,
USPS-T-16
,/-’
BEFORE THE
POSTAL RATE COMMISSION
WASHINGTON, D.C. 20268-0001
POSTAL RATE AND FEE CHANGES, 1997
I
I
I
I
,‘Z
m,
5, i 0
c
Docket No. R97-1 ;;:
‘s 2
C.” -0
pii:
A’? -L *
yc.,: ‘Iu
4 --
DIRECT TESTIMONY
OF
PHILIP A. HATFIELD
ON BEHALF OF
UNITED STATES POSTAL SERVICE
TABLE OF CONTENTS
.. .
SKETCH .. . .. .. . .. .. . .. . .. . _... . .. . . .. . .. . .. . .. . . .. . .. .. . .. . .. . . .. . .. .. . . .. . . .. . .. . . . .. . .. II I
AUTOBIOGRAPHICAL
I.
PURP’OSE AND SCOPE OF TESTIMONY
Il.
IMPROVEMENTS
F-i
Ill.
OVER PREVIOUS
. .. . .. . . .. .. . . .. . . .. .. .. . . .. . . .. .. . .. . .. . . .. . .. . . . . .. . .. , . 1
METHODOLOGY
. . . . . .. . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . 2
OF PARCEL POST COSTS BY RATE CATEGORY .................. 2
A.
DIVISION
B.
DETERMINATION
OF DISTANCE RELATED I NON-,DISTANC:E
RELATED COSTS ......................................................................................
1.
GCD RELATED AND NON-GCD
RELATED
2.
LOCAL COSTS ...............................................................................
3.
LONG DISTANCE
.4.
INTERMEDIATE
:5.
SUMMARY..
4
ClOSTS ..................... 5
6
COSTS.. ...........................................................
.7
COSTS ...............................................................
.8
.....................................................................
: ............ 11
C.
CUBE-WEIGHT
D.
IPOSTAL OWNED VEHICLE COSTS.. ....................................................
E.
TERMINAL
RELATIONSHIP
AND LINEHAUL
ESTIMATION..
....................................
COSTS IN COMMERCIAL
12
.I4
AIR .................. 16
DEVELOPMENT
OF PARCEL POST UNIT TRANSPORTATION
COST
ESTIMATES . .. . .. . .. . . .. .. . .. . .. . .. . .. . .. .. .. . .. . .. . . .. . . .. . . .. . .. .. . . .. . . .. . .. .. . .. . ,.. . . .. . .. . .. .. . I... . . . .. . . .. . .17
A.
DIVISION OF PARCEL POST TRANSPORTATION
C.OSTS BY
17
FUNCTION AND RATE CATEGORY . .. . .. . . .. . .. . .. . . .. .. . .. ..___._....._......._____....
B.
I-STIMATION
-
OF PARCEL POST CUBE-WEIGHT
REXATIONSHIPS
. ..20
. . . .. .._.....................................................
20
‘I
MODEL SPECIFICATION
2.
ESTIMATION
2.1
RESULTS .. . ..._...............................................................................
METHOD . . .. . . .. . .. . .. . . .. .. . . . .. . .. . .. .. . .. . . .. . .. . .. .. . . .. . .. . . .. . . .. . 21
21
C.
CUBIC FEET AND CUBIC FOOT MILE ESTIMATES . .. . . .. ..__.._................ 22
D.
CALCULATION
OF UNIT TRANSPORTATION
I
COSTS ..____......._...........23
LIST OF EXHIBITS
.-
-
AND APPENDICIE:S
EXHIBIT USPS-16A:
SUMMARY OF PARCEL POST UNIT TRANSPORTATION
COSTS BY ZONE
EXHIBIT USPS-16B:
SUMMARY
APPENDIX
I:
DIVISION
APPENDIX
II:
PARCEL POST CUBIC FOOT AND CUBIC FOOT MILE INPUT
DATA
APPENDIX
Ill:
PARCEL POST TRANSPORTATION
CATEGORY AND ZONE
APPENDIX
IV:
PARCEL.POST
OF CUBE-WEIGHT
RELATIONSHIP
OF PARCEL POST TRANSPORTATION
CUBE-WEIGHT
RESULTS
COSTS
COSTS BY RATE
RELATIONSHIP
.--
DIRECT TESTIMONY
1
2
OF
3
PHILIP A. HATFIELD
4
AUTOBIOGRAPHICAL
5
6
7
8
Services at Price Waterhouse
9
have been with Price Waterhouse
IO
.-.
My name is Philip A. Hatfield.
SKETCH
I am a Consultant
in the Office of Government
LLP (hereafter Price Waterhouse)
My work at Price Waterhouse
im Arlington,
Virginia.
since 1994.
has been devoted to serving the United States
11
Postal Service and I am an affiliate of Price Waterhouse’s
12
I have worked on many projects fbr the United States Postal Service, specializing
13
cost estimati,on. rate design analyses, and financial analysis.
14
Postal Service includes volume variable cost analysis in transportation
15
processing.
16
At Price Waterhouse,
17
transportation.
18
transportation
19
Center ,for Postal Consulting.
My experienoe
with the
and mail
I have worked on various projects related to parcels and
I have been involved with studies of the calculation
of parcel post
costs by zone for almost three years.
Over the past three years, I have visited a number of Postall Service lield offices
20
including airport mail facilities (AMFs), bulk mail centers (BMCs), processingi and
,21
distribution
22
observed transportation
23
processing
24
25
in
centers (P&DCs), and associate post offices (AOs). During these visits, I
operations,
cost system (TRACS) tests, transportationt
operations,
mail
and delivery operations.
I received a bachelor’s
degree in Economics
Mary in 1994.
Ill
~----
from The College of William and
I
1
P.
I.
AND SCOPE OF TESTIMONY
2
The purpose of this testimony is to develop per piece volume variable
3
4
transportation
5
cost estimates begins with the test year volume variable parcel post transportation
6
costs.
7
zone are calculated
8
BMC, intra-BMC,
9
separate clost estimates for two types of parcel post which are currently entered as
cost estimates for use in parcel post rate design.
Usiing other inputs developed
in this testimony,
separate
for each of the three existing rate categories
and destination
BMC (DBMC).
DMBC: DBMC parcel post entered at a destination
11
at a destination
12
transportatiion
13
new rate category of parcel post entered at a destination
P&DC.
Development
of these
unit cost estimates
by
of parcel post: inter-
In addition, this testimony develops
10
14
,,---
PURPOSE
BMC and DElMC parcel post entered
Finally, this testimony estimates the potential difference
in
costs between DBMC parcel post entered at a dejstination P&DC and a
The remainder
of this testimony
delivery unit (DDU):
is divided into the following three sections:
15
improvements
over previous methodology,
16
transportation
costs, and appendices.
17
between the methodology
18
testimony
19
gives an overview of the entire methodology,
20
development
development
of parcel post unit
The first section describes
used to develop unit transportation
and the methodology
the major differences
cost estimates
used in Docket Nos. R90-1 and R94-I.
and the appendices
of the cost estimates in detail.
21
1
in this
The second
describe the
1
2
II.
3
IMPROVEMENTS
OVER PREVIOUS
The last time the methodology
METHODOLOGY
for allocating
4
costs to zone was described
5
Wang (USPS-T-21).
6
have occurre’d that allow a more precise estimation
7
costs.
8
determining
9
Specifically,
l
his testimony,
several changes
of parcel post [unit transportation
the following changes have been made to the methodology
parcel post transportation
of
costs for use in rate setting:
a n’ew method for separating
total parcel post purchased1 transportation
costs
rate categories
‘I 1
.
a more precise determination
112
.
a more precise method’of
of distance relation
estimating
the relationship
between cubic- volume
and! weight in parcel post
13
14
.
the inclusion of postal owned vehicle transportation
15
.
the different treatment
costs
of terminal and line-haul costs in commercial
air
transportation
16
17
transportation
on the record was in Docket No. R90-1 by witness Nai-Chi
Since witness Wang submitted
into the component
‘IO
parcel post purchased
Other than the modifications
18
parcel post pulrchased transportation
19
by Dr., Wang.
20
improvement
described
above, the methodology
for allocating
costs to zone mirrors the methodology
The remainder of this section of this testimony describes
described
these areas of
in more detail.
21
CllVlSlON OF PARCEL
22
23
A.
234
The first improvement
POST COSTS BY RATE CATEGORY
over the previous method of allocating
2:5
transportation
26
costs by rate category.
27
average transportation
28
transportation
29
BMC and intra-BMC transportation
parcel post
costs to rate category and zone is the ability to separate transportation
In Docket No. R90-I,
Dr. Wang’s testimony
developed
an
cost per piece by zone for all of parcel post. The same average
#costs for all parcel post were used in the rate design .for both the intercost per piece.
DBMC transportation
costs were
/--
1
calculated
2
discount represented
4
associated
5
dividing total parcel post purchased
6
categories
7
divided into three functional
8
each
9
parcel pos,t: inter-BMC,
10
costs. This
only the costs avoided between intra-BMC and DBMC.
Since Docket No. R90-I, a more precise methodology
3
_/-"
by applying a discount to the average parcel post transportation
for determining
with each rate category of parcel post has been dev’eloped.
has two steps.
of the functional
transportation
the costs
The method for
costs into the component
First, total parcel post purchased
cost pools: local, intermediate,
rate
transportation
costs are
and long distance.
Second,
cost pools is divided among the three existing rate categories
intra-BMC,
and DBMC.
The division of total transportation
costs into the three functions is relatively
11
straightfotward.
12
can be categorized
13
These cost pools are described
14
Once transportation
15
divided amlong the three rate categories
16
used to determine
17
parcel posit cubic feet, product definition, and the extent to which certain transportation
18
legs are bypassed.
19
By examining
of
each transportation
cost account individually,
as falling into the local, intermediate,
the costs
or long1 distance cost pool.
in more detail later in this testimlony and in Appendix
costs by function are calculated,
each pool of functional
based on a number of factors.
I.
costs is
The factors
the level of costs incurred by each rate categ’ory include: share of
The methodology
described
costs associated
above and used in this testimony estimates the
20
transportation
with each rate category of parcel post. Further, the unit
21
costs developed
22
specifically
23
average unlit transportation
24
and DMBC combined)
25
Clearly, the ahility to separate total purchased
26
enables the calculation
27
category
for each rate category in this testimony account only for the costs
associated
with that rate category.
