Proposed Rule2022-15229
Periodic Reporting
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
July 18, 2022
Issuing agencies
Postal Regulatory Commission
Abstract
The Commission is acknowledging a recent filing requesting the Commission initiate a rulemaking proceeding to consider changes to analytical principles relating to periodic reports (Proposal Two). This document informs the public of the filing, invites public comment, and takes other administrative steps.
Full Text
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<title>Federal Register, Volume 87 Issue 136 (Monday, July 18, 2022)</title>
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[Federal Register Volume 87, Number 136 (Monday, July 18, 2022)]
[Proposed Rules]
[Pages 42667-42669]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-15229]
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POSTAL REGULATORY COMMISSION
39 CFR Part 3050
[Docket No. RM2022-8; Order No. 6224]
Periodic Reporting
AGENCY: Postal Regulatory Commission.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Commission is acknowledging a recent filing requesting the
Commission initiate a rulemaking proceeding to consider changes to
analytical principles relating to periodic reports (Proposal Two). This
document informs the public of the filing, invites public comment, and
takes other administrative steps.
DATES: Comments are due: August 26, 2022.
ADDRESSES: Submit comments electronically via the Commission's Filing
Online system at <a href="https://www.prc.gov">https://www.prc.gov</a>. Those who cannot submit comments
electronically should contact the person identified in the FOR FURTHER
INFORMATION CONTACT section by telephone for advice on filing
alternatives.
FOR FURTHER INFORMATION CONTACT: David A. Trissell, General Counsel, at
202-789-6820.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Introduction
II. Proposal Two
III. Notice and Comment
IV. Ordering Paragraphs
I. Introduction
On July 7, 2022, the Postal Service filed a petition pursuant to 39
CFR 3050.11 requesting that the Commission initiate a rulemaking
proceeding to consider changes to analytical principles relating to
periodic reports.\1\
[[Page 42668]]
The Petition identifies the proposed analytical changes filed in this
docket as Proposal Two.
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\1\ Petition of the United States Postal Service for the
Initiation of a Proceeding to Consider Proposed Changes in
Analytical Principles (Proposal Two), July 7, 2022 (Petition). The
Petition was accompanied by a study supporting its proposal. See
Michael D. Bradley, Calculating Variabilities for Postmaster Costs,
July 7, 2022. The Postal Service also filed a notice of filing of
public and non-public materials relating to Proposal Two. Notice of
Filing of USPS-RM2022-8-1 and USPS-RM2022-8-NP1 and Application for
Nonpublic Treatment, July 7, 2022.
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II. Proposal Two
Background. In Docket No. RM2020-2 (Proposal Ten), the Postal
Service proposed revisions aimed at updating and improving the
attribution of Postmaster costs.\2\ The Commission raised four main
issues with Proposal Ten and ultimately rejected it because the Postal
Service did not show that its proposed revisions to Postmaster cost
variability and attribution would result in a significant improvement
in the attribution of costs nor were necessitated by the public
interest. See Order No. 5932 at 9-46. The Commission offered two
alternative methods that would remedy the deficiencies in Proposal Ten,
and encouraged the Postal Service to resubmit an updated Postmaster
variability analysis. See id. at 47. Following the Commission's
guidance in Order No. 5932, the Postal Service now submits Proposal Two
to address and improve the Postmaster variability analysis. See
Petition at 2.
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\2\ See Petition at 1 (citing Docket No. RM2020-2, Order on
Analytical Principles Used in Periodic Reporting (Proposal Ten),
July 8, 2021 (Order No. 5932)).
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Proposal. The first of the two variability calculation methods
offered by the Commission in Order No. 5932 was termed the ``Large
Sample Version of Proposal Ten Variability'' (LSVPTV) method.\3\ The
LSVPTV method addresses the Postmaster variability discontinuity issue
through analyzing the variability calculation under the assumption that
there is an infinite number of Post Offices in the two grades for which
the variability is calculated. See id. at 3. However, the Postal
Service states that under this method, the Work Service Credit (WSC)
probability distribution is unknown and must be estimated in an
additional analysis before the variability can be calculated. See id.
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\3\ See id. at 3 (citing Docket No. RM2020-2, Library Reference
PRC-LR-RM2020-2/5, July 8, 2021, at 1 (File A5)).
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The second variability calculation method offered by the Commission
in Order No. 5932 was termed the ``Minimization of Error Distance
Between Predicted and Actual Cost'' (MEDBPAC) method, which was also
referred to as a ``geometrical'' approach. See id. at 3-4 (citing File
A5 at 12). To calculate a variability for a given Executive
Administrative Schedule (EAS) grade pair, the algorithm modifies the
total Postmaster cost equation by replacing the counts of the numbers
of offices in the higher and lower EAS grades with the sums of the
probabilities of an office being in either the higher or lower EAS
grade, as determined by the logit model. See id. at 4.
The Postal Service considered and evaluated the two methods and
determined that the MEDBPAC method provides a stronger foundation than
the LSVPTV method for calculating Postmaster attributable costs. See
id. The Postal Service asserts that the LSVPTV method has several
disadvantages. First, it involves calculating the limit of the
variability function, not calculating the variability directly from the
variability function itself. See id. Second, it requires assuming that
there is an infinite number of Post Offices, which may present issues
for pairs of EAS grades with relatively few Post Offices. See id. at 4-
5. Third, it requires non-parametric estimation of the continuous
probability distribution of the WSCs for each pair of Post Offices,
which imparts arbitrariness to the estimation and adds another step of
complexity to the calculation. See id. at 5. Fourth, the calculated
LSVPTV variability turns out to be the variability of cost with respect
to the threshold WSC level, not WSCs directly, which may cause issues
for the calculation of incremental costs. See id.
