reporting Rule robs it of the respite to which it is
entitled, because it provides others with information that would enable
them, in the period between rate cases, to study how postal costs and
revenues behave. Substantive Comments at 17.
---------------------------------------------------------------------------
\20\ This argument, of course, ignores the various kinds of
hearings that the Act authorizes the Commission to initiate between
rate cases.
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Apparently, in the Postal Service's view, a ``rate case'' happens
whenever, and wherever a person's thoughts turn to postal cost or
revenue behavior, and if the Postal Service didn't ask them to do it,
Sec. 3624(c)(1) is violated. It is hard to take this proposition
seriously. One obvious flaw in this logic is the fact that the Act
contains a complaint procedure whereby the public may ask the
Commission, at any time, to hold a hearing on whether current rates
violate the policies of the act. See 39 U.S.C. Sec. 3662. This cannot
be reconciled with the Postal Service's ``respite'' theory. It should
also be noted that there is nothing in the legislative history of Sec.
3624(c) to suggest that it was motivated by a desire to give the Postal
Service a respite from other Chapter 36 hearings, let alone give it a
respite from others' rate-related thoughts.\21\
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\21\ Section 3624(c)(1) was adopted as part of the 1976
amendments to the Act. The legislative history of this provision
indicates only two motives for adopting the 10-month time limit for
completing rate cases. The overriding motive was the desire to
shorten rate cases so that revenues could be increased more quickly,
and the financial crisis that prompted the 1976 amendments would not
reoccur. See Report of Committee on Post Office and Civil Service,
House of Representatives, on H.R. 8603, Postal Reorganization
Amendments of 1976, Pub. L. 94-421, 94th Cong., 2d Sess., October
1976, at page 334 (Remarks of Senator McGee). A secondary motive was
to reduce the Postal Service's control over the ratesetting process
by lengthening the period that the Postal Service must wait before
it puts temporary rates into effect, from 90 days to 10 months after
it files a rate request. Id. at 51. The OCA asserts that under the
original statute, temporary rates, as a practical matter, became
permanent rates, shortening the hearing time before de facto
permanent rates were implemented to 90 days. It contends that the
effect of the 1976 amendments was to greatly expand the opportunity
of intervenors in rate cases to influence the selection of permanent
rates. OCA Reply Comments at 4, n.9.
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B. Disclosure Policy Under the Periodic Reporting Rule
The Postal Service expresses a deep-seated insecurity about the
Commission's willingness and ability to afford confidential treatment
to materials that it might provide under the Periodic Reporting Rule.
The cause of this insecurity, it asserts, is its experience with
Freedom of Information Act (FOIA) requests for information that it has
provided to help the Commission prepare its report to Congress on
international mail under 39 U.S.C. Sec. 3663. Substantive Comments at
29-30.
The Postal Service emphasizes that it is exempt from a duty to
disclose commercial information that ``under good business practice
would not be publicly disclosed'' by Sec. 410(c)(2) of the Postal
Reorganization Act. It argues as though this section of the Act is a
general-purpose exemption from the duty to disclose commercial
information. Section 410(c)(2), however, is expressly limited to the
Postal Service's duty to respond to FOIA requests. The Commission's
authority to require the Postal Service to provide information on a
periodic basis is not derived from FOIA, but from its authority under
Sec. 3603 of the Act to adopt procedures that are ``necessary and
proper'' to carry out its ratemaking and classification functions.
More to the point, the stated concern about the potential need to
afford confidential treatment to data provided to comply with the
proposed rule changes appears to be largely a red herring. As discussed
at some length above, all of the information called for by the proposed
rules have been provided and made public in recent years, either as
part of a rate case filing or as a courtesy to the Commission. Except
for facility-specific data, the Postal Service has never seen fit to
request confidential treatment for any of this information, and it does
not now identify any competitive disadvantage it is likely to suffer as
a result of public access to these historical operating results. Except
for facility-specific data, it seems highly unlikely that the Postal
Service will have justification to seek confidential treatment of the
materials it will provide to comply with revised rule 102.
Furthermore, the Commission always has conscientiously dealt with
requests for confidential treatment of data both during and outside of
docketed cases. Existing procedures assure that both the Postal
Service, and all others providing information to the Commission, have
ample safeguards to assure that their concerns will be fully heard and
evaluated in timely fashion, and their rights fully protected.
