Competitive Postal Products
| Published date | 30 November 2021 |
| Citation | 86 FR 67882 |
| Record Number | 2021-25841 |
| Section | Proposed rules |
| Court | Postal Regulatory Commission |
67882
Federal Register / Vol. 86, No. 227 / Tuesday, November 30, 2021 / Proposed Rules
1
See Docket No. RM2017–1, Order Adopting
Final Rules Relating to the Institutional Cost
Contribution Requirement for Competitive
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Signed in Washington, DC, on November
23, 2021.
Treena V. Garrett,
Federal Register Liaison Officer, U.S.
Department of Energy.
[FR Doc. 2021–25977 Filed 11–29–21; 8:45 am]
BILLING CODE 6450–01–P
POSTAL REGULATORY COMMISSION
39 CFR Part 3035
[Docket Nos. RM2017–1 and RM2022–2;
Order No. 6043]
RIN 3211–AA29
Competitive Postal Products
AGENCY
: Postal Regulatory Commission.
ACTION
: Supplemental notice of
proposed rulemaking.
SUMMARY
: On January 3, 2019, the
Commission adopted final rules to
implement a dynamic formula-based
approach for calculating the
institutional cost contribution
requirement for Competitive products,
which is also referred to as ‘‘the
appropriate share,’’ in accordance with
the applicable statutory requirements.
Subsequently, the United States Court of
Appeals for the District of Columbia
Circuit (D.C. Circuit), in a decision
issued in April 2020, remanded two
issues to the Commission for
clarification. This supplemental notice
of proposed rulemaking addresses the
issues identified by the D.C. Circuit,
initiates the Commission’s third 5-year
review of the appropriate share, reissues
the dynamic formula-based approach to
calculating the appropriate share as a
proposed rule, and invites public
comment.
DATES
: Comments are due: February 25,
2022; Reply Comments are due: March
25, 2022.
ADDRESSES
: For additional information,
Order No. 6043 can be accessed
electronically through the Commission’s
website at https://www.prc.gov. Submit
comments electronically via the
Commission’s Filing Online system at
http://www.prc.gov. 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. Relevant Statutory Requirements
II. Background
III. Basis and Purpose of Proposed Rule
IV. Proposed Rule
I. Relevant Statutory Requirements
Section 3633(a)(3) of title 39 of the
United States Code requires the
Commission to ‘‘ensure that all
competitive products collectively cover
what the Commission determines to be
an appropriate share of the institutional
costs of the Postal Service.’’ 39 U.S.C.
3633(a)(3). Section 3633(b) requires that
the Commission revisit the appropriate
share regulation at least every 5 years in
order to determine if the minimum
contribution requirement should be
‘‘retained in its current form, modified,
or eliminated.’’ 39 U.S.C. 3633(b). In
making such a determination, the
Commission is required to consider ‘‘all
relevant circumstances, including the
prevailing competitive conditions in the
market, and the degree to which any
costs are uniquely or disproportionately
associated with any competitive
products.’’ Id.
II. Background
Pursuant to section 3633(b), the
Commission initiated Docket No.
RM2017–1 for the purpose of
conducting its second review of the
appropriate share requirement since the
enactment of the Postal Accountability
and Enhancement Act (PAEA), Public
Law 109–435, 120 Stat. 3198 (2006). In
its second review of the appropriate
share, the Commission found that
market conditions have changed since
the PAEA’s enactment and since the
Commission’s last review of the
appropriate share.
1
Most significantly,
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Federal Register / Vol. 86, No. 227 / Tuesday, November 30, 2021 / Proposed Rules
Products, January 3, 2019, at 4–12, 114–170 (Order
No. 4963); see 84 FR 537 (January 1, 2019).
2
Incremental costs are the variable and fixed
costs that would be eliminated if a product or group
of products were discontinued, or, equivalently, the
total cost caused by the product or group of
products. See Section IV.B.2.
the parcel delivery market has
experienced a significant increase in
demand, particularly over the last 5
years, due to the growing prevalence of
e-commerce. Order No. 4963 at 5–12.