The previous methodology
estimated
costs in each zone for all parcel post (inter-BMC,
intra-BMC,
and assigned these average unit costs to each rate category.
transportation
of more precise unit transportation
28
,/-‘
3
cosits by rate category
cost estimates
for each rate
1
2
3
B.
DETERMINATION
OF DISTANCE
RELATED COSTS
4
The next improvement
RELATED
I NON.-DISTANCE
over the previous method of allocating
transportation
volume variable
5
parcel post purchased
costs to rate cells deals with ithe way in which
6
costs are allolcated to zone.
How costs are allocated to zone depends
7
costs have been categorized
as distance related or nondistance
8
related costs ;are costs that would not be expected to vary between
9
zones.
Because these costs do not vary between
based on the percentage
11
transportation
Nlondistance
parcels in different
of cubic feet in that zone, which implies the same
12
costs that would be expected to vary between
13
are allocated ito zone based on the percentage
14
therefore the cost per cubic foot increases with zone.
cost per cubic foot for parcels in each zone.
In Docket No. R94-I, the Commission
folr each mode of purchased
These costs
of cubic foot miles im each zotie and
developed
percentage
17
calculated
18
that are non-distance
19
costs for the mode.
20
more accounts have been identified as non-distance
a nondistance
transportation.’
specific purchased
Distance related costs are
parcels in different zones.
16
by identifying
related.
zones, they are allocated to zone
10
15
on whether the
related
Each percentage
transportation
accounts within the mode
related and then dividing the costs in these accounts
The same methodology
is employed
in this testimony;
22
transportation
23
three categories,
2*4
.
Local:
cost accounts and components
by the total
however,
related.
To explain why more accounts have been identified as non-distance
21
was
related, all
have been grouped ilnto the following
which are referred to hereafter as transportation
Parcel post volume variable transportation
functions:
costs incurred in transporting
2;5
parcel post pieces between facilities that are within the service alrea of a processing
26
and distribution
27
PBDCs.
center (P&DC), primarily between associate
’ Docket No. RW.1, PRC LR-11 at 35 (highway,
rail, and water), 38 (air),
4
ofices
(AOs) and
f--
Intermediate:
Parcel post volume variable purchased
2
in transporting
parcel post pieces between facilities that are within the service area
3
of a bulk mail center (BMC), primarily between P&DCs and IBMGs.
1
4
-
l
Long distance:
transportation
Parcel post volume variable purchased
5
incurred in transporting
6
BMC service areas, primarily between two BMCs.
transportation
costs incurred
costs
parcel post pieces between facilities that are in different
7
In order to determine
if the transportation
costs associated
8
distance or non-distance
9
parcels in different zones for each function.
with each function are
related, it is necessary to examine the distance traveled by
If the distance traveled on a particular
10
function does not necessarily
differ for parcels in different zones, then the costs
11
12
associated1 with that function are not related to zoned distance. Likewise, if the distance
._
traveled on a particular function could be expected to increase for parcels in higher
13
zones, then the costs associated
with that function are related to zoned distance.
14
/---
GCD RELATED AND NON-GCD
15
16
1.
17
Before analyzing
each function, it is necessary
RELATED
COSTS
to draw a distinction
between
18
costs that are related to the total distance actually traveled and casts that are related to
19
zoned distance.
20
be expected to increase as distance traveled increases.
21
traveled by a parcel, however, do not necessarily
22
higher zones.
23
is not the actual distance traveled by the parcel.
24
is the great circle distance (GCD) between origin and destination
25
area.’
For all parcels, the majority of volume variable ,transportation
Increases
costs can
in the distance
imply the parcel will move towards
This is true because the distance used to calculate the zone of a parcel
Therefore,
The distance u:sed to calculate zones
3digit ZIP Code
GCD is roughly the shortest distance on the surface of t.he earth
*‘In the determination of postal zones, the earth is considered to be divided into units of area thirty
minutes square. identical with a quarter of the area formed by the intersecting parallels of latitude and
i-
meridians of longitude.
5 4010.
The distance between these units of area is the basis of the postal zones.’ DMCS
5
between the origin and destination
travel pattern of a typical inter-BMC
P&DC of a particular parcel.”
parcel.
Figure II-I shows the
The dotted line segment f represents
GCD. All solid lines represent the actual travel pattern of the parcel.
the distance traveled on any function of transportation
causes an increase in the GCD measurement
with that furxtion
9
If an increase in
for a particular parcel necessarily
for that parcel, then the co&
are related to zoned distance (hereafter
associated
referred to as ‘GCD related”).
If an increase in the distance traveled on any function of transporl:ation
necessarily
the
cause an increase in the GCD, then the costs associated
does not
with that function
are not related to zoned distance (hereafter referred to as ‘non-GICD related”).
IO
INTER-BMC
FIGURE II-I
PARCEL TRANSPORTATION
PAlTERN
11
12
,t3
‘14
2.
LOCAL COSTS
with the definitions
of GCD related and non-GCD
15
function of transportation
can be analyzed.
16
Figure 11-l by line segments
‘I7
3digit ZIP Code area of the destination
18
digit ZIP Code area of the origin P&DC, increases
related established,
Local transportation
a and e. Because the destination
is represented
each
in
post office is within the
P&DC and the origin post oftke is within the 3in the distance traveled between
’ Because P&DC% in general serve one or more 3digit ZIP Code areas, it follow!; that origin and
destination 3digit ZIP Code areas of a parcel correspond roughly to the origin and destination P&DC.
post
1
offices and PBDCs will not affect the GCD of a parcel.
2
whose travel pattern is identical, except for distances
3
will always be in the same zone. Therefore,
4
inter-BMC
5
components
6
distance related.
7
relationship
8
that have b,een categorized
9
were also tlreated as non-distance
IO
11
parcels.
Accordingly,
between
post office and P&DC,
all local costs are non-GCD
all costs in the transportation
that have been categorized
Although
In other ‘words, two parcels
as local in Appendix
accounts
related for
and
I are categorized
as non-
Figure II-1 only shows a typical inter-.BMC parcel, this
also holds for intra-BMC and DBMC parcels.
All transportation
as local and therefore non-distance
related by the Commission
accounts
related in this testimony
in Docket No. R94-14,
with one exception.
One modification
to the e$sting
methodology
for determining
12
transportation
13
costs. This modification
14
of all postal owned vehicle costs as local transportation.
15
costs were not included in the analysis of parcel post transportatlion
16
R94-I, no detemination
17
made in thalt docket.
Because these costs are categorized
18
non-distance
in this testimony.
19
described
parcel post
costs to be used in rate setting is the inclusion of postal ownedvehicle
related
is described
in more detail later; it involves the categorization
Since postal owned vehicle
costs in Docket No.
regarding whether or not these costs are distance related was
as local, they are treated as
The rationale for treating these c&s
as local is
later.
20
21
22
23
LONG DISTANCE
3.
COSTS
Next, long distance costs will be examined.
Again referring to Figure II-l,
24
consider two parcels.
Both parcels travel the same distance between
25
P&DCs (lines a and e) and between P&DCs and BMCs (lines 6 and d), but one travels
26
further between
27
travels furthler between
28
move towards a higher zone.
BMCs (line c). Holding all other distances
BMCs will necessarily
constant, the parcel that
have a greater GCID and therefore will
In other words, an increase in the long distance
’ Docket No. R94-1, PRC LR-11 at 35 (highway, rail, and water), 38 (air).
7
--
post offices and
1
transportation
of a particular parcel will cause an increase in GCD. Therefore,
2
distance costs are GCD related and have been treated as distance related in this
3
testimony.’
4
distance and therefore
5
related by the Commission
The purchased
transportation
long
accounts that have be’en categorized
as long
distance related in this testimony were als,o treated as distance
in Docket No. R94-1 .6
6
4.
7
8
INTERMEDIATE
9
IO
a.
11
Finall’y, intermediate
associated
costs
13
the Commission
14
intermediate
15
however, the intermediate
16
treated as non-GCD
17
costs are non-GCD
18
INTER-BMC
transportation
with an inter-BMC
12
COSTS
recommended
in this testimony
costs will be discussed.
The intermediate
parcel will be examined first. In Docket No. R94-1,
that all costs that have been categorized
be treated as distance related.’
transportation
In this testimony,
costs incurred by inter-BMC
related, and therefore non-distance
as L
related.
parcels are
To explain why these
related, the simple illustrative example in Figure II-2 will be used.
Imagine that in a given year the Postal Service only deliverled two parcels, each
19
measuring
one cubic foot. Parcel A is deposited
in Washington,
DC to be delivered to
20
Los ,Angeles,, CA (zone 8) and parcel B is deposited
21
to Philadelphlia,
22
transportation
costs for the year are $1000 and the volume variable long distance
23
transportation
costs for the year are $800.
24
to origin BMC, 2,625 miles from origin BMC to destination
125
destination
126
origin BMC, ;!25 miles from origin BMC to destination
in Washingtorn, DC to be delivered
PA (zone 3). Also, assume that the volume variable intermediate
BMC to destination
5 Exceptions include the small portion
handling, nehvolrk air, and western air
Appendix I.
’ The transportation costs not included
related. See Doscket No. R94-1. PRC
’ Ibid.
P&DC.
Parcel A travels 50 mil’es from oldgin P&DC
BMC, and 25 miles from
Parcel B travels 50 miles from origin P&DC to
BMC, and 2!5 miles from
of parcel post transportation costs in commercial air terminal
accounts. These exceptions are discussed in more detail in
in the calculation of the nondistance related factor are distance
LR-11 at 35 (highway, rail, and water), 38 (air).
/‘
1
destination
2
miles are associated
3
associate’d with zone 3.
4
BMC to destination
P&DC.
Therefore,
2,700 (90 percent) of total cubic foot
with zone 8 and 300 (10 percent) of total cubic foot miles are
Treating long distance transportation
costs as distance related results in $720
5
per cubic ,foot in zone 8 and $80 per cubic foot in zone 3 for long distance
6
transportation.
7
more than ten times as many long distance miles as the zone 3 parcel.
8
intermediate
9
cubic foot in zone 8 and $100 per cubic foot in zone 3 for intermediate
This result is very reasonable
transportation
considering
the zone 8 parcel traveled
Treating
costs as distance related, however, results in $900 per
tr.ansportation.
10
EXAMPLE
FIGURE II-2
OF PARCEL POST TRANSPORTATION
I
I
Cubic
Feet
zone3
Zone.?