Protecting Commercially Sensitive Information Required by the Rule
In a rate case, a litigant occasionally will seek to discover
information that another litigant considers to be commercially
sensitive. The Commission resolves such issues by balancing one
litigant's need for the information to support its case against the
potential commercial harm that disclosure might cause to the other
litigant. In such cases there is a general presumption that discovery
should be granted in order to afford the discovering party its due
process right to prove its case. The tension between the discovering
party's need to prove its case and the opponents need to protect
commercially valuable information is sometimes resolved by granting
discovery subject to various protective conditions. For example, only
temporary access may be granted, and only to specified persons or
groups.
The CRA documentation that the rule requires is among the
documentation that the Postal Service has consistently disclosed in
rate cases without asserting that the documentation has commercial
value and without seeking protective conditions. The minor exception to
this Postal Service policy has been its consistent request that
facility-specific data, and mailer-specific data, be coded so as to
mask the identity of the facility or the mailer. The Postal Service has
not explained why the same approach could not be satisfactorily applied
to disclosure under this rule.
In its comments, the Postal Service strenuously objects to
following the same disclosure policy with respect to the same
documentation in the context of the Periodic Reporting Rule. It asserts
that ``the majority of the information designated by the Commission's
proposed rules consists of commercial information that would not be
disclosed under good business practices.'' As part of its justification
for this position, it notes that the material covered by the rule
includes information specific to
[[Page 65369]]
particular facilities. Substantive Comments at 31-32. The position that
the Postal Service has taken appears to be based in part on the
assumption that facility-specific data would somehow be at risk if it
were disclosed under the rule. The Commission has no intention of
affording less protection to the information obtained under the
Periodic Reporting Rule than it has consistently afforded in the
context of a rate case. The position that the Postal Service has taken
also appears to be influenced by its overly-broad and inaccurate
characterizations of the documentation that the rule requires.
Express Authority for the Rule Is Not Required
The Postal Service emphasizes that the Postal Reorganization Act
does not expressly authorize the Commission to require the Postal
Service to provide access to information outside the context of Chapter
36 rate hearings. Id. at 24. The Postal Service further emphasizes that
Sec. 410(c) of the Act exempts it from the obligation to disclose the
following information in response to Freedom of Information Act
requests:
Information of a commercial nature, including trade secrets,
whether or not obtained from a person outside the Postal Service,
which under good business practice would not be publicly disclosed.
The Postal Service assumes that Sec. 410(c) not only exempts such
information from mandatory disclosure in response to requests filed
under the Freedom of Information Act, but, by implication, exempts it
from mandatory disclosure under any circumstance, other than pending
Chapter 36 hearings. Id. at 26.
Although the Act does not expressly authorize the Commission to
require the Postal Service to provide information outside the context
of Chapter 36 hearings, express authority is not required, given the
availability of Sec. 3603. Because of its broad language, any exercise
of Sec. 3603 authority is necessarily an exercise of implied
authority. The issue is whether it is plausibly and reasonably implied.
The Commission has already explained why it needs the documentation
required by the rule if it is to effectively evaluate all of the issues
presented in Sec. 3624 hearings within severely compressed litigation
windows. It has already explained why that information is needed if the
Commission is to ensure that intervenors in future rate cases have a
realistic opportunity to understand the immensely complex documentation
supporting Postal Service rate requests, and to develop alternatives,
in the severely compressed litigation window available. Having shown
the need for the rule to carry out its functions under Sec. Sec. 3622,
3623, and 3662 of the Act, the Commission has demonstrated that the
rule is the kind of procedure that Congress meant to authorize by the
general language of Sec. 3603.
The Rule Does Not Conflict With the Policy Underlying Sec. 410(c)
The Commission sees no conflict between the Periodic Reporting
Rule, as authorized by Sec. 3603, and the disclosure policy reflected
in Sec. 410(c) of the Act. Section 410(c) does not expressly apply in
contexts other than Freedom of Information Act (FOIA) requests. There
are special considerations that are likely to have led Congress to
exempt the Postal Service from mandatory disclosure of commercially
sensitive information in response to FOIA requests. The most
significant of those considerations is that in deciding whether to
comply with a FOIA request, an agency may not take into account the
need of the requesting party for the information that it is requesting,
NLRB v. Sears, Roebuck & Co., 421 U.S. 132 (1975) at 143 n. 10, and it
generally may not take into account its own burden in complying with
such a request. See Ruotolo v. Dept. of Justice, 53 F.3d 4, 10 (2d Cir.