This has led to steady increases in
revenue and profit for all competitors in
the market, as well as growth in
competitive volumes and market share
for the Postal Service. Id. In light of the
changes described above, Order No.
4963 adopted a dynamic formula-based
approach to determining the appropriate
share and adopts related rule changes.
Id. at 19–29.
However, Order No. 4963 was
appealed by the United Parcel Service,
Inc. and later remanded to the
Commission for further consideration by
the United States Court of Appeals for
the District of Columbia Circuit. United
Parcel Serv., Inc. v. Postal Reg. Comm’n,
955 F.3d 1038 (D.C. Cir. 2020). The
court identified two major aspects of
Order No. 4963 for the Commission to
clarify on remand.
First, the court found that ‘‘the
Commission ha[d] not adequately
explained how the statutory phrases
‘direct and indirect postal costs
attributable to [a particular competitive]
product through reliably identified
causal relationships’ and ‘costs . . .
uniquely or disproportionately
associated with any competitive
products’ can coincide.’’ Id. at 1041,
1049. Second, the court found that ‘‘in
focusing narrowly on costs attributed to
competitive products under [39 U.S.C.]
3633(a)(2), the Commission failed to
discharge its responsibility under [39
U.S.C.] 3633(b) to ‘consider . . . the
degree to which any costs are uniquely
or disproportionately associated with
any competitive products.’ ’’ Id. at 1042,
1049 (emphasis in original).
As part of Order No. 6043 and to
provide necessary background
concerning the issues identified by the
court, Chapter IV of the Order details
the evolution of postal costing. The
current cost attribution methodology is
designed to facilitate the attribution of
costs to products to the greatest extent
feasible. See Section IV.A.1. The
Commission discusses the nature of
institutional costs and why they cannot
be allocated any further. See Section
IV.B.4. With respect to Competitive
product regulation, the Commission
explains how section 3633, as
implemented by the Commission,
functionally results in a series of
interrelated price floors. See Section
IV.B. The price floor required by 39
U.S.C. 3633(a)(2), which requires each
Competitive product to recover its
product-level attributable costs, is
included in the calculation of the price
floor under 39 U.S.C. 3633(a)(1), which
requires the recovery of both product-
and group-level attributable costs for
Competitive products collectively. See
Section IV.B.2–3. This is because
incremental costs
2
currently form the
basis for both cost attribution and
testing for cross-subsidization of
Competitive products by Market
Dominant products. See id. Therefore,
the price floor under paragraph (a)(1) is
currently equivalent to the total
attributable cost of Competitive
products collectively, which includes
both individual product-level
incremental costs as well as group-level
costs that are incremental for
Competitive products collectively. See
id.
Chapter V discusses the regulatory
scheme for Competitive products and
amplifies the Commission’s
interpretation of 39 U.S.C. 3633(a)(3)
and (b). Based on the PAEA’s text,
context, and structure, and as confirmed
by its history, the purpose of the
appropriate share provision is to ensure
fair competition in the market for
competitive postal services by
protecting against any possibility that
prices for the Postal Service’s
Competitive products (despite covering
their attributable costs), might
nevertheless be anticompetitively priced
as a result of the Postal Service’s
institutional costs being jointly incurred
by Market Dominant and Competitive
products. See Section V.B. The
Commission concludes that the primary
focus of the appropriate share provision
is to protect competition rather than to
ensure a particular level of institutional
cost coverage. See id.
The Commission clarifies that the
‘‘uniquely or disproportionately
associated’’ standard appearing in 39
U.S.C. 3633(b) is broader than the
‘‘reliably identified causal relationship’’
standard for cost attribution under 39
U.S.C. 3631(b), such that the latter
standard can be viewed as a subset of
the former. See id. The Commission
also, as directed on remand, considers
the ‘‘uniquely or disproportionately
associated’’ standard as applied to all
accrued costs, which includes both
attributable and institutional costs. See
id. To rise to the level of being
‘‘uniquely or disproportionately
associated with any competitive
products’’ as contemplated by 39 U.S.C.