Total
1
1
2
COST ALLOCATION
Cubic Long distmce
Foot
UIsb
Miles
GCD Related
300
2,700
3.WO
brtemdirb
Intemwdiate I
co&
costs
G;CD Rslatad NonCCD Related
SO
720
800
100
--s
11
12
Treating intermediate
transportation
costs as distance rel,ated results in the zone
13
8 parcel costing nine times as much as the zone 3 parcel, despite the fact that both
14
parcels travel the same distance on intermediate
15
This outcome occurs because the main determinant
16
parcels is miles traveled on the long distance leg. Allocation
of intermediate
17
the basis of GCD miles or zone, when the two are unrelated,
causes anomalies
18
the one described
19
GCD for inter-BMC
20
in the above example.
transportation
175 cubic foot miles).
of GCD ancl zone for inter-BMC
Because intermediate
costs on
such as
costs are unrelated to
parcels, this testimony treats those costs as mondistance
related.
b.
1
2
3
Intermediate
INTRA-BMC
transportation
costs for intra-BMC
parcels are treated as non-
4
distance related.
There are some situations where an increase in the number of
5
intermediate
6
situations
7
miles is associated
8
As depicted
9
and d) of parcel A will not affect the GCD of parcel A (line f). On the other hand,
miles for an intra-BMC
where it does.
parcel does not affect GCD miles and some
However, in the cases where an increase in intermediate
with an increase in GCD, there is no causal link between the two.
in Figure 11-3, increasing
the intermediate
the intermediate
10
increasing
transportation
11
clearly affect the GCD distance (line f).
transportation
distance (lines b
distance (lines 6' and d’) of parcel B will
12
-.
COMPARISON
FIGURE II-3
OF TWO INTRA-BMC PARCEL TRANSPORTATION
PATERNS
b
Z&El
: f
e
d
1 DPSDC 1
Parcel A
I5
DDU ]
Parcel B
13
14
As shown above, the geographical
location of processing
facilities and the path
15
that a particular parcel happens to take through the network determines
16
in intermediate
17
transportation
Idistance will increase GCD or not. increases
distance for intra-BMC
if an increase
in intermediate
parcels do not necessarily
cause parcels to
.r-
1
migrate towards a higher zone. Therefore,
2
treated as, nondistance
intermediate
transplortation
costs are also
related for intra-BMC parcels.
3
4
5
6
I-
DBMC
C.
Last, the intermediate
transportation
costs associated
7
examined.
8
related to GCD for DBMC parcels.
9
pattern of DBMC parcel post due to its entry location.
wi’th DBMC parcels are
Unlike inter-BMC and intra-BMC parcels, intermedialte costs are clearly
The reason for the differenoe is the unique travel
Because DBMC parcel post is
10
entered at a BMC and generally travels directly from that BMC to the destination
11
the intermediate
12
shown in Figure 114, an increase’in
13
an increase in GCD (line
14
with DBMC parcel post are GCD related and are treated as distance related in this
15
testimony.”
transportation
9.
distance is the main determinant
intermediate
Therefore,
of GCD and zone. As
distance (line (I) will necessarily
the intermediate
P&DC,
transportation
cause
casts associated
16
FIGURE Ii-4
DBMC PARCEL TRANSPORTATION
PATIERN
c
4
e
DDU
17
18
19
20
21
/-
5.
SUMMARY
The distance relation analysis above can be summarized
most part, distance related costs and non-distance
as follows.
For the
related costs are determined
in the
a This is corMstent with the Commission’s treatment of DBMC transportation costs that have been
dassified as intermediate in this testimony. See Docket No. R94-1, PRC LR-11 at 35 (highway. rail. and
water), 38 (air).
11
.__..-.
1
same manner as in Docket Nos. R90-1 and R94-I, with one major exception.
The
2
costs incurred in moving parcels within the service area of a BMC (intermediate
3
transportation
costs) are now treated as nondistance
4
BMC parcek.
As demonstrated
5
therefore should not be distributed
.-
related for inter-BMC and intra-
above, these costs are not related to GCD or zone and
to zone based on GCD.
6
CUBE-WEIGHT
RELATIONSHIP
7
8
C.
9
Another area in which this testimony
improves upon the previous methodology
10
for allocating
11
between cubic volume and weight in parcel post (cube-weight
12
change made to estimation
13
one relationship
14
estimated, one for each rate category.
15
Because separate transportation
16
category within parcel post in Appendix
17
different cube-weight
18
relationship
19
form of cost per cubic foot into estimates of transportation
20
development
21
that different cost per cubic foot estimates are available by zone for each rate category,
22
it is possible ito apply the different cube-weight
23
appropriate
24
parcel post transportation
ESTIMATION
costs to zones is in estimating
of the cube-weight
the relationship
relationship).
The only
is that instead of estimating
for all parcel post, three separate cube-weight relationships are
relationship
relationship
cost pools are developed
I of this testimony,
for each rate
it is possible to apply a
to the costs in each rate category.
has two primary uses: (1) to convert transportation
The cube-weight
cost estimates in the
cost per piece for use in the
of rates and (2) to calculate the total number of cubic: feet by zone.
relationships
Now
in eac:h rate category to the
cost per cubic foot estimates.
It is apparent from the regression
results in USPS LR-H-176
that the relationship
125
between cubic volume and weight in each rate category is different.
26
a graph of the cube-weight
27
post.8 Since these relationships
28
parcel post cube-weight
29
categories,
especially
relationships
estimated
for each rate category of parcel
vary by rate category,
relationship
the application
would result in an averaging
when converting
Figure II-5 shows
of the overall
of costs between
rate
cost per cubic foot estimates to cost per piece
1
estimates.
For example, assume that the DBMC relationship
2
pound DBMC parcel is 1.5 cubic feet in size and the inter-BMC
3
a typical IO-pound
4
parcel post cube-weight
5
cubic feet in size. Application
6
costs between
7
actually are and inter-BMC costs would be higher.
8
can be cakulated
9
relationship
inter-BMC
showed that a typical 1 Orelationship
showed that
parcel is 1 cubic foot in size. Also assume that the overall
relationship
showed that a typical IO-pound
of the overall relationship
parcel is 1.25
would result in the averaging
of
inter-BMC and DBMC, i.e., DBMC costs would be lower than they
for each rate category,
Here, since separate cost estimates
it is preferable
to apply a different cube-weight
for each rate category rather than to use the average relationship
10
parcel post. In calculating
11
different cube-weight
12
are significantly
unit transportation
relationship.for
cost estimates, this. testimony
for all
employs a
each rate category because these rellationships
different for each rate category of parcel post.”
13
9 The data used to plot the graph in Figure II-5 are from USPS LR-H-176 at 30-:31.
” In Docket No. R94-1, one cube-weight relationship for all parcel post was estimated (PRC Op., Docket
No. R94-1, page V-l 16).
13
ESTIMATED
CUBE-WEIGHT
FIGURE II-5
RELATIONSHIPS
BY RATE CATEGORY
-
D.
POSTAL OWNED VEHICLE
As mentioned
determination
inter-facility
earlier, this testimony includes postal owned vehicle costs in the
of parcel post transportation
transportation
Service as opposed
COSTS
costs.
Postal owned vehicle costs represent
costs that are incurred by vehicles owned by the Postal
to contract transportation.
Because they are not contract
14
~--
-__-
--
I
transportaltion,
2
the labor associated
3
cost segment 8, vehicle service drivers.
4
parcel post transportation
5
transportation
6
category and zone of parcel post in the same manner as purchased
7
costs.
r
,--
with postal owned transportation
14,. Rather, the costs for
are accounted
for separately
in
These costs are includled in the analysis of
costs because they are closely related to purchased
costs. This testimony distributes
Quantifying
8
9
these costs are not reflected in cost segment
postal owned vehicle costs to rate
tranaportation
the correct amount of postal owned vehicle c:osts that are associated
with parcel post is a two step process.
First, the direct labor costs associated
with
IO
parcel post postal owned vehicles is taken directly from the test year cost segments
II
components.
I2
owned vehicle direct labor to class and subclass of mail. Second, the indirect costs
13
associated with postal owned vehicles are determined
I4
factor.
I5
designed to account for all indirect costs associated
I6
labor costs. Applying the piggyback
I7
volume variable postal owned vehicle costs associated
I8
Cost segment 8, v:hicle
service drivers, contains the distribution
and
of postal
through the use of a piggyback
The vehicle service driver piggyback factor for parcel po:st (USPS LR-H-77)
is
with postal owned vehicle direct
factor to the direct labor co:sts results in the total
with parcel post.
All parcel post postal owned vehicle costs are categorized
19
transportation.
20
the service area of a P&DC. Therefore,
21
purchased
as local
The Postal Service uses its own vehicles mainly for transportation
within
postal owned vehicle service mirrors intra-SCF
transportation
22
costs. ” In this testimony, parcel post postal owned vehicle
.- costs are treated in the same manner as intra-SCF purchased transportation costs.
23
Because they are categorized
24
The earlier discussion
25
vehicle cos,ts as it does to purchased
as local, these costs are treated as non-distance
of local transportation
costs applies equally to postal owned
transportation
26
” See Docket No. R90-1, Exhibit USPS-T-12G
related.
at 1.
I5
categorized
as local.
TERMINAL
AND LINEHAUL
COSTS IN COMMERCIAL
I
2
E.
3
For the most part, the parcel post costs in purchased
AIR
trans,portation
<accounts are
4
treated as either all distance related or all non-distance
5
categorized
6
parcel post costs associated
7
transportation
8
commercial
9
mail between facilities that are in different BMC service areas, is categorized
ias local, intermediate,
with commercial
One exception
air transportation.
is the treatment
As evidenced
air transportation.
distance.
II
related, commercial
12
nondistance
Commercial
air transportation,
While all long distance surface transportation
air transportation
of
by the
cost system (TRACS), a small amount of parcel post is transported
10
I3
or long distance.
related based on how they are
on
because it tends to move
as long
costs are treated as distance
is divided between distance related costs and
related costs because of the nature of air transportation.
The detail of air transportation
accounts shown in Alexandrovich
WP B
I4
Worksheet
I5
linehaul costs and terminal handling costs.
16
with flights once they have been loaded and are in the air. Terminal handling costs, on
I7
the other hand, are the costs associated
18
unloading,
19
I”, the terminal handling portion of air transportation
20
virtue of the fact that every flight receives these costs regardless
21
traveled.
