Proposed Rule2024-11566
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
May 28, 2024
Issuing agencies
Postal Regulatory Commission
Abstract
The Commission is acknowledging a recent Postal Service filing requesting the Commission initiate a rulemaking proceeding to consider changes to analytical principles relating to periodic reports (Proposal Three). 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 89 Issue 103 (Tuesday, May 28, 2024)</title>
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[Federal Register Volume 89, Number 103 (Tuesday, May 28, 2024)]
[Proposed Rules]
[Pages 46046-46049]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-11566]
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POSTAL REGULATORY COMMISSION
39 CFR Part 3050
[Docket No. RM2024-8; Order No. 7120]
Periodic Reporting
AGENCY: Postal Regulatory Commission.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Commission is acknowledging a recent Postal Service filing
requesting the Commission initiate a rulemaking proceeding to consider
changes to analytical principles relating to periodic reports (Proposal
Three). This document informs the public of the filing, invites public
comment, and takes other administrative steps.
DATES:
Comments are due: July 8, 2024.
Reply Comments are due: July 22, 2024.
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 Three
III. Notice and Comment
IV. Ordering Paragraphs
I. Introduction
On May 13, 2024, 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\ The Petition identifies the proposed analytical
changes filed in this docket as Proposal Three.
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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 Three), May 13, 2024 (Petition). The
Postal Service also filed a notice of filing of non-public materials
relating to Proposal Three. Notice of Filing of USPS-RM2024-8-NP1
and Application for Nonpublic Treatment, May 13, 2024.
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II. Proposal Three
Background. On November 22, 2023, the Postal Service filed a notice
to establish a new Zone 10 for Priority Mail Express (PME), Priority
Mail (PM), and USPS Ground Advantage (GA) and proposed associated Zone
10 rates.\2\ The Commission approved the proposed price and
classification changes and directed the Postal Service to file a
rulemaking proceeding proposing and
[[Page 46047]]
supporting the methodological changes necessary to derive separate Zone
10 transportation costs for Priority Mail and USPS Ground Advantage.\3\
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\2\ Docket No. CP2024-72, USPS Notice of Changes in Rates and
Classifications of General Applicability for Competitive Products,
November 22, 2023.
\3\ Docket No. CP2024-72, Order Approving Price Adjustments and
Classification Changes for Domestic Competitive Products, March 22,
2024, at 36 (Order No. 7016). The Commission directed the Postal
Service to file a rulemaking proceeding within 90 days from the
issuance of the order. Id.
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In accordance with Order No. 7016, the Postal Service filed notice
with the Commission to develop procedures to derive separate Zone 10
transportation cost estimates for PM and GA.\4\
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\4\ See Petition, Proposal Three at 1 n.1, 2. The Postal Service
indicates that PME models are unaffected by the addition of Zone 10,
as the current PME transportation costs are not disaggregated by
zone.
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The Postal Service states that the mail transportation cost model
for PM is updated annually and filed with the Annual Compliance Review
(ACR), most recently in Docket No. ACR2023, Library Reference USPS-
FY23-NP27, December 29, 2023. Petition, Proposal Three at 2. The
current GA transportation cost model was first introduced as an interim
model during the FY 2023 ACR and is under concurrent review before the
Commission in Docket No. RM2024-7.\5\
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\5\ Docket No. RM2024-7, Petition of the United States Postal
Service for the Initiation of a Proceeding to Consider Proposed
Changes in Analytical Principles (Proposal Two), May 10, 2024.
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The Postal Service states that ``the current Priority Mail
transportation models (USPS-FY23-NP27, `FY2023ParcelsCostModel.xls' and
`FY2023FlatsCostModel.xls') group the costs from Cost Segment 14 into
cube- and weight-related, air- and surface-related, distance- and non-
distance-related components to calculate an overall cost per pound and
a cost per cube by zone.'' Petition, Proposal Three at 2. The Postal
Service explains that ``[t]he distributions to each zone are based on
the cube and weight of parcels and flats by zone, parameters derived
from USPS-LR-L-39, and USPS-LR-L-37 Table 107 air weight and average
haul mileage by zone summaries for aggregated air lanes.'' Id.
The Postal Service states ``[t]he current USPS Ground Advantage
transportation model (USPS-FY23-NP27,
`GATransportationByZone_FY23.xls') groups the costs from Cost Segment
14 in to Local/Intermediate costs, Long Distance Surface costs, and Air
costs to derive a cost per cubic foot.'' Id. at 3. The Postal Service
notes that ``[t]he distributions of these components by zone are based
on mileage factors and proportions of weight by zone for Surface and
Air volume from the Product Tracking and Reporting System (PTR).'' Id.