3633(b), the cost’s relationship with the
product or products must be distinct
(uniquely associated) or out of
proportion compared to the cost’s
relationship with other products or
groups of products (disproportionately
associated). See id.
Chapter VI applies the Commission’s
interpretation to ‘‘all relevant
circumstances,’’ resulting in the
Commission electing to maintain the
dynamic formula-based approach to
determining the appropriate share.
Under 39 U.S.C. 3633(a)(3), the prices
set for Competitive products must be
marked up high enough to generate
revenue above and beyond the costs
attributable to Competitive products at
the individual product and group level
in order to also cover an appropriate
share of the Postal Service’s
institutional costs. See Section VI.A.1.
The price floor set by 39 U.S.C.
3633(a)(3) is made up of the appropriate
share of institutional costs, as
determined by the Commission, plus the
attributable cost of Competitive
products collectively. See id. Thus, this
price floor set by 39 U.S.C. 3633(a)(3) is
higher than both of the price floors set
by 39 U.S.C. 3633(a)(1) and (a)(2). See
id. Because all attributable costs are
already included in the Competitive
product price floor under 39 U.S.C.
3633(a)(3), the Commission declines to
further account for them as part of the
appropriate share. See id. Double-
counting such costs would be
economically unsound and would
undermine the Postal Service’s ability to
effectively compete. See id.
The Commission applies the
‘‘uniquely or disproportionately
associated’’ standard to all of the Postal
Service’s accrued costs. See Section
VI.A. The Commission has analyzed the
degree to which any costs are ‘‘uniquely
or disproportionately associated with
any competitive products,’’ (39 U.S.C.
3633(b)), and found there are no costs
(other than those that also meet the
definition of attributable costs) that can
be identified to be ‘‘uniquely or
disproportionately associated with any
competitive products.’’ 39 U.S.C.
3633(b); see Section VI.A.1.
The nature of the residual costs which
remain in the institutional cost category
is such that the relationships between
such costs and specific products or
groups of products are not discernible or
quantifiable. See id. There is no method
to identify a portion of institutional
costs as associated with Competitive
products that would not be arbitrary and
capricious. See Section VI.A.2.
Moreover, employing arbitrary cost
allocation methods would seriously
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See id. (citing FY 2020 ACD at 91–95; FY 2019
ACD at 86–89; FY 2018 ACD at 112–17; Order No.
4402 at 52–53 (83 FR 6758, Feb. 14, 2018).
4
Market power is a firm’s ability to price a
product or service higher than the marginal cost of
producing it and, as a concept, embodies both
absolute and relative aspects. Id. A firm’s absolute
market power is its ability to raise prices with
regard to its own consumers. Id. A firm’s relative
market power, which can also be described as its
market position, is its capacity to exercise market
power relative to its competitors. Id.
undermine the Postal Service’s ability to
compete. See id.
The inability to further allocate
institutional costs under the current
methodology, however, does not mean
that the Postal Service has an unfair
competitive advantage with respect to
Competitive products. See id. The
available evidence suggests that the
market is healthy and competitive. See
id.; Section VI.B.2. There is no evidence
that the Postal Service has engaged in
anticompetitive pricing of Competitive
products; to the contrary, the evidence
suggests that the Postal Service is
incentivized to maximize Competitive
product profits, and its market conduct
has been in line with what would be
expected of a profit-maximizing firm.
See Section VI.A.2. Competitive product
contribution to institutional costs has
always exceeded the required amount,
often by a significant margin.
3
The
Commission has elected to retain the
appropriate share to serve as a margin
of safety against any possibility of the
Postal Service having an unfair
competitive advantage. See Section
VI.A.2. Under the proposed dynamic
formula-based approach, the
appropriate share requirement would
increase due to growth in the
profitability or market share of the
Postal Service’s Competitive products.