22
14.0.1 allows for the separation
of commercial
air trans#portation costs into
Linehaul costs are the costs associated
with various ground activities such as loading,
anld moving the mail. As pointed out by the Commission
Because of the different properties
costs is non-distance
associated
celated by
of the distance
with the linehaul and terminal
23
handling portion of air transportation
24
commercial
25
those that are non-distance
216
related costs, the distance related portion of commercial
2,7
parcel post are distributed
2:8
portion of commercial
air transportation
in Docket No. R94-
costs, this testimony
divides parcel post
costs into those that are distance related (linehaul) and
related (terminal handling).
Along with other distance
air transportation
costs in
to zone based on cubic foot miles. The nondistance
air costs are distributed
‘z PRC Op., Docket R94-1. pages 111-64-56
I6
to zone based on cubic feet.
related
I
2
3
III.
4
DEVELOPMENT
ESTIMATES
OF PARCEL
This section of testimony
outlines the methodology
5
transportation
6
heavily on the discussions
7
section is to describe the methodology
8
information
COST
used to calculate
unit
costs by rate category and zone for parcel post. This section relies
is contained
The development
9
POST UNIT TRANSPORlTATlON
and analyses presented
in Section II. The purpose of this
of developing
the unit co,st estimates.
Additional
in the appendices.
of parcel post unit transportation
10
down into :three components:
II
category and function (i.e., local, intermediate,
12
post-cube-weight
13
below.
cost estimates
(I) division of parcel post transportation
relationships,
or long distance),
and (3) calculation
of unit costs.
‘can be broken
co:sts by rate
(2) estimation
of parcel
Each is discussed
-
14
15
16
17
A.
DIVISION OF PARCEL POST TRANSPORTATION
FUNCTION AND RATE CATEGORY
I8
The first step in the development
of unit transportation
I9
total parcel post purchased
transportation
20
must be divided into the three transportation
21
intermediate,
22
straightforward.
23
purchased
24
owned vehiicle costs); intermediate
25
costs in each account that is categorized
26
transportation
27
The division of parcel post transportation
28
Appendix
and long distance.
First, total parcel post costs
functions defined in Section II, i.e., local,
costs are calculated
account that is categorized
costs are calculated
coasts by zone is to divide
As stated above, this division is relatively
Local transportation
transportation
costs two ways.
COSTS BY
transportation
by adcling the costs in each
as local (and piggybacked
costs are calculated
as intermediate;
postal
by adding the
and long distance
by adding the costs in each long distance account.‘3
costs into functions is presented
in detail in
I. A summary of the results of this division is shown in Table Ill-l .14
I3 A detailed description of how each of the transportation cost accounts is classified is provided in
Appendix I of ‘this testimony.
I4 Alaska non-pref air costs are not included in any cost calculations in this testimony because they are
accounted for separately in Ms. Mayes testimony (USPS-T-37).
I7
1
--
TABLE III-1
DIVISION OF TEST YEAR TRANSPORTATION
COSTS BY FUNCTION
(ALL COSTS IN THOUSANDS)
Local
Intermediate
Long distance
Total
Mode
Air
5 0
Highway
584,367
Rail
$5,948
$3,279
$9,227
$85,973
$47,802
$218,142
$137
$39,683
$39,820
5 0
Water
Total
$134
55,780
$84,501
$97,838
5 0
$5,914
$90,764
$273,103
2
3
Once parcel post volume variable transportation
costs are divided between the
4
three functions,
S
above, this division is accomplished
6
BMC and DBMC parcels do not incur any of the transportation
7
classified as long distance.
8
intra-BMC
and DBMC parcel post. Specifically,
9
originating
in the service area of a BMCIASF and destinating
a second division of costs into rate categories
area. The destination
11
a BMC or ASF ;and is addressed
12
intermediate
14
conclusion
15
transportation
16
functions
First, intra-
costs which are
is based on the product definitions
of
intra-BMC rates apply to parcel post
within the same lservice
BMC (DBMC) rates apply to parcel post mail tlhat is deposited
at
for delivery within the service area of that facility.”
Second, the average cost per cubic foot per leg of transportation
13
As stated
based on the following considerations.
This observation
10
is possible.
in the local and
is the same for parcel post parcels in each rate category.
This
is based on the fact that all parcel post pieces travel on thle same
from BMCs to PBDCs, and from PBDCs to delivery units.
IJsing the above information,
each of the functional
17
into rate categoiries.
18
post. Local and intermediate
19
relative proportions
of cubic foot legs in each rate category.
20
relative proportions
of cubic foot legs, it is necessary
cost pools is then divided
Long distance costs are entirely allocated to inter-BMC
costs are allocated to rate categories
parcel
based on the
In order to determine
to know the number of cubic feet
---.
” DMCS % 322.15 (inta-BMC)
and 322.14 (DBMC).
18
/--
1
in each rate category and the average number of legs traveled in each function for
2
inter-BMC,
3
category are calculated
4
.r---
intra-BMC,
and DBMC parcels.
in Appendix
The number of cubic feet in each rate
II of this testimony
and are described
To Icalculate the average number of legs of each transportation
later.
function traveled
5
by inter-BMC,
6
‘typical’ palrcel. A typical inter-BMC parcel travels from p&t office to P&DC, from P&DC
7
to BMC, frfom BMC to BMC, from BMC to P&DC, and from P&DC to delivjery unit. This
8
means that a typical inter-BMC
9
legs of intermediate
intra-BMC,
and DBMC parcels, I analyzed the transportation
pattern of a
parcel receives two legs of local transportation
transportation.
and two
Likewise, a typical intra-BMC parcel travels from
10
post office to P&DC, from P&DC to BMC, from BMC to P&DC, alnd from P&DC to
11
delivery unit. This means that a typical intra-BMC
12
transportation
13
parcel travlels from BMC to P&DC and from P&DC to delivery unit. Therefore,
14
DBMC panzel receives one leg of intermediate
15
transportation.
and two legs of intermediate
Adjustments
16
parcel also receives two legs of local
transportation.
Finally, a typicial DBMC
transportation
a typical
and one leg of local
are made to account for three cases where significant amounts of
17
volume were identified as exceptions
18
above.
19
parcel:
These exceptions
to the typical parcel travel patterns described
cause the average parcel to be different from the typical
20
.
inter-BMC
rated parcels which are entered at a BMC,
21
l
intra-BMC
parcels which are held out at a post oftice. and
22
l
DBMC parcels which are entered at the destination
P&DC.
23
The degree of each of these occurrences
can be estimated and each creates a
24
difference
25
in each rate category.
Adjusting the typical number of local and intermediate
26
traveled by inter-BMC.
intra-BMC,
27
legs. Using1 cubic feet and average number of legs, parcel post functional
28
transportatilon
29
costs is described
between the average and typical number of legs per transportation
function
legs
and DBMC parcels yields the average number of
costs are divided into the three rate categories.
in detail in Aooendix
Tlhe above division of
I. A summarv of the results of this division is
19
__-
shown in Table 111-2. The results shown in Table Ill-2 are developed
in Appendix
I of
this testimony.
TABLE Ill-2
TEST YEAR PARCEL POST TRANSPORTATION
COSTS BY RATE CATEGORY
(ALL COSTS IN THOUSANDS)
Intermediate
Long distance
Local
Total1
$26,934
$32,263
$17,828
$21,355
DBMC
$39,739
$44,219
Total
$84,501
$97,837
Intra-BMC
4
c
5
6
B.
IISTlMATlON
7
Before calculating
$0
$90,76!5
$ 0
$90,76!;
OF PARCEL POST CUBE-WEIGHT
RELATIONSHIPS
unit costs from the cost pools described
above, it was
8
necessary
to develop the relationship
between cubic volume and w’eight in each rate
9
category of palrcel post. The inputs to the development
10
average cubic feet per piece in each weight increment
11
number of pieces in each weight increment for each of the three rat,e categories
12
parcel post.
of these relationships
are the
(2-70) and the corresponding
of
13
II
1'4
15
16
MODEL SPECIFICATION
The model used to estimate the cube-weight
relationship
1'7
rate categories
116
Docket No. R914-1 .16 It is a translog model that can be described
in each of the three
of parcel post was the same model recommended
by the Commission
in
as follows:
ln(cf / pc) = 0 + b[ln(Zbs)]
+cfh(zbs)]*
1!3
20
Where ‘cf/pc” is the average cubic feet per piece for each weight increment and ‘Ibs” is
2'1
the corresponding
weight increment.
l6 PRC Op., Docket No. R94-1. page V-116.
1
2.
2
3
4
ESTIMATION
The correct estimation
represents
METHOD
technique
to employ when estimating
5
each observation
an average is a form of weighted
6
Specifically,
7
relationships
8
increment.
9
volume in each weight increment must be accounted
a relationship
least squares.”
the data for each rate category used to estimate the cube-weight
in this testimony
are the average cubic feet per piece for each weight
Since the number of parcels by weight increment vary considerably,
10
complete explanation
11
USPS LR-H-176.
of the regression
the
for explicitl’y in the model.
method, see Appendix
For a
IV and Library Reference
..
12
3.
13
14
15
where
RESULTS
The results of each regression
are statistically
significant.
For each of three
16
equations,
17
tit. Also, th’e probability
18
is less than 0.01 percent in every case. These results indicate that the model used to
19
estimate the cube-weight
20
:the R-square value is greater than 0.98, indicating that the moclel is a good
that each of the variables is not significalntly different from zero
relationship
is an appropriate
Further, the results of the three regressions
relationships
model.
show that the parcel post data
21
represent three distinct cube-weight
22
subclass.
To make this determination,
23
conducted
on data.for each of the three rate categories.
24
or Chow test, is an F-test used “to test the hypothesis
25
coefficients
26
determine
27
conduct three tests to determine
28
regressions
a series of tests of structural change were
are different in subsets of the data.“”
the equivalence
were equivalent.
as opposed to one for the entire
of coefficients
The test for structural change,
that some or all of the regression
Since the Chow test is used to
in only two data sets, it was necessary
if the coefficients
First, the regression
to
in each of the three rate category
coefficients
” J. Johnston, Econometric Methods 293-296 (McGraw-Hill 1964).
‘BWllliam H. Greene, Econometric Analysis 218 (Macmillan Publishing
of the inter-BMC
and
Compalny 1990)
21
__~...
-
1
intra-BMC
2
DBMC data ‘were tested.
Finally, the regression
3
DBMC data ‘were tested.