1995). Disclosure is mandatory unless the information falls within one
of the narrow exemptions that the FOIA makes available. These
simplifying procedures were thought necessary to make the FOIA
effective, but they introduce a procedural arbitrariness that is not
necessarily appropriate in all circumstances involving disclosure of
sensitive materials. Aware that the FOIA does not allow a balancing of
the public's need for information against the potential harm to the
agency of providing it, Congress exempted the Postal Service from
disclosing commercially sensitive materials in the FOIA context.
The Postal Service does not have express authority to withhold
information that the Commission needs to effectively carry out its
functions under the Act. Outside of the FOIA context, Congress did not
expressly exempt the Postal Service from disclosure of commercially
sensitive materials, or expressly make the Postal Service the arbiter
of what materials should be considered commercially sensitive. What
Congress intended where another Federal agency, such as the Commission,
has demonstrated a substantial need for information from the Postal
Service, and is willing and able to balance its need for that
information against the burden and potential commercial harm of
providing it, can only be surmised from the other provisions of the
Postal Reorganization Act.
The Postal Service frequently points out that Congress, in adopting
the Postal Reorganization Act, intended that the Postal Service
function more like a private business than it had been functioning.
Exemption from responding to some kinds of FOIA requests is one way in
which the Postal Service resembles a private business.
At the same time, however, Congress gave the Postal Service special
monopoly privileges and made it clear that these privileges carried
with them special duties toward the public that a private business does
not have. The first section of the Act, 39 U.S.C. Sec. 101, is replete
with these special duties. Chief among these are its obligation to
provide the public with universal service [Sec. 101(b)] that is
capable of binding the nation together [Sec. 101(a)].\22\ The Postal
Service is also required to charge rates that are based on principles
of equity and other public policies, not just profitability. See Sec.
101(d). The Postal Rate Commission has a key role to play in ensuring
that rates comply with these policies.
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\22\ Section 101(a), states:
The United States Postal Service shall be operated as a basic
and fundamental service provided to the people by the Government of
the United States, authorized by the Constitution, created by Act of
Congress, and supported by the people. The Postal Service shall have
as its basic function, the obligation to provide postal services to
bind the Nation together through the personal, educational,
literary, and business correspondence of the people. It shall
provide prompt, reliable, and efficient services to patrons in all
areas and shall render postal services to all communities. The costs
of establishing and maintaining the Postal Service shall not be
apportioned to impair the overall value of such service to the
people.
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Given the remarkable dissimilarities between the Postal Service and
a private business with respect to its obligations to the public, it is
implausible that Congress would have intended the Postal Service to
have the power to decide for itself what the outside world may know
about it, including what the outside world may know about its
operations and finances that bear on ratemaking, except during rate
litigation. The Commission is not aware of any government monopoly that
has been granted absolute power to decide for itself what its
disclosure policy will be. It is much more plausible to surmise that,
apart from litigation, the Postal Service's power to decide what its
disclosure policy will be is not absolute, but qualified. One of the
respects in which it is qualified is where the
[[Page 65370]]
Commission (which has primary ratemaking responsibility under the Act)
\23\ has demonstrated a need for a limited amount of documentation of
routine financial reports to make the ratesetting process function
properly.
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\23\ See National Association of Greeting Card Publishers v.
USPS, 462 U.S. 810, 821 (1983) quoting S. Rep. No. 91-912 at 4
(1970).
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The Commission's Periodic Reporting Rule is a restrained exercise
of its authority to establish procedures that ensure that its hearings
afford meaningful due process both to the Postal Service and to the
affected public, and ensure that the Commission maintains the expertise
that is required to make informed rate recommendations. As such, it is
authorized under Sec. 3603 of the Act.
In deciding whether the updated Periodic Reporting Rule is an
appropriate exercise of the Commission's Sec. 3603 authority, the
questions to be answered are whether the need for the information
identified by the Commission is real and substantial, and whether
providing it would significantly impair the functioning of the Postal
Service.