See id.
With the foregoing clarifications
having been made, the Commission
explains how the formula operates and
how it accounts for the prevailing
competitive conditions in the market
and other relevant circumstances that
the Commission has historically
considered qualitatively when
evaluating the appropriate share
requirement. See Section VI.B. Because
the dynamic formula-based approach
reasonably reflects the qualitative
statutory criteria from 39 U.S.C. 3633(b),
it easily falls within the Commission’s
broad discretion to determine what the
appropriate share should be. See
Section VI.B.1. The Commission
concludes that the appropriate share
requirement, as derived from the
formula, is sufficient to prevent the
possibility of the Postal Service
engaging in anticompetitive pricing of
Competitive products. See Section
VI.B.1.c.
III. Basis and Purpose of Proposed Rule
The purpose of the Commission’s
dynamic formula-based approach is to
provide an objective basis on which to
quantify the statutory considerations of
section 3633(b) in order to determine
the year-to-year change in Competitive
products’ joint minimal capacity to
generate profit that can be contributed
to the coverage of institutional costs.
Order No. 6043 at 99.
The formula seeks to determine the
Postal Service’s overall market power by
measuring its absolute and relative
market power.
4
In order to assess the
Postal Service’s absolute market power
and its market position, the formula
utilizes two distinct components. The
first component is the Competitive
Contribution Margin, which measures
the Postal Service’s absolute market
power. Id. at 99–101. Specifically, the
Competitive Contribution Margin is
calculated by subtracting the total
attributable costs of producing the
Postal Service’s competitive products
collectively from the total amount of
revenue the Postal Service is able to
realize from those competitive products
collectively in a given fiscal year, and
then dividing this result by the total
competitive product revenue. Id. at 99–
100. The formula assesses the year-over-
year percent change in the Competitive
Contribution Margin to determine how
much, if any, the Postal Service’s
absolute market power has changed. Id.
at 100.
The second component of the formula
is the Competitive Growth Differential,
which measures the Postal Service’s
market position. Id. at 100–101.
Specifically, the Competitive Growth
Differential is calculated by subtracting
the year-over-year percent change in the
combined revenue for the Postal
Service’s competitors from the year-
over-year percent change in the Postal
Service’s competitive product revenue.
Id. This relative growth is then weighted
by the Postal Service’s market share. Id.
at 100.
Using the above-described
components, the Commission’s formula
is represented by the following
equation:
AS
t∂1
= AS
t
* (1 + %DCCM
t¥1
+
CGD
t¥1
)
If t = 0 = FY 2007, AS = 5.5%
Where,
AS = Appropriate Share
CCM = Competitive Contribution Margin
CGD = Competitive Growth Differential
t = Fiscal Year
Id. at 102.
In order to calculate an upcoming
fiscal year’s appropriate share
percentage (AS
t∂1
), the formula
multiplies the sum of the prior fiscal
year’s Competitive Growth Differential
and percentage change in the
Competitive Contribution Margin (1 +
%DCCM
t¥1
= CGD
t¥1
) by the current
fiscal year’s appropriate share (AS
t
). Id.
Both components of the formula are
given equal weight. Id. The formula is
recursive in order to incorporate all
changes in the parcel delivery market
since the PAEA was enacted and the
appropriate share was initially set. Id. at
103. The formula’s calculation thus
begins in FY 2007 with a beginning
appropriate share of 5.5 percent. Id. The
upcoming fiscal year’s appropriate share
will be updated by the Commission
each year as part of the Commission’s
Annual Compliance Determination,
which is performed pursuant to 39
U.S.C. 3653. Id.
Because another 5 years has passed
since the Commission’s review began in
Docket No. RM2017–1, Order No. 6043
also initiates the Commission’s third 5-
year review via Docket No. RM2022–2.