The Postal Service states that it applies the resulting costs by
zone to appropriately reflect the costs associated with a specific
customer's weight and zone profile when calculating the financial
projections of negotiated service agreements (NSA) that include PM or
GA. Id. The Postal Service also states that the ``forward-looking
financial projections are filed to demonstrate expected compliance with
the requirements of 39 U.S.C. 3633(a), pursuant to 39 CFR 3035.105(c)''
and that ``these costs are applied in the ACR proceedings each year to
demonstrate compliance with the same requirements, pursuant to 39 [CFR]
3050.21(g)(2).'' Id.
Proposal Three. The Postal Service proposes updating the
methodology for distributing the transportation costs for PM and GA by
using more granular data to produce distribution keys by zone for both
the new Zone 10 assignment and the existing zones. Id. at 4. The Postal
Service avers that the changes to the transportation cost models
described in Proposal Three involve several phases. Id.
First, Proposal Three entails a mechanical update to PM
transportation models, where the Postal Service plans to consolidate
and eliminate redundancy in workbooks detailing the models. Id. The
Postal Service states that the result of this update is not a new
methodology nor introduction of new information. Id. at 6.
Second, the Postal Service would add Zone 10 to the model
structures for PM and GA. Id. at 5-6. The Postal Service states,
``inputs such as volumes, weights, and cubes would be remapped
according to the new zone definitions.'' Id. at 5.
Third, Proposal Three utilizes additional detailed information the
Postal Service developed to account for the distance taper effect.\6\
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\6\ See Docket No. RM2023-9, Order Approving Analytical
Principles Used in Periodic Reporting (Proposal Four), November 2,
2023, at 8 (Order No. 6771). Order No. 6771 approved methodology
changes for PM transportation costs and encouraged the Postal
service to conduct future analysis on the phenomenon whereby trips
of shorter distances are more expensive per mile compared to trips
of longer distances, i.e., the distance taper effect. The Postal
Service indicates that it has ``conducted the additional analysis
and proposes the following data-driven approach to developing cost
adjustment factors that reflect the economies achieved as the number
of zones traversed by surface trips increases.'' Petition, Proposal
Three at 5.
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The Postal Service states that ``[t]he proposed methodology takes
advantage of detailed information that is available for Highway
Contract Route (HCR) trips:''
<bullet> The total mileage in a quarter for each trip can be
determined from its origin and destination together with the number of
trips per quarter. The same information is currently used by
Transportation Cost System (TRACS) to identify HCR trips and trip
lengths.
<bullet> The predicted cost per mile is determined from contract
information for each route within a contract type and cost segment.
This cost per mile can be applied to all trips assigned to that route.
<bullet> For each trip, the zone from origin to destination can be
determined from the three-digit ZIP Codes of the origin and destination
facilities.
Petition, Proposal Three at 6.
The Postal Service states that ``[f]or each zone, the average cost
per mile can be calculated by aggregating the quarterly miles and
predicted quarterly costs for all trips whose origin and destination
map to that zone.'' Id. The Postal Service asserts that ``[b]ecause
there are relatively few trips that directly extend to high zones, even
within the Inter-[sectional center facility]SCF contract type, there is
some variability in the calculated cost per mile.'' Id. The Postal
Service proposes to aggregate Zones 5 through 8 into a single group in
order to mitigate this variability. Id.
The Postal service summarizes the distance taper adjustment factors
for Inter-SCF regular trips for FY 2023 Q4 as follows:
------------------------------------------------------------------------
Distance
Zone group taper
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1............................................................ 1.54
2............................................................ 1.14
3............................................................ 1.04
4............................................................ 0.94
5-8.......................................................... 0.93
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Id. at 7.
The Postal Service states that it ``intends to repeat this analysis
each fiscal year and provide updated distance taper factors in USPS-
FYxx-NP27 along with other updated parameters that are provided for the
transportation cost models utilized for NSAs.'' Id.
Fourth, the Postal Service proposes a methodological change for the
treatment of transportation cost pools for both PM and GA in order to
refine the existing methodologies by using more granular data to
develop new distribution keys by zone to distribute the costs more
accurately in each Cost Segment 14 cost pool by the applicable cost
driver. Id.
Proposal Three--Priority Mail. In Proposal Three, the Postal
Service also proposes several changes to methodology used to calculate
the cost per pound and per cube for PM parcels
[[Page 46048]]
and flats.\7\ The summary of each aspect of these proposed changes
follows.
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\7\ The Postal Service describes the existing methodology at
length, and that description is not repeated here. See Petition,
Proposal Three at 7-13.