The Need of Litigants for Meaningful Due Process
If there is a common theme among the comments received in this
docket from potential intervenors in rate cases, it is that, under
current circumstances, the litigation ``playing field'' in omnibus rate
cases is tilted so steeply in favor of the Postal Service that their
basic right to due process is jeopardized. The causes are severe
asymmetry in the time and resources available to prepare for a rate
filing, severe asymmetry in access to relevant information, the immense
scope and detail of the filing, and the short statutory deadline for
digesting and reacting to it. As the American Bankers Association
points out
[m]uch of the complexity associated with omnibus rate cases for the
Commission and intervenors arises from the fact that they cannot
even begin to prepare for such a case until it is filed. The changes
to the Commission's rules as proposed in Commission Order No. 1358,
which would require the USPS to periodically file much of the basic
information upon which requests for new rates are based, would
greatly facilitate effective decision making by the Commission and
effective participation by intervenors in omnibus rate cases.
ABA Comments at 1-2. American Business Media concurs:
[w]ith data available on an ongoing basis, not only would the
Commission be better prepared for a rate filing, but the Postal
Service's customers would not bear the burden of having the ten or
twelve feet of papers, plus computer material, dropped on them with
the expectation that they can review, understand, question, and
refute those portions that are relevant in time for the Commission
to issue a recommended decision in ten months.
ABM Reply Comments at 2. The OCA summarizes the dilemma of
intervenors:
[a]s a participant in rate cases, the OCA has watched the complexity
and sophistication of Postal Service presentations rise
exponentially. The ``lead'' time required by the OCA (or any other
participant) to match the level of the Service's evidence has also
increased exponentially. But the Postal Service seeks to preserve
its lead-time advantage of ``six months'' while denying any lead
time to participants. At some point (already passed, as far as the
OCA is concerned) the advantage to the Postal Service becomes
overwhelming, and due process evaporates. Whatever may have
motivated the Commission to propose the new periodic reporting
rules, the effect of their implementation will be to level the
litigation field for participants other than the Postal Service.
OCA Reply Comments at 4-5. [Footnote omitted.]
That the playing field is tilted is not merely the self-serving
perception of intervenors in rate cases. The Federal court of appeals
in Association of American Publishers, Inc. v. Governors of the United
State Postal Service, 485 F.2d 768, 779 (D.C. Cir. 1973) has commented
on the problem as well:
[The Postal Service] alone takes in the full scope of Postal Service
operations when presenting its proposals. And it alone is in a
position to influence the Postal Service's day-to-day accounting
procedures and record keeping. Outsider challenges to the
fundamental approach the Postal Service takes to ratemaking are
unlikely to meet with stunning success under these circumstances
[footnote omitted].
The problem of securing meaningful due process for intervenors in
rate cases is real and substantial, and the information required by the
updated Periodic Reporting Rule is reasonably designed to partially
solve that problem. The remaining question is whether providing that
information would significantly impair the functioning of the Postal
Service. The Commission has explained earlier that the burden of
complying with the rule is a tiny fraction of the burden of documenting
a full-blown rate case, primarily because the Postal Service produces
almost all of this information routinely anyway, for reasons apart from
the rule.
The Postal Service's Assertions of Commercial Sensitivity Are
Unexpectedly Broad
The Postal Service, unexpectedly, asserts that the majority of the
information required by the rule is commercially sensitive. It is very
difficult to evaluate this assertion because it is made at such a
general level. The Postal Service makes almost no effort to identify
which of the diverse information required by the rule it now believes
falls in this category.
There are a number of reasons that this broad assertion of
commercial sensitivity is unexpected. One is because the subject matter
of the information required by the rule is information that the rule
has required for decades, and the Postal Service has provided for
decades, without suggesting that it is commercially sensitive. Another
reason that this assertion is unexpected is because the information
required by the rule is information that the Postal Service has
routinely provided in omnibus rate cases without asserting that it is
sensitive and without seeking to file it under protective conditions.
Furthermore, on several occasions, the Postal Service has voluntarily
disclosed much of the CRA documentation that it now seeks the most
strenuously to withhold. In 1998, for example, after the Docket No.
R97-1 omnibus rate case was concluded, the Postal Service voluntarily
provided the Commission with an extensively documented interim-year CRA
that was calculated according to Commission attribution methods. The
documentation included the B workpaper spreadsheets and some of the
input datasets that the updated Periodic Reporting Rule now requires.
There was no assertion that this information was commercially
sensitive, and no request that it be maintained under protective
conditions. Similarly, on May 30 of this year, the Postal Service
voluntarily included with its CRA submitted under the prior version of
the Periodic Reporting Rule, the B workpaper spreadsheets for the major
costs segments (Segments 3, 6, 7, and 14).\24\
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\24\ See Letter of May 30, 2003, from Daniel J. Foucheaux, Chief
Counsel, Ratemaking, to the Hon. Steven W. Williams, Secretary,
Postal Rate Commission. This was apparently done on the assumption
that the B workpapers for these cost segments are the current
counterpart to the CRA documentation that it had provided in past
years under the Periodic Reporting Rule.