Because the issues and facts under
review are related, the two dockets are
consolidated to enable more efficient
administration of proceedings before the
Commission. See 39 U.S.C. 503; 39 CFR
3010.104.
IV. Proposed Rule
In order to implement the
Commission’s formula, existing
§ 3035.107(c) is reissued. Proposed
§ 3035.107(c)(1) establishes the formula
that is to be used in calculating the
appropriate share and defines each of
the formula’s terms. Proposed
§ 3035.107(c)(1) states that the
appropriate share of institutional costs
to be covered by competitive products
set forth in that rule is a minimum
contribution level. Proposed
§ 3035.107(c)(2) establishes the process
by which the Commission shall update
the appropriate share for each fiscal
year. The Commission will annually use
the formula to calculate the minimum
appropriate share for the upcoming
fiscal year and report the new
appropriate share level for the
upcoming fiscal year as part of its
Annual Compliance Determination.
List of Subjects for 39 CFR Part 3035
Administrative practice and
procedure.
For the reasons stated in the
preamble, the Commission proposes to
amend chapter III of title 39 of the Code
of Federal Regulations as follows:
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1
85 FR 60933 (September 29, 2020).
PART 3035—REGULATION OF RATES
FOR COMPETITIVE PRODUCTS
■1. The authority citation for part 3035
continues to read as follows:
Authority: 39 U.S.C. 503; 3633.
■2. Amend § 3035.107 by revising
paragraph (c) to read as follows:
§ 3035.107 Standards for compliance.
* * * * *
(c)(1) Annually, on a fiscal year basis,
the appropriate share of institutional
costs to be recovered from competitive
products collectively, at a minimum,
will be calculated using the following
formula:
AS
t∂1
= AS
t
* (1 + %DCCM
t¥1
+
CGD
t¥1
)
Where:
AS = Appropriate Share, expressed as a
percentage and rounded to one decimal
place.
CCM = Competitive Contribution Margin.
CGD = Competitive Growth Differential.
t = Fiscal Year.
If t = 0 = FY 2007, AS = 5.5 percent.
(2) The Commission shall, as part of
each Annual Compliance
Determination, calculate and report
competitive products’ appropriate share
for the upcoming fiscal year using the
formula set forth in paragraph (c)(1) of
this section.
By the Commission.
Erica A. Barker,
Secretary.
[FR Doc. 2021–25841 Filed 11–29–21; 8:45 am]
BILLING CODE 7710–FW–P
ENVIRONMENTAL PROTECTION
AGENCY
40 CFR Part 52
[EPA–R05–OAR–2015–0699; FRL–9271–01–
R5]
Air Plan Approval; Ohio; Partial
Approval and Partial Disapproval of
the Muskingum River SO
2
Nonattainment Area Plan
AGENCY
: Environmental Protection
Agency (EPA).
ACTION
: Proposed rule.
SUMMARY
: The Environmental Protection
Agency (EPA) is proposing to partially
approve and partially disapprove a
revision to the Ohio State
Implementation Plan (SIP) intended to
provide for attaining the 2010 primary,
health-based 1-hour sulfur dioxide (SO
2
)
national ambient air quality standard
(NAAQS or ‘‘standard’’) for the
Muskingum River SO
2
nonattainment
area. This SIP revision (hereinafter
referred to as Ohio’s Muskingum River
SO
2
attainment plan or plan) includes
Ohio’s attainment demonstration and
other attainment planning elements
required under the Clean Air Act (CAA).
EPA is proposing to approve the base
year emissions inventory and affirm that
the nonattainment new source review
requirements for the area have been met.
EPA is proposing to disapprove the
attainment plan, since the plan relies
on, among other things, acquisition of a
parcel of land by a facility, Globe
Metallurgical (Globe), located within the
nonattainment area. Globe has recently
indicated to EPA and Ohio EPA that it
will not be purchasing that parcel of
land. Additionally, EPA is proposing to
disapprove the plan for failing to meet
the requirements for meeting reasonable
further progress (RFP) toward
attainment of the NAAQS, reasonably
available control measures/reasonably
available control technology (RACM/
RACT), emission limitations and control
measures as necessary to attain the
NAAQS, and contingency measures.