The Postal Service contends that in comparison, the MEDBPAC method
has several advantages. First, it is much closer in form to established
methods of variability calculation. See id. Second, it is transparent
and does not require another layer of assumptions and estimations. See
id. Third, it makes use of the actual distribution of WSCs across Post
Offices, ensuring that the variabilities reflect the underlying cost
surface. See id. Fourth, it is consistent with the economic theory
underlying attributable cost calculation. See id. Therefore, the Postal
Service proposes to use the MEDBPAC method to calculate the Postmaster
variability.
The Postal Service also determined to extract Form 150 WSC data
from 2022 to update the logit models used in Docket No. RM2022-2, as
those logit models were estimated from older Form 150 WSC data from
2019. See id. The Postal Service states that doing so updates the
variability analysis to the most recent data available and demonstrates
the stability of the logit models. See id.
As the 2022 Postmaster variabilities depend not only on the logit
models estimated on the 2022 WSC data, but also on the EAS salary
schedule for 2022, the Postal Service summarized the changes in EAS
salary schedule for 2022 in comparison with the EAS salary schedule for
2019. See id. at 7-8.
Based on the logit models estimated on the 2022 WSC data and the
2022 EAS salary schedule, the Postal Service calculated the 2022
Postmaster variabilities. See id. at 8, Table 1. The Postal Service
also included the 2019 Postmaster variabilities for comparison and
found that three of the estimated variabilities were very stable, one
showed modest change, and two showed substantial change due to EAS
salary schedule change from 2019 to 2022. See id. at 8-9.
Impact. In the Postmaster cost model used currently, a single
variability is applied against the costs for EAS grades 18 through 22,
and grades 24 and above receive a zero variability by assumption. See
id. at 10. In contrast, the variability calculation using the MEDBPAC
method as proposed by the Postal Service calculates variability for
each of the EAS grades below EAS-26, including EAS-24. See id. The
Postal Service states that doing so results in an overall variability
of 3.03 percent, calculated by first calculating the total volume
variable costs implied by the individual EAS grade variabilities and
then dividing that sum by total accrued costs. See id.
The Postal Service states that under the proposed approach the new
overall variability is lower than the existing variability for three
reasons. First, the Postal Service observes that current variability
calculation method is overstated due to a computational error. See id.
Second, the Postal Service notes that the Post Office Structure
Plan (POStPlan) eliminated the lower EAS grades. See id. In lower EAS
grades, Postmaster could move relatively rapidly through WSCs to a
higher salary. See id. In higher EAS grades, Postmaster would need much
larger increases in WSCs in order to move to a higher salary. See id.
Therefore, the Postal Service contends that eliminating the lower EAS
grades results in the less likelihood of Postmaster cost increase for a
given percentage increase in volume, which in turn results in the lower
overall variability. See id.
Third, the Postal Service states that the current variability
calculation method measures only the potential increase in cost from an
increase in WSCs, not the actual increase captured by the distribution
of offices, by WSCs, and within each grade. See id. at 10-11. Thus, the
Postal Service notes that the current methodology tends to overstate
the variability because it assumes that all offices would change grades
when
[[Page 42669]]
WSC changes. See id. at 11. In contrast, the Postal Service observes
that its proposed MEDBPAC method averages the variabilities calculated
at each Post Office used to estimate the logit models, and reflects the
actual changes in cost associated with a given change in WSCs. See id.
The Postal Service states that since most Post Offices have WSC levels
that are unlikely to change EAS grades in response to a WSC change, the
actual overall variability should be lower. See id.
The Postal Service calculated the impact of new Postmaster
variabilities on costs of domestic Market Dominant products in Table
2.\4\ The Postal Service asserts that lower new variabilities do not
have a large impact on those costs, as unit Postmaster costs are low to
begin with. See id. at 11.
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\4\ See id. at 12, Table 2. The impact of the new variabilities
on Competitive products are presented in the non-public materials
submitted by the Postal Service, Excel file ``Non Public
Impact.xlsx'' in Library Reference USPS-RM2022-8/NP1.
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III. Notice and Comment
The Commission establishes Docket No. RM2022-8 for consideration of
matters raised by the Petition. More information on the Petition may be
accessed via the Commission's website at <a href="https://www.prc.gov">https://www.prc.gov</a>.
Interested persons may submit comments on the Petition and Proposal Two
no later than August 26, 2022. Pursuant to 39 U.S.C. 505, Madison
Lichtenstein is designated as an officer of the Commission (Public
Representative) to represent the interests of the general public in
this proceeding.
IV. Ordering Paragraphs
It is ordered:
1. The Commission establishes Docket No. RM2022-8 for consideration
of the matters raised by the Petition of the United States Postal
Service for the Initiation of a Proceeding to Consider Proposed Changes
in Analytical Principles (Proposal Two), filed July 7, 2022.
2. Comments by interested persons in this proceeding are due no
later than August 26, 2022.
3. Pursuant to 39 U.S.C. 505, the Commission appoints Madison
Lichtenstein to serve as an officer of the Commission (Public
Representative) to represent the interests of the general public in
this docket.
4. The Secretary shall arrange for publication of this order in the
Federal Register.
By the Commission.
Erica A. Barker,
Secretary.
[FR Doc. 2022-15229 Filed 7-15-22; 8:45 am]
BILLING CODE 7710-FW-P
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</html>Indexed from Federal Register on July 18, 2022.
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