In all three tests, the null hypothesis
4
equivalent
5
data were tested.
Next, the regression
coefficients
coefficients
of the inter-BMC
of the intra-BMC
and
and
that the coefficients
were
was rejected at the 95 percent level of significance.
The predicted cubic feet per piece estimates
6
category are listed in Exhibit USPS-16B.
7
regression
results are described
by weight increment for each rate
The input data, regression
in detail in Appendix
model, and
IV and in USPS LR-H-176.
8
9
10
C.
CUBIC FEET AND CUBIC FOOT MILE ESTIMATES
11
One last set of information
is needed before calculating
unit transportation
costs
13
the nurnber of cubic
- feet
and cubic foot miles by zone for each rate category are needed to accomplish the
14
following task:s:
12
‘15
by zone for each rate category of parcel post. Specifically,
l
‘16
divide functional
transportation
costs among rate categolries (as described
above),
‘17
l
distribute
rate category costs to zones, and
‘I8
l
compute a unit cost by zone for each rate category.
‘I9
20
The calculation
of cubic foot data by zone for each rate cate’gory begilns with the
i!l
test year piece volumes by zone and weight increment for each rate category from Ms.
22
Mayes (Mayes WP LA.). Every piece volume taken from Ms. Mayes is multiplied by the
i!3
corresponding
24
number of cubic feet by zone and weight increment for each rate category.
25
example, the number of inter-BMC pieces in the two pound weight iincrement in zone 5
26
is multiplied by the estimated
27
pound weight increment to yield the number of inter-BMC cubic feet in the two pound
28
increment in zone 5. Once this calculation
29
weight increment,
30
yield the total inumber of cubic feet by zone for each rate category.
estimate of cubic feet per piece from Exhibit USPS-‘IGB to yield the
f-or
number of cubic feet for an inter-BMC: parcel in the two
is completed
the cubic foot estimates are aggregated
22
for each rate category
and
over all weight increments
After cubic feet by
to
F
1
zone are calculated
2
cubic feet by zone are separated
3
the destination
4
P&DC.
5
estimates for DBMC and DSCF parcel post.
6
for the three existing rate categories
of parcel post, the DBMC
between DBMC parcel post that is currently entered at
BMC and DBMC parcel post that is currently entered at the destination
This separation
of DBMC cubic feet is used to develop separate unit cost
Cubic foot mile data are used exclusively to distribute distance related
7
transportation
8
of cubic foot miles in each zone to total cubic foot miles in the rate category is used.
9
The number of cubic foot miles by zone for each rate category is obtained directly from
costs to zones for each rate category.
IO
existing data (USPS LR-H-135).
11
more detail in Appendix
II.
In fact, only the relative proportion
Cubic foot and cubic foot mile data are described
in
..
12
,-.L
D.
15
Calculation
OF UNIT TRANSPORTATION
of unit volume variable transportation
COSTS
costs by zone for each rate
16
category of parcel post is a two step process.
17
rate category and by function) are divided among zones using total cubic feet and cubic
18
foot miles by zone.
19
cubic feet in each zone to yield cost per cubic foot by zone for each rate category.
20
First, the cost pools described
two ways.
22
the percentage
23
distributed
24
percentage
25
easily calculated
26
category developed
above (by
Next, the cost pools for each zone are divided by the number of
Wrthin each rate category, transportation
21
27
,/-.
CALCULATION
13
14
If the costs are non-distance
costs are allocated to zones in one of
related, they are distributed
of cubic feet in each zone.
to zone based on
If the costs are distance related, they are
to zone based on the percentage
of cubic foot miles in each zone.
The
of cubic feet and cubic foot miles in each zone for each rate category
is
from the total cubic feet and total cubic foot miles by zone and rate
in Appendix
II.
The next step in the development
of unit costs by rate cell is to calculate the
28
average cost per cubic foot for each zone in each rate category.
29
straightforward.
30
number of cubic feet in the given zone to yield a cost per cubic foot for each zone and
Each of the cost pools by zone described
23
This calculation
is also
above are divided by the
1
transportation
2
three functions to produce total unit costs by zone for each rate category.
3
the intra-BMC
4
feet in zone 3. Then, the intermediate
5
cubic feet in zone 3. The two costs per cubic foot are added to produce the total intra-
6
BMC cost per cubic foot in zone 3. The resulting unit cost estimates
by zone for each
7
rate category are shown in Exhibit USPS-16A.
described
8
are presented
9
rate category are listed in Table 111-3.
10
The last step in the development
function.
Then, the costs per cubic foot by zone are added across the
For example,
local costs in zone 3 are divided by the total number of intra-BMC
in detail in Appendix
cubic
costs in zone 3 are divided by total intra-BMC
All of the calculations
III. The resulting unit cost estimates
of unit transportation
above
by zone and
cost estimates
is to
11
estimate the potential costs avoided by a new rate category of parcel post. The new
12
rate category will be for parcels entered directly at the destination
13
DDU parcel post pieces will avoid all purchased
14
incurred below the level of the delivery unit. Beginning
15
transportation
16
(DSCF), an avoided transportation
17
transportation
18
component
19
incurred transporting
20
transportation
21
foot. A detailed description
22
provided in Appendix
23
costs associated
cost is calculated
transportation
delivery unit (DDU).
costs except those
with the purchased
with DBMC parcel post entered at a destination
cost is developed
using a separation
parts. Applying the percentage
P&DC
for DDU parcel post. The avoided
of local transportation
costs into its
of total base year local transportation
costs
parcels to the delivery unit, to the test year DSCF unit
cost, results in DDU avoided transportation
Ill.
.L,
of the development
costs of $0.3337 per cubic
of DDU avoided transportation
costs is
._
Local
TABLE Ill-3
TEST YEAR UNIT TRANSPORTATION
COSTS
(ALL FIGURES ARE IN DOLLARS PER CUBIC FOOT)
Inter-BMC
Intra-BMC
DBMC
(Non-DSCF)
N/A
$0.9402
N/A
Zone l/2
$2.0558
$1.7527
$0.7006
Zone 3
$2.5060
$1.7527
$1.5337
N/A
Zone 4
$3.2502
$1.7527
$2.6943
N/A
Zone 5
$4.3483
$1.7527
$4.5374
N/A
Zone 6
$5.7406
N/A
N/A
N/A
Zone 7
$7.4536
N/A
N/A
N/A
Zone 8
$8.8578.
N/A
N/A
N/A
1
25
$0.3997
,-,
Exhibit
Summary
USPS-l 6A
of Parcel Post Unit Transportation
Costs by Zone
.,-
Exhibit USPS-16A
Page 1 Of 1
Summary of Parcel Post Unit Transportation
Costs by Zone
Cost per Cubic Foot by Zone for Each Rate Category
121
Ill
m
Intermediate
costs
SO.4788
$0.9575
so.9575
so.9575
so.9575
N/A
NIA
N/A
Total inba-BMC
costs
SO.9402
$1.7527
$1.7527
$1.7527
$1.7527
N/A
N/A
N/A
Local I DSCF
costs
N/A
$0.3997
so.3997
$0.3997
so.3997
N/A
N/A
N/A
(W
Intermediate
costs
N/A
s0.3010
$1.1340
$2.2947
S4.1378
N/A
NIA
N/A
DBMC (non-DSCF)
costr
N/A
so.7036
$1.5337
$2.6943
$4.5374
NIA
N/A
N/A
161
ZOIW
LoCal
l-2
3
4
5
6
7
8
DBMC
Zone
Lotal
l-2
3
4
5
6
7
fl
DDU Cost Avoidance
151
Total inter-•MC
costs
N/A
$2.0558
$2.5060
$3.2502
$4.3483
$5.7406
$7.4536
SE.8578
LOUI
costs
SO.4615
so.7952
$0.7952
so.7952
$0.7952
N/A
NIA
N/A
LoCal
1-2
3
4
5
6
7
8
,---
r41
Long distance
NDR costs
N/A
$0.0623
SO.0623
SO.0623
SO.0623
SO.0623
SO.0623
SO.0623
Intermediate
costs
NIA
$0.9361
$0.9361
SO.9361
SO.9361
SO.9361
$0.9361
$0.9361
zone
IllbYVBhlC
131
Long distance
DR costs
N/A
so.2759
$0.7261
$1.4704
s2.5684
$3.9607
$5.6738
$7.0779
LOCd
costs
N/A
SO.7815
SO.7815
$0.7815
50.7815
SO.7815
$0.7815
$0.7815
PI
(DSCF costs less DDU costs in Skr)
Column [lj: Appendix 111.page 6. column 7.
Column (21: Appendix 111.page 6. column 6.
Column [3]: Appendix 111,page 6. column 9.
Column (41: Appendix III, page 6. column 10.
Column (51: Column I+ mlumn 2 * column 3 + column 4.
Column 161: Appendix 111,page 7. mlumn 5.
Column f?j: Appendix 111,page 7. column 6.
Column (6.1: Column 6 + cd~mn 7.
Column 191: Appsndir Ill, page 8. column 5.
Column (101: Appendix Ill, page 6 cdumn 6.
Column (111: Column 9 + mlumn IO.
Row 1,: Appendix III, page 9, row 12.
WI
P11
so.3337 y
Exhibit
-
USPS-165
Exhibit USPS-IGB
Page 1 of 2
Summary of Cube-Weight
Parcel Post Cube-Weight
Model Spedficalion:
,--..
/-.
LN(CFIPC) = a + b(LN(Lbs))
Ill
PI
a=
b=
C’
Inbx-BMC
-2.309845
1.270280
-0.117185
Inter-BMC
-2.151951
1.324356
0.141188
LBS
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
26
29
30
31
32
33
34
35
141
Estimated
CFlPC
0.22635
0.34794
0.46113
0.56612
0.66364
0.75448
0.83938
0.91897
0.99360
I.06434
1.13099
1.19411
I.25401
1.31096
1.36518
1.41690
1.46630
1.51355
1.55879
1.60215
1.64377
1.68376
1.72220
1.75919
I.79483
1.02917
1.66230
1.69426
1.92517
I.95503
1.98390
2.01183
2.03888
2.06507
Column
Column
Column
Column
Column
Column
a=
b=
c=
Relationship
Relationship
+ c(LN(Lbs))’
131
a=
b=
c=
DBMC
-1.979277
1.270645
-0.121248
ISI
@I
Estimated
CFIPC
0.27204
0.42004
0.55580
0.67963
0.79271
0.89629
0.99150
1.07932
1.16059
1.23602
I.30623
1.37175
1.43301
I.49043
1.54434
1.59505
1.64281
1.68708
I.73046
1.77073
1.80887
1 .a4503
1.67934
1.91193
I.94292
1.97240
2.00047
2.02721
2.05271
2.07704
2.10026
2.12244
2.14363
2.16389
Estimated
CFlPC
0.31624
0.48632
0.64422
0.79022
0.92542
1.05100
1.16801
1.27741
1.37998
1.47641
1.56731
1.65317
1.73446
1.81155
1.66479
1.95449
2.02091
2.06429
2.14435
2.20279
2.25627
2.31146
2.36249
2.41151
2.45862
2.50394
2.54758
2.58961
2.63013
2.66922
2.70694
2.74338
2.77058
2.81262
111: Inta-•MC panmeter estimates are from USPS LR-H-176 at 20.