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First, calculations for PM air weight and average haul by zone have
been updated to incorporate Zone 10. Id. at 14. In addition, ``instead
of mapping each lane to a zone according to great circle mileage
distance between origin and destination airports, the zone is now
determined using the official mapping of the 3-digit ZIP pairs of the
origin and destination airports (i.e., according to the distance
between the centroids of the 3-digit ZIPs in which the origin and
destination airports are located.).'' Id. The Postal Service claims
this is ``an improvement over the current methodology because it would
remove anomalies such as assigning some Intra-Alaska air lanes to Zone
2 when there is no such Zone 2 ZIP pair within Alaska.'' Id. The Postal
Service states that ``[t]he air weights by origin and destination
airport for the relevant offshore lanes would be remapped from the
current zone to Zone 10'' and ``the ODIS-RPW data would be remapped
according to the new zone definitions.'' Id. 14-15. The Postal Service
asserts that ``ODIS-RPW information is collected at the 3-digit ZIP
level, but Zone 9 only applies to certain 5-digit ZIPS,'' therefore
Zone 9 ODIS-RPW data is unavailable and would be combined with Zone 10.
Id. at 15. The Postal Service indicates that because both Zone 9 and
Zone 10 pieces would be on flights from the Continental U.S., and it is
not possible to separate Zone 9 air weight from Zone 10 air weight, and
Zones 9 and 10 must be reported together. Id.
Additionally, air weights for Commercial Air, UPS, and Air Taxi
distributions by zone would be kept separate rather than aggregated and
Air Taxi air weights would be further split into Intra-Caribbean versus
all other lanes. Id.
The Postal Service proposes to remove calculating the average haul
mileage per zone for the FedEx, Commercial Air, UPS, Hawaii, and Air
Taxi cost pools because these cost pools do not have distance-related
cost components. Id. at 16. However, the Postal Service indicates that
the average haul calculation for the Alaska air modes would remain
unchanged from the current methodology. Id.
The Postal Service proposes maintaining the separation of the
existing distributions by zone for Alaska, Hawaii, and the Caribbean
instead of combining these distributions in the final step. Id.
Second, the Postal Service proposes replacing several parameters in
the cost model for costs pertaining to mail in Alaska, reflecting
distance and non-distance related costs for that mail. Id. The Postal
Service also removes the parameters identifying local volume that
avoids contract transportation, as it found that local pieces are
comingled with higher zone packages and incur the same transportation
costs. Id. at 17. The Postal Service indicates that new distribution
keys ``would be developed for each individual cost pool in Cost Segment
14 based on the new air weights by cost pool, average haul mileages,
total weights, and total cubic feet by zone for parcels and flats.''
Id.
Third, The Postal Services proposes that air weight and average
haul miles by zone be calculated for individual providers, rather than
aggregated. Id. The Postal Service states:
The Priority Mail air weight by zone would be distributed
between parcels and flats, as in the current methodology, and the
air cube for FedEx Day Turn parcels and flats would be calculated
using the density factors and the air weight for FedEx. Next, the
Air distribution keys for each air cost pool for parcels and flats
would be calculated using the weight and cube by zone from the same
cost pool. This refinement would represent an improvement over the
current methodology because now, for example, UPS costs would be
distributed to each zone according to the UPS weight by zone rather
than being distributed based on the total air weight across all
modes. Likewise, the FedEx Day costs would be distributed to each
zone according to the FedEx cube by zone, rather than being
distributed based on the total air cube across all modes.
Id.
The Postal Service indicates that:
Two distribution keys would be calculated for the Alaska cost
pools: the pound distribution based solely on the Alaska air weight
by zone; and the pound-miles distribution, which would be calculated
by multiplying the Alaska air weight by zone by the average haul
mileage by zone for Alaska. The Alaska Non-Preferential cost pool
would employ a weighted average of the pound and pound-mile
distributions using the percent distance-related Alaska Non-
Preferential parameter.
Id. at 18.
Fourth, the Postal Service would calculate two distribution keys
for surface transportation cost pools. One for distance-related surface
transportation, and one for non-distance-related surface
transportation. Id. The Postal Service further describes the breakout
of these distribution keys into surface and air and details the
calculation. Id. at 18-20. In sum, these distribution keys would be
applied at the cost pool level for the cost pools within CS14:
<bullet> Commercial air costs would be distributed by the
commercial air weight proportions by zone.
<bullet> FedEx Day Turn costs would be distributed by the FedEx
cubic feet proportions by zone.
<bullet> UPS costs would be distributed by the UPS air weight
proportions by zone.
<bullet> Peak air costs would be distributed by the total air
weight proportions by zone.
<bullet> Alaska Non-Preferential costs would be distributed by a
weighted average of the Alaska air weight and Alaska pound-miles
proportions by zone.