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Taken together, this history adds up to a shift in the attitude of
the Postal Service toward the commercial sensitivity of the CRA
documentation that the updated rule requires. This new attitude is not
satisfactorily justified by the Postal Service. Once facility
identifiers are removed from the required datasets, there is no
apparent commercial use to which any of this
[[Page 65371]]
documentation could be put, and the Postal Service has suggested none.
The commenters argue that the Postal Service's main motive in
opposing the update to the Periodic Reporting Rule is not its new-found
concern for the commercial sensitivity of this data, but the loss of
the tactical advantage that it has entering rate cases fully prepared
while the intervenors play a desperate game of catch up in the short
litigation window available. See ABA Comments at 3-4, OCA Reply
Comments at 1, UPS Reply Comments at 6. American Business Media's
comments are representative
American Business Media submits that what the Postal Service
fears is actually the loss of the enormous advantage it obtains by
springing mountains of data, new costing methodologies, and hundreds
of proposed rates upon the Commission and other parties a mere ten
months before a heavily litigated case with dozens of active parties
must be resolved.
ABM Reply Comments at 5. [Footnote omitted.]
The comments in this docket from those who have participated in
past rate hearings agree that the Postal Service's assertions of the
commercial sensitivity of the information required by the Periodic
Reporting Rule are indiscriminately broad. The American Bankers
Association, for example, argues that
* * * virtually no other enterprise, including those that compete
with the Postal Service in the small area where there is direct
competition, has a cost structure that even remotely resembles the
cost structure of the USPS. Thus, the sort of data the proposed rule
changes would require the Postal Service to produce does not seem to
be the sort of data that would give competitors in the small area
where there is competition information of value.
ABA Comments at 4.
These commenters point out that only a few of the Postal Service's
products are provided in competitive markets (Express Mail, Priority
Mail, and parcel post), and that their commercial significance is
minor. (They accounted for only 7 percent of net postal revenue in FY
2002.) They argue that this competitive ``tail'' should not wag the dog
in matters of information disclosure. They note that if there is
sensitive information about these services in the materials required by
the rule, the Postal Service could identify it with specificity and
seek appropriate protective conditions to prevent any perceived harm.
ABA Comments at 4, GCA Comments at 6-7, UPS Reply Comments at 6.
Commercial Sensitivity Objections Involve Only the Frequency of
Disclosure Required by the Rule
As already noted, the Postal Service has consistently disclosed the
CRA documentation required by the updated Periodic Reporting Rule to
the public in its omnibus rate requests and has voluntarily disclosed
most of this documentation in some interim years as well. It has not
asked that it be treated as commercially sensitive in either context.
The Postal Service's objections to its disclosure under the Periodic
Reporting Rule, therefore, have to be based almost entirely on the
prospect that under the rule, these same materials would be disclosed
more frequently than they otherwise would be. The logic of the Postal
Service's position seems to be that disclosing these materials is not a
significant commercial risk when their disclosure occurs at the
frequency that it has in the past, but would become a significant risk
if disclosed annually.
The Potential Harm of Annual Disclosure Has Already Been Tested
If annual disclosure were the true test of the dangers of
disclosing these materials, the Postal Service has already conducted
this test. Every year for a six-year period starting with FY 1995
(provided in Docket No. MC96-3), and ending in FY 2000 (provided in
Docket No. R2001-1), the Postal Service has publicly disclosed the CRA
documentation that the Periodic Reporting Rule now requires. Rather
than suffer financially, this was by far the most prosperous period
that the Postal Service has had since the adoption of the Postal
Reorganization Act in 1970. The Postal Service's competitive services
participated fully in this unprecedented prosperity. This should dispel
the Postal Service's fears that annual disclosure of the information
required by the Periodic Reporting Rule will adversely affect its
financial prospects or its competitiveness. By the same token, it
should also dispel the notion that the institutional calamities that
the Postal Service warned would ensue from annual disclosure will, in
fact, occur. Over this period there was no attempt by the Commission to
monitor day-to-day management of the Postal Service, to audit its books
of account, to supervise its data collection activities, or develop
rate recommendations outside of a pending rate case. Nor did the
Commission compromise any Governors' decision through interim-year
research, or take any other action that ``fundamentally altered'' the
institutional relationship between the Commission and the Postal
Service.