[2]: Inter-BMC parameter estimates are fmm USPS LR-H-176 at 14.
[3]: DBMC parameter ertimtates are from USPS LR-k-176 at 26.
141. Exp (a + b * (LN(LBS)) + c * (LN(L6S))2). using mlumn 1 parameters.
IS]: Exp (a + b - (LN(tBS)) + c * (LN(l.5S))2). using &wnn 2 parameten.
[6): Exp (a + b * (LN(LBS)) + c * (LN(L6S))‘). using mlumn 3 parameten.
Results
by Rate Category
Exhibit USPSlGB
Page 2of 2
Summary of Cube-Weight
Parcel Post Cube-Weight
LBS
26
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
IV
Inba-BMC
Estimated
CFlPC
2.09046
2.11507
2.13894
2.16211
2.18460
2.20643
2.22765
2.24827
2.26831
2.28700
2.30676
2.32522
2.34317
2.36066
2.37769
2.39428
2.41044
2.42620
2.44155
2.45653
2.47113
2.48538
2.49928
2.51284
2.52608
2.53901
2.55163
2.56395
2.57599
2.58775
2.59923
2.61046
2.62143
2.63216
2.64264
(21
Inter-BMC
Estimated
CFIPC
2.18327
2.20181
2.21955
2.23654
2.25281
2.26839
2.28333
2.29764
2.31136
2.32452
2.33714
2.34925
2.36086
2.37200
2.38269
2.39295
2.40279
2.41223
2.42129
2.42999
2.43833
2.44634
2.45402
2.46139
2.46845
2.47523
2.48173
2.48796
2.49393
2.49965
2.50513
2.51038
2.51540
2.52021
2.52481
Relationship
I31
DBMC
Estimated
CFIPC
2.84554
2.87740
2.90824
2.93811
2.96705
2.99510
3.02231
3.04869
3.07430
3.09915
3.12328
3.14671
3.16948
3.19161
3.21312
3.23403
3.25437
3.27415
3.29340
3.31213
3.33037
3.34812
3.36541
3.38224
3.39864
3.41462
3.43019
3.44537
3.46016
3.47458
3.48864
3.50235
3.51573
3.52877
3.54149
Relationship
Results
by Rate Category
(Continued)
\
Column [II: Exp (a * b * (lN(LBS)) + c - (LN(L6-S))‘). using column 1 parameters from page 1.
Column VI: EXP (a + b * (LN(LBS)) + c - (LN(LBS))‘). using column 2 parameters horn page 1.
Column (31: Exp (a + b * (tN(LBS)) + c * (LN(LBS))‘). using mlumn 3 parameters from page 1.
-.
,--.
USPS-T-16
Appendix I
Division
Pages l-10:
Page 11:
Page 12:
Page 13:
of Parcel Post Transportation
Description of Appendix
Division of Total Parcel Post Costs Into Function
Summary of Test Year Transportation Costs
Division of Functional Costs Into Rate Categories
Costs
USPS-T-16
Appendix I
Pagelof13
-,
1
INTRODUCTION
I.
2
3
The purpose of Appendix
I of this testimony
4
parcel post transportation
5
categories:
6
year volume variable parcel post transportation
7
transportation
8
shows how the base year calculations
9
Finally, Appendix
inter-BMC,
is to show how total volume variable
costs are divided among the three component
intra-BMC,
functions:
and DBMC.
local, intermediate,
First, Appendix
rate
I shows how total base
costs are divided into three
and long distance.
Next, the appendix
are applied to test year transportation
I shows how test year transportation
costs.
costs for each function are
10
divided into the component
rate categories.
11
above (local, intermediate,
and long distance) are integral to the division of parcel post
12
volume variable transportation
13
follows:
14
.
Local:
The transportation
costs to rate category.
functions
described
Each function is defined as
The volume variable parcel post transportation
costs incurred in transporting
15
parcel post pieces between facilities that are within the service area of a P&DC,
16
primarily between AOs and PBDCs.
17
.
Intermediate:
The volume variable parcel post purchased
transportation
18
incurred in transporting
19
service area of a BMC, primarily between PBDCs and BMCs.
20
.
Long distance:
costs
parcel post pieces between facilities that are within the
The volume variable parcel post purchased
21
incurred in transporting
22
BMC service areas, primarily between two BMCs.
transportation
costs
parcel post pieces between facilities that are in different
23
24
II.
DIVISION OF TRANSPORTATION
COSTS INTO FUNCTIONS
25
26
Page 11 of this appendix shows the division of base year volume variable
27
transportation
costs for all parcel post into the following transportation
28
(defined above):
29
volume variable costs in each transportation
local, intermediate,
and long distance.
functions
Column 1 lists the base year
account from the base year Purchased
-,
USPS-T-16
Appendii I
PageZof13
1
Transportation
2
costs are omitted from all cost calculations
3
accounted
4
costs in all accounts that are categorized
5
treated as non-distance
6
accounts and components
7
associated
8
l
for separately
related.’
WP 8.14.
(USPS-T-37).
as local. All accounts
Column 2 shows the
categorized
along with a brief description
of the transportation
with each account:
IntraSCF
highway:
This account includes the costs associated
11
service.
Inland water:
This account includes costs associated
13
serve addresses
14
be accessed
15
.
with highway
mail within the service area of a P&DC (formerly known as a
SCF). This account also includes costs for intra-city transportation
l
as local are
The following is a list of all local transportation
IO
12
Alaska non-pref air
in this testimony because they are
in Ms. Mayes testimony
contracts to transport
9
.r.
Report which is provided in Alexandrovich
and rural box
with water contracts that
that are on rivers, lakes, and other inland bodies of water that can
only by boat.’
Postal owned
vehicle:
The costs associated
with parcel post postal owned vehicle
16
service are treated as local in this testimony.
The transportation
17
these costs is similar to intra-SCF purchased
highway transportation.’
costs falling into the categories
associated
18
All transportation
19
moving mail between facilities which are within the service area of one P&DC.
20
Column 3 shows the costs in all accounts which are categorized
21
All accounts categorized
as intermediate
22
distance related based on rate category.’
23
transportation
24
with each account:
with
listed above are primarily incurred
as intermediate.
are treated as distance related or nonThe following is a list of all intermediate
accounts along with a brief description
of the transportation
associated
’ For a discussion of why functional transportation costs are treated as distance related or non-distance
related. please see pages 4 through 12 of this testimony.
’ Mail Transportation Contracting Guide, USPS Publication 33 at 3. January 1996.
’ Postal owned vehicle cost calculations are shown on page 12 of this appendix.
’ For a discussion of how functional transportation costs are broken down into distance related or nondistance related costs. please see pages 4 through 12 of this testimony.
USPS-T-16
Appendix I
Page30fi3
1
IntraAlaska
and Intra-Hawaii
2
with air contracts to transport
3
Inter-SCF
4
contracts to transport
5
Plant loaded
6
scheduled
one-way
7
Intra-BMC
highway:
8
contracts to transport mail from facilities within the service area of a particular BMC
9
to that BMC.
highway:
mail within the states of Alaska and Hawaii.
This account includes the costs associated
mail between
highway:
highway
air: These accounts include the costs associated
P&DCs.
This account includes the costs associated
This account includes the costs associated
Alaskan
11
highway contracts to transport
12
Plant loaded
13
scheduled
14
Offshore
water:
15
transport
mail between the continental
16
All transportation
17
mail between facilities which are within the service area of one BMC.
service:
with highway
This account includes the costs associated
mail to or within the state of Alaska.
This account includes the costs associated
with
_
with on-call or
one-way rail transportation.
This account includes the costs associated
with water contracts to
United States and Puerto Rico and Hawaii.6
costs falling into the above accounts were primarily incurred moving
Column 4 shows the costs in all accounts which were categorized
18
with on-call or
highway transportation5
10
rail:
with highway
19
distance and treated as distance related.’
20
transportation
21
with each account:
22
.
The following is a list of all long distance
accounts along with a brief description
Loose sack container
rate air (linehaul
as long
of the transportation
portion):
associated
This account includes the costs
23
associated
with air contracts to move mail throughout
24
scheduled
commercial
25
the linehaul portion of loose sack container rate air is treated as distance related.
air carriers.B As discussed
the United States by
on page 16 of this testimony,
5 USPS LR-H-1 at 14-5.
’ Ibid., at 14-9.
’ For a discussion of why functional transportation costs are treated as distance related or nondistance
related, please see pages 4 through 12 of this testimony.
8 USPS LR-H-1 at 14-2.
---
-~
only
-,
USPS-T-16
Appendix I
Page4of13
1
l
2
l
4
Passenger
rail:
transport
5
l
This account includes the costs associated
Freight
This account includes the costs associated
mail on commercial
passenger
rail: This account includes the costs associated
with rail contracts to
7
All transportation
8
mail between facilities that are in different BMC service areas.
11
mail on freight trains.
costs falling into the above accounts were primarily incurred moving
Column 5 shows the costs in all accounts which were categorized
transport
13
dedicated
.
Western
mail throughout
air: This account includes the costs associated
transport mail throughout
16
dedicated
l
the United States on the Postal Service’s primary
air network, operated out of the central United States.
15
17
as long
distance and treated as non-distance related.’ Those accounts include:
-_
. Network air: This account includes the costs associated with air contracts to
12
14
with rail contracts to
trains.
transport
IO
with highway
BMCs.
6
9
_-
highway:
contracts to transport mail between
3
.-.
Inter-BMC
with air contracts to
the United States on the Postal Service’s secondary
air network, operated out of the western United States.