Based on the change in circumstances
since the original proposed action, EPA
is now proposing a changed course of
action.
DATES
: Comments must be received on
or before December 30, 2021.
ADDRESSES
: Submit your comments,
identified by Docket ID No. EPA–R05–
OAR–2015–0699 at https://
www.regulations.gov, or via email to
arra.sarah@epa.gov. For comments
submitted at Regulations.gov, follow the
online instructions for submitting
comments. Once submitted, comments
cannot be edited or removed from
Regulations.gov. For either manner of
submission, EPA may publish any
comment received to its public docket.
Do not submit electronically any
information you consider to be
Confidential Business Information (CBI)
or other information whose disclosure is
restricted by statute. Multimedia
submissions (audio, video, etc.) must be
accompanied by a written comment.
The written comment is considered the
official comment and should include
discussion of all points you wish to
make. EPA will generally not consider
comments or comment contents located
outside of the primary submission (i.e.,
on the web, cloud, or other file sharing
system). For additional submission
methods, please contact the person
identified in the
FOR FURTHER
INFORMATION CONTACT
section. For the
full EPA public comment policy,
information about CBI or multimedia
submissions, and general guidance on
making effective comments, please visit
https://www2.epa.gov/dockets/
commenting-epa-dockets.
FOR FURTHER INFORMATION CONTACT
: Gina
Harrison, Environmental Scientist,
Attainment Planning and Maintenance
Section, Air Programs Branch (AR–18J),
U.S. Environmental Protection Agency,
Region 5, 77 West Jackson Boulevard,
Chicago, Illinois 60604, (312) 353–6956,
harrison.gina@epa.gov. The EPA Region
5 office is open from 8:30 a.m. to 4:30
p.m., Monday through Friday, excluding
Federal holidays and facility closures
due to COVID–19.
SUPPLEMENTARY INFORMATION
:
I. What actions did EPA propose in this
SIP submission?
On September 29, 2020,
1
EPA
proposed to approve Ohio’s SO
2
plan for
the Muskingum River area submitted on
April 3, 2015 and October 13, 2015, and
supplemented on June 23, 2020. EPA
also proposed to approve and
incorporate by reference Ohio EPA’s
Director’s Final Findings and Orders
issued to Globe on June 23, 2020
(DFFOs), including emission limits and
associated compliance monitoring,
recordkeeping, and reporting
requirements. In addition, EPA
proposed to approve the base year
emissions inventory and to affirm that
the new source review requirements for
the area had previously been met.
EPA’s notice of proposed rulemaking
provided an explanation of the
provisions in the CAA and the measures
and limitations identified in Ohio’s
attainment plan to satisfy these
provisions. Ohio’s plan was based on,
among other things, the proposed
acquisition by Globe of a tract of
property to the north of the Globe
facility that would have resulted in
increased distance between the
emissions source and the fenceline. EPA
found that with the inclusion of this
property within Globe’s fenceline,
Ohio’s modeling results, based on
modeling without receptors on fenced
plant property and including the
property proposed for purchase, were
adequate to demonstrate that no
ambient violations of the 1-hour SO
2
NAAQS would occur.
On June 1, 2021, EPA learned from
Ohio EPA that Globe had decided not to
purchase the land as anticipated by the
attainment plan. As the attainment
demonstration relied on the inclusion of
this property within Globe’s fenceline,
failure to obtain the land renders the
attainment demonstration invalid.
Without a valid attainment
demonstration, the proposed plan does
VerDate Sep<11>2014 16:27 Nov 29, 2021 Jkt 256001 PO 00000 Frm 00005 Fmt 4702 Sfmt 4702 E:\FR\FM\30NOP1.SGM 30NOP1
lotter on DSK11XQN23PROD with PROPOSALS1