What did happen over this six-year period of annual disclosure was
that the Commission had a better opportunity to keep current on the
``state of the art'' of cost attribution as practiced by the Postal
Service. It had a better opportunity to evaluate its forecasting models
to see where their assumptions held up and where they didn't. The
Commission was better able to waive some documentation requirements in
minor cases, due to the availability of recent Base Year CRA
documentation. And, finally, some of the pressure was taken off of the
Commission and the intervenors to quickly digest the enormous amount of
supporting material filed with omnibus rate requests.
Recent history with annual disclosure, therefore, confirms that it
significantly improves the ability of the Commission to process rate
hearings without causing any of the various forms of institutional harm
that the Postal Service posits. The purpose of the updates to the
Periodic Reporting Rule is to continue the successful pattern of the FY
1995-FY 2000 period, rather than to restructure the Postal
Reorganization Act, as the Postal Service asserts.
V. Provisions of the Rule Not Related to Documentation of the CRA
In addition to updating the portions of the Periodic Reporting Rule
that deal with documenting the CRA, the updated rule reduces the lag
allowed for reporting billing determinants for Express Mail, Priority
Mail, and parcel post to 12 months after the close of the fiscal year,
[Sec. 102(a)(10)]; requires the Postal Service to provide its
Integrated Financial Plan [Sec. 102(a)(11)]; requires it to provide
the input data and calculations used to produce annual Total Factor
Productivity estimates [Sec. 102(a)(12)]; requires it to provide a
finer level of detail in its quarterly RPW reports [Sec. 102(b)(1)];
and requires it to provide On-roll and Paid Employee Statistics (OPRES)
[Sec. 102(c)(4)]. The Postal Service indicates that it does not object
to these changes in the updated Periodic Reporting Rule. Substantive
Comments at 36-37.
The Postal Service does object to Sec. 102(c)(5), which requires
it to provide the ``HAT'' report, relating to the Postal Service's
Active Employee Statistical Summary. It argues that the HAT report
includes miscellaneous information about postal employees, most of
which is not related to ratemaking. Id. at 37, n.22. While it includes
miscellaneous information about employees, the HAT
[[Page 65372]]
report is very relevant to ratemaking because it lists the number of
employees within each pay grade and step within the many different pay
scales used by the Postal Service. This information, which can not be
found in the On-Rolls and Paid Employee Statistics, is used to develop
several estimates that are important in determining the revenue
requirement in rate cases. For example, it is used to develop the
average step increase for bargaining unit employees, as well as their
attrition rate. The information in the HAT report cannot be associated
with individual employees, and it is not reported by facility. The
Postal Service does not contend that the availability of the data will
have any specific detrimental effect on it or its employees. For these
reasons, it is included in the updated rule.
VI. Suggestions of the Commenters
In the past, the Periodic Reporting Rule required billing
determinants to be reported within two weeks of their presentation to
postal management. Since FY 1995, billing determinants have been
received from 6 to 16 months after the close of the fiscal year. In the
past the Periodic Reporting Rule allowed billing determinants for
Express Mail, Priority Mail, and parcel post to be delayed an
additional year, causing them to be from 18 to 28 months [entity] old
when received. In its NPR, the Commission proposed that the rationale
for the distinction between billing determinants for competitive mail
classes and other mail classes be reexamined. In order to focus the
reexamination, the Commission proposed that billing determinants for
competitive classes be provided within a year after the close of the
fiscal year to which they apply. NPR at 7.
UPS is the only party to offer substantive comments on this issue.
It argues that there has never been a reasoned justification for
treating billing determinants for competitive classes differently than
for other classes in the context of the Periodic Reporting Rule. It
points out that the Postal Service provides all billing determinants at
the same time in support of its omnibus rate requests, without
suggesting that billing determinants for competitive classes are
commercially sensitive. It argues that the Postal Service has never
pointed to any instance in which providing current billing determinants
for competitive services during a rate case has caused it competitive
harm, nor identified any way in which a competitor could use current
billing determinants to put the Postal Service at a competitive
disadvantage. UPS Comments at 2-4. It also argues that all billing
determinants should be provided on a date certain, shortly after the
close of the fiscal year, rather than on a floating time table as they
now are. It cites an example of the Postal Service voluntarily
publicizing current volumes for parcel post rate categories at a recent
National Postal Forum as evidence that the Postal Service itself does
not consider them to be commercially sensitive. Id. at 5.