Loose sack container
rate air (terminal
18
account includes the costs associated
19
United States by scheduled
20
this testimony,
21
treated as non-distance
handling
portion):
As stated earlier, this
with air contracts to move mail throughout
commercial
air carriers.
As discussed
the
on page 16 of
only the terminal handling portion of loose sack container
rate air is
related.
22
The categories
listed above are the only long distance costs that are treated as non-
23
distance related.
24
described
25
air is due to the hub-and-spoke
26
western air do not move a piece of mail from its origin directly to its destination.
27
all flights move from their origin to a central processing
The rationale for treating terminal handling costs in commercial
on page 16 of this testimony.
The special treatment
nature of the air transportation.
air is
of network and western
In general, network or
Rather,
facility and then move back out
’ For a discussion of why functional transportation costs are treated as distance related or nondistance
related please see pages 4 through 12 of this testimony.
USPS-T-16
Appendix I
Page5of13
1
again to their destinations.
2
zone of a particular parcel gives no indication of how far it will actually fly on network or
3
western air.
4
All purchased
Therefore,
transportation
5
intermediate,
6
division of other transportation
the number of GCD miles used to determine
accounts
not listed above as either local,
or long distance, have been divided into the three functions
7
Air taxi:
8
same proportion
9
Contract
accounts to function.
The costs in this account are distributed
These accounts
to transportation
based on the
include:
function in the
as the composite of all other parcel post air transportation
terminal
and van damage:
IO
transportation
11
SCF, intra-BMC,
12
Highway
13
transportation
14
SCF. intra-BMC,
15
highway costs.”
16
Rail empty
17
function in the same proportion
18
plant load rail costs.‘3
The costs in this account
function in the same proportion
inter-BMC,
inter-BMC,
equipment:
19
In determining
20
based on a combination
21
accounts
22
distribution
23
class and subclass.”
24
classes and subclasses
25
costs.‘5
as the composite
inter-
to
of intra-SCF,
inter-
plant load, and contract terminal and van damage
The costs in this account are distributed
as the composite
of the distribution
have been distributed
to
-
as the composite
of passenger
costs by class and subclass, the accounts
to transportation
train, freight rail, and
listed above are normally
keys of other accounts.
to transportation
of the same combination
The costs in these
function on page 11 based on the
of accounts which determine
their distribution
For example, air taxi volume variable costs are distributed
of mail on the basis of the composite
Because air taxi costs are distributed
I0 USPS LR-H-l at 14-5.
” Ibid. at 14-7.
‘2 Ibid.
” Ibid. at 14-g.
” Ibid at 14-1 through 14-g.
” Ibid. at 14-5.
of intra-SCF.
The costs in this account are distributed
function in the same proportion
costs.”
are distributed
and plant load highway costs.”
empty equipment:
the
to
to
of other air transportation
to class on the basis of other accounts,
USPS-~-16
Appendix I
Page 6 Of 13
r‘
1
they are distributed
to function (local, intermediate,
2
those same accounts.
and long distance) on the basis of
Finally, just below the total costs for each transportation
3
4
through 5, the percentages
5
calculated.
6
transportation
7
mode of transportation.
8
transportation
9
costs by function.
of parcel post transportation
Each percentage
represents
costs in each function are
the amount of base year parcel post
costs that are classified as local, intermediate,
These percentages
costs by mode to determine
mode in columns 1
or long distance, for each
are applied to the test year parcel post
the distribution
of test year transportation
10
11
III.
TEST YEAR TRANSPORTATION
COSTS
-
12
13
‘--
of transportation
costs
14
described
15
transportation
16
purchased
17
air costs. As stated earlier, Alaska non-pref air costs are not considered
18
calculations
19
(USPS-T-37).
20
mode and in total. Rows 7 through 10 represent the percentage
21
year transportation
22
page 11 listed just below the total costs for each mode.
23
percentages
24
mode (row 6) to yield the test year costs by function (rows 11 through 14).
25
/-
Page 12 of this appendix takes the categorization
above for the base year and applies them to the test year purchased
costs by mode.
transportation
Rows 1 through 6 of page 12 show how test year
costs are adjusted to reflect the removal of all Alaska non-pref
because they are accounted
for separately
in these cost
in Ms. Mayes’ testimony
Row 6 shows the adjusted test year parcel post transportation
costs by function.
The percentage
breakdowns
breakdown
costs by
of base
by mode are from
Finally, the functional
in rows 7 through 10 are each multiplied by the adjusted test year costs by
Rows 16-19 show the adjustment
made to test year local cost in order to include
26
parcel post postal owned vehicle costs. The test year parcel post vehicle service driver
27
direct labor costs are shown in row 16. These costs are multiplied
29
vehicle service driver piggyback factor (row 17) to add the indirect costs associated
29
postal owned vehicle service.
by the parcel post
The result, total test year volume variable parcel post
with
USPST-16
Appendix I
Pqx7Of13
1
postal owned vehicle costs, is shown in row 18. This total is added into the test year
2
local transportation
costs.
Adjusted
local costs are shown in row 19.
3
4
IV.
DIVISION
OF FUNCTION
COSTS TO RATE CATEGORY
5
6
Page 13 of this appendix shows how the parcel post transportation
7
each transportation
function (local, intermediate,
8
into the three parcel post rate categories:
9
year transportation
costs associated
costs for
and long distance) are further divided
inter-BMC,
intra-BMC,
and DBMC.
The test
with each function are shown in row 1. For each
10
function, costs are distributed
11
relative proportions
12
traveled in each function.
13
total cubic foot legs in local parcel post, then 40 percent of the local costs will be
14
distributed
15
total. They are used to determine
16
DBMC cubic feet. This method of distributing
17
observation
18
is the same for each rate category,
19
inter-BMC
20
transport
21
cost per cubic foot to transport
22
to inter-BMC,
intra-BMC,
and DBMC based on their
of cubic feet and the average number of legs of transportation
to inter-BMC.
For example,
if inter-BMC
parcels make up 40 percent of
Rows 2 through 5 show cubic feet by rate category and in
the relative proportions
of inter-BMC,
intra-BMC,
and
costs to rate category is based on the
that the cost per cubic foot for one leg of a given function of transportation
i.e., the cost per cubic foot to transport an average
parcel from a P&DC to an A0 is the same as the cost per cubic foot to
an average intra-BMC parcel from a P&DC to an A0 which is the same as the
an average DBMC parcel from a P&DC to an AO.
However, there are a number of identifiable
to this conclusion
23
affect the relative cost of inter-BMC,
24
function.
25
mail centers.
26
incur as much local and intermediate
27
DBMC parcels, they would tend to lower the amount of local and intermediate
28
distributed
29
average number of legs of each transportation
First, a certain proportion
intra-BMC,
exceptions
of inter-BMC
and DBMC transportation
that
costs by
parcel post is entered at origin bulk
Because these parcels all fall into the inter-BMC rate category and do not
to inter-BMC
parcels.
costs per cubic foot as intra-BMC
parcels and
costs
To account for origin BMC entered parcels, the
function was adjusted accordingly
USPS-T-16
Appendix I
Page6of13
,/-‘
1
Specifically,
2
and intermediate
3
of each function of transportation.
Therefore,
4
all inter-BMC
average of normal inter-BMC
5
BMC entered parcels.
6
calculated
7
,‘--
a normal inter-BMC parcel will travel two legs of both local transportation
transportation.
An origin BMC entered parcel will travel only one leg
parcels is a weighted
The weighted
the average number of legs traveled by
parcels and origin
average number of legs for inter-BMC
parcels is
in rows 6 through 9.
The second exception to the conclusion
8
function is intra-BMC
9
percentage
of equal unit cost per leg for each
parcels which are “held out” at the post office level. A certain
of local intra-BMC parcels (parcels that originate and destinate within the
10
service area of a single post office) are set aside for delivery when they reach or are
11
entered at the post office. These-parcels
12
Therefore,
13
processing.
Whereas
14
intermediate
transportation,
15
each function of transportation.
16
legs traveled by intra-BMC parcels is a weighted
17
and intra-BMC
18
legs for intra-BMC parcels is calculated
19
are commonly
these parcels are not sent to facilities beyond the origin post ofke
a parcel held out at the post office receives zero legs of
Just as with inter-BMC
parcels, the average number of
average of normal intra-BMC parcels
parcels held out at the post oftice. The weighted
The third exception to the conclusion
of equal unit cost per leg for each function
21
current DBMC parcel post is entered at destination
22
leg of intermediate
23
of both local and intermediate
24
receives one leg of local and no intermediate
25
intermediate
26
normal DBMC and DBMC entered at the destination
27
number of legs for DBMC parcels is calculated
transportation.
P&DC.
A certain proportion
PBDCs and therefore,
of
avoids one
Whereas the normal DBMC parcel receives one leg
transportation,
the destination
P&DC entered parcel
transportation.
The average number of
legs traveled by DBMC parcel post is calculated
Finally, the following series of adjustments
of each rate category.
average number of
in rows 10 through 13.
is DBMC parcel post which is entered at the destination
.I--- 29
for further
a normal intra-BMC parcel receives two legs of both local and
20
28
referred to as “held qut”.
P&DC.
as a weighted
The weighted
average of
average
in rows 14 through 17.
are made to reflect the characteristics
Since by definition only inter-BMC parcels receive long distance
USPS-T-16
Appendix I
Page 9 Of 13
1
transportation,
2
parcels is zero and the number of long distance legs traveled by inter-BMC
3
one. All normal DBMC parcels either move from a BMC to a P&DC and from a P&DC
4
to a post office or simply from a P&DC to a post office; therefore,
5
local transportation
6
the number of long distance legs traveled by intra-BMC
appropriate
8
cost associated
9
calculations
10
11
number of legs traveled by the average parcel, the amount of transportation
with each rate category in each function is calculated.
These
are shown in rows 18 through 21.
The division of functional transportation
._
mathematically by the following:
costs by rate category can be described
-
TC,, = %,
+ Tc,,,
13
Where TC,, represents
14
intermediate,
15
incurred by inter-BMC
parcels, TC,,,,,,
16
incurred by intra-BMC
parcels, and TC,,,,,,
17
costs incurred by DBMC parcels.
18
are, in fact, the variables which were solved for.
20
the number of legs of
of cubic feet in each rate category adjusted by the
12
19
parcels is
incurred by normal DBMC parcels is one.
