[Federal Register Volume 71, Number 149 (Thursday, August 3, 2006)]
[Notices]
[Pages 44052-44054]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-6653]
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POSTAL RATE COMMISSION
[Docket No. MC2006-6; Order No. 1472]
Extension of Negotiated Service Agreement
AGENCY: Postal Rate Commission.
ACTION: Notice and order.
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SUMMARY: This document informs the public that the Postal Service is
seeking approval of a one-year extension of the negotiated service
agreement with Capital One Services, Inc. The document describes the
agreement, identifies certain preliminary decisions, and addresses
procedural steps, including key deadlines.
DATES: 1. August 14, 2006: Deadline for intervention, statements
identifying issues requiring a hearing, and objections to rule 197
treatment.
2. August 15, 2006: Prehearing conference.
ADDRESSES: Submit comments electronically via the Commission's Filing
Online system at http://www.prc.gov.
FOR FURTHER INFORMATION CONTACT: Stephen L. Sharfman, general counsel,
at 202-789-6820.
Procedural History
Capital One Services, Inc. Negotiated Service Agreement, 67 FR
61355 (September 30, 2002).
On July 26, 2006, the United States Postal Service filed a request
seeking a recommended decision from the Postal Rate Commission
approving a one-year extension of the negotiated service agreement with
Capital One Services, Inc.\1\ The Capital One negotiated service
agreement was first recommended by the Commission on May 15, 2003,\2\
and ordered into effect for a period of three years ending September 1,
2006, by the United States Postal Service Board of Governors.\3\ The
Request, which includes seven attachments, was filed pursuant to
chapter 36 of the Postal Reorganization Act, 39 U.S.C. 3601 et seq.\4\
The Postal Service asks that this case proceed under the Commission's
rules for requests to renew previously recommended negotiated service
agreements with existing participants. Rule 197 [39 CFR 3001.197].
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\1\ Request of the United States Postal Service for a
Recommended Decision to Extend the Duration of the Previously
Recommended Negotiated Service Agreement with Capital One, July 26,
2006 (Request).
\2\ PRC Op. MC2002-2, May 15, 2003.
\3\ Decision of the Governors of the United States Postal
Service on the Opinion and Recommended Decision of the Postal Rate
Commission Recommending Experimental Rate and Service Changes to
Implement Negotiated Service Agreement with Capital One, Docket No.
MC2002-2, June 2, 2003.
\4\ Attachment A to the Request contains proposed changes to the
Domestic Mail Classification Schedule; Attachment B contains the
current rate schedules, which have not been modified from Docket No.
MC2002-2; Attachment C is a certification required by Commission
rule 193(i) specifying that the cost statements and supporting data
submitted by the Postal Service, which purport to reflect the books
of the Postal Service, accurately set forth the results shown by
such books; Attachment D is an index of testimony and exhibits;
Attachment E is a compliance statement addressing satisfaction of
various filing requirements; Attachment F is a copy of the amendment
to the Negotiated Service Agreement and the Negotiated Service
Agreement itself; and Attachment G contains the decision of the
Governors for the original Negotiated Service Agreement.
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The Postal Service has identified Capital One Services, Inc.
(Capital One), along with itself, as parties to the negotiated service
agreement. This identification serves as notice of intervention by
Capital One. It also indicates that Capital One shall be considered a
co-proponent, procedurally and substantively, of the Postal Service's
Request during the Commission's review of the negotiated service
agreement. Rule 191(b) [39 CFR 3001.191(b)].
In support of the direct case, the Postal Service has filed Direct
Testimony of Jessica Lowrance on
[[Page 44053]]
Behalf of the United States Postal Service, July 26, 2006 (USPS-T-1).
The Request further relies on record evidence entered in Docket No.
MC2002-2. The Postal Service's Compliance Statement, Request Attachment
E, identifies the Docket No. MC2002-2 material on which it proposes to
rely.
Rule 197(b) [39 CFR 3001.197(b)] requires the Postal Service to
provide written notice of its Request, either by hand delivery or by
First-Class Mail, to all participants in the Commission docket
established to consider the original agreement, Docket No. MC2002-2.
This requirement permits an abbreviated intervention period by
providing additional time for the most likely participants to decide
whether or not to intervene. A copy of the Postal Service's notice was
filed with the Commission on July 26, 2006.\5\
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\5\ Notice of the United States Postal Service of Filing Request
for a Recommended Decision to Extend the Duration of the Previously
Recommended Negotiated Service Agreement with Capital One, July 26,
2006.
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The Postal Service submitted a contemporaneous filing requesting
the expedited issuance of a recommended decision.\6\ The Motion further
requests that participants in this docket accompany their notices of
intervention with detailed pleadings responding to an order to show
cause why the term extension should not be recommended as proposed.
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\6\ Motion of the United States Postal Service for Expedited
Issuance of a Recommended Decision, July 26, 2006 (Motion).
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The Postal Service's Request, the accompanying testimony of witness
Lowrance (USPS-T-1), the original Docket No. MC2002-2 material, and
other related material are available for inspection at the Commission's
docket section during regular business hours. They also can be accessed
electronically, via the Internet, on the Commission's Web site (http://www.prc.gov).
I. Background: The Capital One Negotiated Service Agreement,
Recommended in Docket No. MC2002-2
The Capital One negotiated service agreement includes two
significant mail service features that form the bases of the
agreement--an address correction service feature, and a declining block
rate volume discount feature.
The address correction service feature provides Capital One, at
certain levels of volume, electronic address corrections without fee
for First-Class Mail solicitations that are undeliverable as addressed
(UAA). In return for receipt of electronic address correction, Capital
One will no longer receive physical return of its UAA First-Class
solicitation mail that cannot be forwarded. Capital One will also be
required to maintain and improve the address quality for its First-
Class Mail. PRC Op. MC2002-2, para. 2004.