The Commission agrees that it would be desirable to receive billing
determinant information at a consistent and shorter interval after the
close of each fiscal year. The Commission has, however, tried to adhere
to a policy of requiring reports under the Periodic Reporting Rule that
do not add significantly to the burden that the Postal Service already
bears when it prepares these reports for its internal purposes. For
that reason, the Commission declines to require that most billing
determinants be provided on a date certain.
The final Periodic Reporting Rule adopts the billing determinant
provision as it was proposed in the NPR. It requires the Postal Service
to provide billing determinants for competitive categories within one
year of the close of the fiscal year to which they apply. UPS correctly
notes that the Postal Service occasionally voluntarily discloses
current volumes for competitive services by rate category. However, to
the Commission's knowledge, the Postal Service does not voluntarily
disclose other current billing determinant detail, such as weight and
zone, for competitive categories. The updated rule should cut the delay
in reporting billing determinant information for competitive categories
from roughly two years to one year. The Commission is reluctant to go
further in this regard, without a more thorough discussion of the
ramifications than has been provided in this docket.
At the beginning of each fiscal year, the Postal Service prepares
an operating budget that includes detailed operating expense and
revenue projections for the coming fiscal year, broken out by
accounting period. Under the Periodic Reporting Rule, the Commission
receives the Postal Service's Financial and Operating Statements
several weeks after the close of each accounting period. See rule
102(c)(1). These statements compare the detailed operating revenues and
expenses projected in the Postal Service's operating budget with actual
results. Under the updated Periodic Reporting Rule, the Postal Service
would provide an annual Operating Plan as part of its Integrated
Financial Plan. See rule 102(a)(11). This annual Operating Plan is less
detailed than the operating plans contained in its accounting period
reports.
The OCA proposes that the updated Periodic Reporting Rule require
the Postal Service to provide its operating budget projections for all
12 accounting periods at the beginning of the fiscal year, rather than
provide them shortly after each accounting period closes. The OCA's
rationale for adding this requirement to the updated rule is that the
Commission and the public should not have to wait until several weeks
after each accounting period to find out the Postal Service's operating
plan for that accounting period. OCA Comments at 4-5.
It is not clear that the Board of Governors approves the operating
plan as an annual summary document or as a document that is as detailed
as the OCA describes. It is, therefore, not clear that requiring
accounting period operating budget projections would conform to the
criteria that the Commission applies to the Periodic Reporting Rule
that it be confined to reports that have already been presented for use
by postal management. In view of this ambiguity, and the tenuous
demonstration of need for altering the time at which the rule would
obtain this information, the Commission declines to include this change
in the updated rule.
The Postal Service is required to file a number of reports with
Congress to meet the requirements of chapters 24 and 28 of the Postal
Reorganization Act. One is the Comprehensive Statement of Postal
Operations, which includes an Annual Performance Plan, and annual
Program Performance Reports. Another is the five-year Strategic Plan.
The OCA proposes that these and all other reports that the Postal
Service is required by the Act to provide to Congress be provided under
the Periodic Reporting Rule as well. Id. at 3-4. The Commission
declines to add reports to Congress to its Periodic Reporting Rules.
The Commission prefers to restrict the rule to reports prepared for
postal management. The Commission notes that these reports are all
readily accessible on the Postal Service's Web site.
VII. Conclusion
For the reasons discussed above, the Commission hereby amends 39
CFR part 3001 (the Periodic Reporting Rules) as set forth below in this
order. Any suggestion or request to modify the Commissions rules raised
by any participant not specifically addressed herein is denied.
It is ordered:
[[Page 65373]]
(1) The Commission adopts the provisions set forth below amending
39 CFR Sec. 3001.102.
(2) The Secretary shall cause this notice of adoption of a final
rule to be published in the Federal Register.
Issued November 3, 2003.
By the Commission.
Steven W. Williams,
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.
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 G--Rules Applicable to the Filing of Reports by the U.S.
Postal Service
0
2. Revise Sec. 3001.102 to read as follows:
Sec. 3001.102 Filing of reports.
Each report listed in this section shall be filed with the
Secretary of the Commission within two weeks of its presentation for
use by postal management, unless otherwise noted. Each report should be
provided in a form that can be read by publicly available PC software.