<bullet> Alaska Preferential costs would be distributed by the
Alaska air weight proportions by zone.
<bullet> Hawaii costs would be distributed by the Hawaii air weight
proportions by zone.
<bullet> Air Taxi costs would be distributed by the air taxi air
weight proportions by zone.
<bullet> CDS Intra-SCF Highway costs would be excluded from the
model.
<bullet> Inter-SCF, Intra-NDC, Inter-NDC, Highway Plant Load,
Alaskan Highway, Highway Empty Equipment, Freight Rail, Rail Plant
Load, Rail Empty Equipment, Inland Water, and Offshore Water costs
would be distributed by the distance-related surface cube proportions
by zone.
<bullet> Intra-SCF Highway costs would be distributed by the non-
distance related surface cube proportions by zone.
<bullet> Peak Highway and Terminal/Van Damage costs would each be
distributed by a weighted average of the distance- and non-distance-
related surface cube proportions by zone.
Id. at 20-21.
Proposal Three--USPS Ground Advantage. In Proposal Three, the
Postal Service also proposes to update the USPS Ground Advantage
transportation cost model.\8\ The summary of each aspect of these
proposed changes follows.
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\8\ The Postal Service describes the existing methodology, and
that description is not repeated here. See Petition, Proposal Three
at 22-23.
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First, the Postal Service proposes the same distance taper factors
as proposed in the PM model for GA. Id. at 24. The Postal Service avers
the addition is an improvement because it would allow the model to
reflect that shorter distance trips have a higher cost per mile on
average compared to longer haul trips. Id.
Second, the Postal Service proposes a methodological change to
address the
[[Page 46049]]
treatment of Domestic Water cost pools. Id. Specifically, Inland and
Offshore Water costs would be disaggregated, and Offshore Water costs
would be distributed independently. Id. at 24-25.
Third, the Postal Service proposes a methodology for Zone 10 long-
distance surface transportation, because GA pieces over one pound may
travel by ocean to offshore locations rather than flying, but they
would also travel by truck to the ocean port. Id. at 25. The Postal
Service proposes accounting for this transport by calculating the
average haul mileage for Zone 10 by analyzing PTR and geographic data.
Id. at 25-26. This analysis would calculate the average miles per piece
for Zone 10 pieces destinating in the Caribbean, Pacific, and Alaska.
Id. at 26. The Postal Service notes the pairs of most common departure
ports and arrival ports for these pieces (Jacksonville, FL with Catano,
PR; Richmond, CA with Honolulu, HI; and Seattle, WA with Anchorage,
AK). Id. The Postal Service intends to use these pairs to calculate
water miles (and by subtracting water miles from average miles per
piece, estimating truck miles per piece) for these pieces. Id. The
Postal Service uses the volume proportions by offshore destination to
produce a weighted average truck mileage for all Zone 10 pieces. Id.
Fourth, the Postal Service proposes to analyze PTR data to identify
Offshore Water Ground Advantage weight percentages by zone. Id. The
weight distribution would be calculated by identifying the zone of the
GA over-one-pound pieces that travel by ocean to or from the offshore
location. Id. The weight distribution would be used to distribute the
GA costs or offshore water transportation by zone and avoids assigning
GA costs to zones that do not incur them as is done with the current
methodology. Id. at 26-27. The costs per cube for each component
category would be summarized to produce the total unit cost per cube by
zone. Id. at 27.
Fifth, the Postal Service proposes to update customer-specific
adjustments for Vehicle Service Driver (VSD) costs for local non-
distance-related surface transportation for GA. Id. This proposed
adjustment allows the Postal Service to account for deviations in VSD
costs driven by the average size of the customers cube. Id.
Impact. The Postal Service provides the impact for each component
of Proposal Three, as well as the combined impact, under seal in
Library Reference USPS-RM2024-8-NP1. Id. Because the impact of Proposal
Three is limited to PM and GA transportation costs separated by zone,
there is no impact on product-level costs. Id. at 28. The Postal
Service avers that the materials filed under seal ``substantiate and
quantify the Postal Service's prior statements that the cost of
transport to offshore locations is higher on average than it is to
transport to non-offshore destinations.'' Id.
III. Notice and Comment
The Commission establishes Docket No. RM2024-8 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
Three no later than July 8, 2024. Reply comments on the Petition and
Proposal Three are due no later than July 22, 2024. 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. RM2024-8 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 Three), filed May 13, 2024.
2. Comments by interested persons in this proceeding are due no
later than July 8, 2024. Reply comments on the Petition and Proposal
Three are due no later than July 22, 2024.
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. 2024-11566 Filed 5-24-24; 8:45 am]
BILLING CODE 7710-FW-P
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