Use of the address correction service feature is a prerequisite to
use of the second feature of the negotiated service agreement, a
declining block rate volume discount. This feature provides Capital One
with a per-piece discount for bulk First-Class Mail volume above an
annual threshold volume. The per-piece discount varies from 3 to 6
cents under a ``declining-block'' rate structure.
The Commission's analysis of the Capital One negotiated service
agreement focused on assuring that the agreement would not make mailers
other than Capital One worse off. Id., para. 8006. To meet this
condition, the Commission's recommendation of the Capital One
negotiated service agreement included the addition of a provision
establishing a cumulative three-year stop-loss limit on rate discounts
of $40.637 million. Id., paras. 5116, 8011. The Commission found that
the estimates of before-rates volumes for Capital One were so
unreliable that without a stop-loss provision there would be no
reasonable assurance that the Postal Service would not lose money on
the Capital One negotiated service agreement. Id., para. 8013.
II. The Request to Extend the Duration of the Capital One Negotiated
Service Agreement
The Postal Service proposes to extend the duration of the ongoing
negotiated service agreement with Capital One by one year while the
parties develop a new negotiated service agreement to be filed in the
upcoming year. The Postal Service asserts that the Capital One
negotiated service agreement has proven successful, benefiting both the
Postal Service and the mailing community as a whole. The Postal Service
and Capital One propose no other modifications to the currently in
effect negotiated service agreement and indicate their intent to
terminate the ongoing agreement once a subsequent agreement is reached.
Request Attachment F at 2.
The Postal Service states that it is probable that no discounts
will be earned in the third year of the agreement, but continuation of
the agreement will serve two policy objectives. First, Capital One will
be provided with an incentive to increase solicitations during the
extension period. Second, Capital One will maintain its contractual
obligation to employ worksharing practices related to Address
Correction Service (ACS) as well as its agreement to participate in
mail quality programs.
The Postal Service asserts that the value from extending the
current agreement will primarily occur from the use of electronic ACS
notices to replace manual notices. The estimated savings from marketing
pieces converted to electronic ACs notices in the extension period is
$5.1 million. USPS-T-1 at 6.
III. Commission Response
Applicability of the rules for requests to renew previously
recommended negotiated service agreements. For administrative purposes,
the Commission has docketed the instant filing as a request predicated
on the extension of a previously recommended negotiated service
agreement which is currently in effect. A final determination regarding
the appropriate characterization of the request and application of the
expedited rules, rule 197 [39 CFR 3001.197], will not be made until
after the prehearing conference.
Representation of the general public. In conformance with section
3624(c) of title 39, the Commission designates Shelley S. Dreifuss,
director of the Commission's Office of the Consumer Advocate, to
represent the interests of the general public in this proceeding.
Pursuant to this designation, Ms. Driefuss will direct the activities
of Commission personnel assigned to assist her and, upon request, will
supply their names for the record. Neither Ms. Dreifuss nor any of the
assigned personnel will participate in or provide advice on any
Commission decision in this proceeding.
Intervention. Those wishing to be heard in this matter are directed
to file a notice of intervention on or before August 14, 2006. The
notice of intervention shall be filed using the Internet (Filing
Online) at the Commission's Web site (http://www.prc.gov), unless a
waiver is obtained for hardcopy filing. Rules 9(a) and 10(a) [39 CFR
3001.9(a) and 10(a)]. Notices should indicate whether participation
will be on a full or limited basis. See rules 20 and 20a [39 CFR
3001.20 and 20a]. No decision has been made at this point on whether a
hearing will be held in this case.
Prehearing conference. A prehearing conference will be held August
15, 2006, at 2 p.m. in the Commission's hearing room. Participants
shall be prepared to address whether or not it is appropriate to
proceed under rule 197 [39 CFR 3001.197], and to identify any issue(s)
that would indicate the need to
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schedule extended discovery or a hearing. Rule 197(c) [39 CFR
3001.197(c)].
Participants intending to object to proceeding under rule 197 [39
CFR 3001.197] shall file supporting written argument, if any, by August
14, 2006. Participants also shall file statements identifying issues
that would indicate the need to schedule a hearing by August 14, 2006.
The Commission intends to make a decision on these issues shortly after
the prehearing conference.
Motion for expedition. The Postal Service's motion for expedition
and to show cause is denied. Rule 197(d) [39 CFR 3001.197(d)] already
provides for expedited treatment of requests to renew negotiated
service agreements. Likewise, rule 197(c) [38 CFR 3001.197(c)] already
requires participants to plead whether or not any material issues of
fact exist that require discovery or evidentiary hearings at the time
of the prehearing conference.
Ordering Paragraphs
It is ordered:
1. The Commission establishes Docket No. MC20056-6 to consider the
Postal Service Request referred to in the body of this order.
2. The Commission will sit en banc in this proceeding.
3. Shelley S. Dreifuss, director of the Commission's Office of the
Consumer Advocate, is designated to represent the interests of the
general public.
4. The deadline for filing notices of intervention is August 14,
2006.
5. A prehearing conference will be held August 15, 2006 at 2 p.m.
in the Commission's hearing room.
6. Participants shall file statements identifying issues that would
indicate the need to schedule a hearing, or objections to proceeding
under rule 197 [39 CFR 3001.197] by August 14, 2006.
7. The Motion of the United States Postal Service for Expedited
Issuance of a Recommended Decision, filed July 26, 2006, is denied.
8. The Secretary shall arrange for publication of this notice and
order in the Federal Register.
Issued: July 27, 2006.
By the Commission.
Steven W. Williams,
Secretary.
[FR Doc. 06-6653 Filed 8-2-06; 8:45 am]
BILLING CODE 7710-FW-M