A processing program that was developed specifically to produce an
accompanying workpaper must be provided in a form that can be executed
by publicly available PC software. COBOL processing programs in use
prior to FY 2003 are exempt from this requirement. The reports and
information required to be provided by this subpart need not include
matters that are exempt from disclosure by law. Whenever a specific
source is cited in this section, that citation includes any successor
or substituted source.
(a) Annual reports. The following information will be filed by the
Postal Service annually. If it is presented for use by postal
management at more frequent intervals, it shall be filed at those
intervals:
(1) All input data and all processing programs that have changed
since the most recently completed general rate proceeding, if they are
used to produce the Cost and Revenue Analysis Report (CRA). Each change
in attribution principles or methods from the previous report will be
identified. The Postal Service shall submit a CRA-USPS Version,
followed within two weeks by a CRA-PRC Version. Documentation of both
versions of the CRA shall include, but not be limited to, the
following:
(i) Spreadsheet workpapers underlying the development of segment
costs by cost component. These workpapers should include the updated
factors, and data from the supporting data systems used, including the
In-Office Cost System (IOCS), Management Operating Data System (MODS),
City Carrier Cost System (CCCS), Rural Carrier Cost System (RCCS), and
National Mail Count.
(ii) Documentation of any special study that has a substantial
effect on estimated costs in any cost segment and was not documented in
the most recently completed general rate proceeding.
(A) Documentation shall consist of all input data and all
processing programs used to obtain the results of the special study.
(B) The Postal Service may elect to provide a written or oral
presentation describing the data and the estimating techniques used, as
well as the results of the special study, and to apply for a waiver of
the requirement in paragraph (a) of this section.
(2) Cost Segments and Components Report. Documentation shall
include, but not be limited to, the following:
(i) Cost segments and components reconciliation to financial
statements and account reallocations.
(ii) The Manual Input Requirement, the ``A'' report, and the ``B''
report;
(iii) The control string commands for the ``A'' report, the ``B''
report (including the PESSA factor calculations), and the ``C'' report;
(iv) The master list of cost segment components, including the
components used as distribution keys in the development of the ``B''
report and the ``C'' report.
(3) City delivery information, including the number of routes by
type, the number of possible deliveries by type, the number of
collection boxes, and the number of businesses served (120 days from
the close of the fiscal year).
(4) Rural carrier information, including the number of routes by
type and miles, stops, boxes served, and mail pieces by route type (120
days from the close of the fiscal year).
(5) Civil Service Retirement Fund Deficit Report (two weeks after
release of the Annual Report of the Postmaster General).
(6) Worker's Compensation Report, including summary workpapers (two
weeks after release of the Annual Report of the Postmaster General).
(7) Annual Report of the Postmaster General.
(8) Congressional Budget Submission, including workpapers. The
Postal Service will also file concurrently Summary Tables SE 1, 2, and
6 (coinciding with their submission to Congress).
(9) Audit Adjustment Vouchers, if any.
(10) Billing Determinants, at the level of detail employed in the
most recent formal request for a change in rates or fees. The provision
of billing determinants for Express Mail, Priority Mail, and parcel
post may be delayed up to 12 months from the close of the fiscal year
to which they apply.
(11) USPS Integrated Financial Plan.
(12) Input data and calculations used to produce annual Total
Factor Productivity estimates.
(b) Quarterly reports. The following information will be filed by
the Postal Service quarterly:
(1) Revenue, Pieces, and Weight, by rate category and special
service.
(2) Origin/Destination Information Report National Service Index.
(c) Accounting period reports. The following information will be
filed by the Postal Service each accounting period:
(1) Summary Financial and Operating Report.
(2) National Consolidated Trial Balances and the Revenue and
Expense Summary.
(3) National Payroll Hours Summary.
(4) On-Roll and Paid Employee Statistics (OPRES).
(5) Postal Service Active Employee Statistical Summary (HAT
report).
(d) Miscellaneous reports. The following information will be filed
by the Postal Service:
(1) Before/After Pay Increase Reports.
(2) Before/After COLA Cost Reports.
(3) A master list of publications and handbooks including those
related to internal information procedures, when changed.
(4) Data collection forms and corresponding training handbooks,
when changed.
(5) Notice of changes in data reporting systems, 90 days before
those changes are implemented.
[FR Doc. 03-28643 Filed 11-18-03; 8:45 am]
BILLING CODE 7710-01-P