Using the proportion
7
and DBMC
the total transportation
or long distance),
(1)
+ TG,
costs for function 1 (either local,
TCF,,,,tnaMcrepresents
represents
the function 1 transportation
costs
the function
costs
represents
1 transportation
the function 1 transportation
The three right hand side terms are unknown
If the functional transportation
and
costs were split merely on the basis of cubic feet,
Equation (1) would be written as the following:
21
(2)
22
However, the fact that the average number of legs traveled by inter-BMC,
23
and DBMC parcels in a given function is not equal, means that Equation
24
adjusted.
25
costs by function can be written as follows:
.Tc FlIIec
26
The relationship
between
inter-BMC,
CF,“ldLKLFI yc
intra-BMC,
Tc,!-
intra-BMC,
2 must be
and DBMC transportation
Tc,,,
= CFI”h.&(cLFI yyc = %.&,,-
(3)
USPS-T-16
Appendix I
Page 10 of 13
.f1
represent
WhereLF,,ntemcv
LFllnm~cIC)
and LFIDBMcs
2
traveled by inter-BMC
3
Manipulating
the average number of function 1 legs
parcels, intra-BMC parcels, and DBMC parcels respectively.
the terms in equation 3 can yield the following two equations:
4
(4)
5
(5)
6
7
Substituting
Equations 4 and 5 into Equation 1 yields:
8
9
Manipulating
the terms in Equation 6 yields:
(7)
10
,.-..,
11
A similar set of manipulations
will yield the following results for intra-BMC and DBMC
12
functional
transportation
16
Equations
7, 8 and 9 were used on page 13 of this Appendix to calculate rows 18, 19,
17
and 20.
costs:
13
14
15
e..
USPS-T-16
Appendix I
Page 11 of 13
Division
Division
of Parcel Post Transportation
of Total Parcel Post Costs Into Function
III
Domestic
(all figures
121
Total Parcel Post
Tnnsportatio”
COSk
Costs
are in thousands)
131
Local
COSk’
151
(41
Intermediate
COSk’
Long
Distance DR Costs’
Long
Distance NDR Costs’
Airmail
Loose sack container rate’
I&a-Alaska
preferential
Inba-Alaska
Intra-Hawaii
“on-prep
N&WTk’
Western air’
Air taxi’
Total Domestic Ainnail
Domestic Airmail Percent
$1.217
$1,726
$1,726
N/A
$601
N/A
$601
9443
$774
5434
$877
12.26%
$51
516
$624
$1.665
23.27%
$51
$16
$3,539
$7,152
fOO.OO%
so
so
O.W%
$2.261
54.610
64.46%
Highway Service
Inta-SCF
Inter-SCF
Plant loaded
Intra-BMC
Inter-BMC
Alaskan highway service
Contrad term van damage’
Area bus
Empty equipment’
Total Highway Service
liighway Service Percent
Railroad Service
Passenger rail
Freight rail
Plant loaded
$37.972
$14.027
$1,616
$71,316
549.169
s1.511
$37,972
$14.027
51.616
$71.316
$49.189
$1.511
$262
so
557
s131
$74
$0
$546
$176,439
100.00%
$116
$38.147
21.62%
$275
S66.876
50.37%
$153
549,416
26.01%
so
so
0.00%
-
$433
$30,372
Empty equipment’
Total railroad service
Railroad Service Percent
S433
$30.372
$106
$2.790
$33,701
100.00%
so
0.00%
Domestic Water
Inland
Offshore
Total Domestic Water
Domestic Water Percent
$111
$111
s-l.788
54,899
100.00%
$111
2.27%
$106
so
$10
$116
0.34%
S4,766
54,766
97.73%
$2.760
$33.565
99.66%
SO
0.00%
‘Rationale for grouping c&s into local. intermediate. and long distance aan be found on pages l-5 of this appendix
2~sk. Commercial air casts are split between columns 4 and 5 based on terminal handling (63.59%) and linehaul (36.41%) percentages.
‘Alaska nonpref air costs have not bnn induded because they are accounted for separetly in Ms. Mayes t&i&y
(USPST-37).
ketwork and western air are the only components of long distance transportation cost that are not related to GCO miles.
%ese arxm~ntS are distributed to each cost category based on the distribution of other accounts (see pages 4 and 5 of this appendix
for a complete desuiption of how these costs are distributed to each fundion).
Column (11: Alexandrovich W 6.14. (base year purchased transportabon cost report).
Column 12): Parcel post transportation costs incurred tnn*pofting par&s &in the servile area of a P&DC.
Column (3): Parcel post transportation 0Dst.sincurred transporting parcel* within the service area of a BMC.
Column [4]. Parcel post axts that PR related to GCD distance. incurred transporting parc& outstie the service area of a ENC.
Column 151: Parcel post costs that are not related to GCD distance. inamed transporting parcels outside the sewice area ot a BMC.
so
SO
0.00%
SO
0.00%
-,
USPS-T-16
Aavendix I
PagelZof13
Division
i--
of Parcel Post Transportation
Summary
Test Year Cost Adjustments
Total Parcel Post Base Year Costs
Total Parcel Post Test Year Costs
Percentage Increase
Base year Alaska non-pref air costs
Test year Alaska non-pref air costs
Adjusted Parcel Post Test Year Costs
Parcel Post Costs by Function
Base Year Local Cost Percentage
Base Year Intermediate Cost Percentage
Base Year Long Distance DR Percentage
Base Year Long Distance NDR Percentage
Test
Test
Test
Test
Year
Year
Year
Year
Local Costs
Intermediate Costs
Long Distance DR Costs
Long Distance NDR Costs
Test Year Total Long Distance Costs
of Test Year Tnnsportation
1’
_u
2’
4’
5’
8’
Costs
Costs
Domestic
Airmail
Highway
Service
Railroad
Service
Domestic
water
TOtal
s89.M7
$115.665
29.02%
$82.495
$106.437
S176.439
$170,676
-3.27%
$33,701
$39,820
18.16%
$4,899
$5.914
20.72%
$304,686
5332,075
8.99%
69.228
$170.676
339.820
35.914
$225,638
0.00%
0.34%
99.66%
0.00%
2.27%
97.73%
030%
0.00%
$0
$137
5134
$5.780
$39.683
SO
so
$37.035
S97.838
$88.617
$2.148
339.683
SO
$90,765
0.00%
64.46%
12.26%
23.27%
21.62%
50.37%
28.01%
O.OQ%
SO
$5.948
$1.132
f2.148
s36.901
$85,973
$47.802
$3.279
$47.802
SO
Postal Omed Vehicle Costs
Test Year Postal Dwned Vehicle Costs
Piggyback Factor
Total Postal Owned Vehide Costs
Adjusted Test Year Local Costs
Row 11: Total transportation oDst by mode fmm base year purchased bansporlatin cost report (Akxandrovich W 8.14.)
Row _U: Total transportation cost by mode from test year roll-forward (Patelunas W E. Table D).
Rowe: (RcwZ-rwl)/rmvl.
Rw$:
Base year purchased transwiation cost mpolt Alaska non-pref air costs (AJexandmvich W 8.14.).
Rows/: Rcw4’(1 +mw3).
Row6/: Rau2-mw5.
Row z/: Appendix I, page 11, mlumn 2. loul cost peranta9es by mode.
Row&? Appendix I, page 11. column 3. intermediate cast percentages by mode.
Row 9/: Appendtb: I, page 11, column 4. long distance (distsnoc related) cast percentages by mode.
Row lo/: Appendix I, page 11, c.olumn 5. long d,stance (nontiit~nce related) cost percenta9es by mode.
Row 11,: Row 7 - mw, 6.
Rows:
Rc.w8’mw6.
Row13/: Rw9’rcw6.
Rw 14/: Row 10 - row 6.
Row 15/: Row 13 + row 14.
Rows:
Patelunas WI’ E. Table D.
Row=/: “SPS LRH-77
Rcw18/: Rowl6‘mwt7.
Row-/:
Row18+totalofmwt,.
SO
s30.687
1.54678
$47.466
$84.501
USPS-T-16
Appendix I
Page 13 Of 13
Division
Division
Transportation
of Parcel Post Transportation
of Functional
Costs
Costs tnto Rate Categories
Local
s84.501
costs for all parcel post:
Inter-BMC cubic feet:
Inb-e-BMC cubic feet:
DBMC cubic feet:
Total parcel post cubic feet:
34.466346
34.466.346
_u
23.033.118
99.429.915
1X929.379
31
4,
4.48%
4.48%
3.17%
1.94
Percentage
Avg. number
Avg. number
Avg. number
7.11%
1 .oo
1.96
1.00
3.17%
3.17%
I.94
0.00
7.11%
7.11%
0.93
0.00
$39.739
S17.828
526.934
$84.501
incurred by DBMC rated parcels:
incurred by intra-BMC rated parcels:
incxlmd by inter-BMC rated parcels:
for all parcel post:
$44,219
$21.355
$32.263
$97.838
Row I/: Appendix I, page 12, mw (9 (local). row 12 (intenediate), row 15 (long distance).
Row 2l: Appendix 11,pa9e 9. column 1. total inter-BMC wbic feet.
Row 3): Appendix II, page 9. column 2. total intraG3MC cubic feet
Row 41: Appendix II, page 9. column 3. total DBMC cubic feet.
Row_Y: Row2+row3+row4.
Rar 6,: Mayes W 1-F.
Rwl/:
(l‘row6)+(2’(1-mw6)).
Row g: (1 - row 6) + (2 * (1 - row 6)).
Row 9,: Inter-8MC rated parcels should reaive one &q of long distance transportation.
Row JQ!: Appendix It, page 9. column 2. intra-BMC Wl cubic feet (1.460.249) divided by intra-BMC lotal wbic feet (23.033.1 IS),
The resulting quotient is multiplied by .S to account for half of the intro-BMC parcels being held out at the local AD.
Row G/: (0 * row 10) + (2 - (1 - mw to)).
Row=:
(O-mwl0)+(2’(1-rowtO)).
Row g,: Intra-BMC rated parcels should not recztie long distance transportation.
Row 14/: Mayes WP I.F.
Rows/: All DBMC parcels should receive one leg of local tmn~potiatlon.
RowlJ
(O’mr,t4)+(1’(1-row14)).
Row 17/: DBMC: parcels should not receive Ion9 distance transportation.
Rows:
Formula for catcutatiatiogthese ccs, is destibsd i” Appendix I, page 10, equation 9
RGW19/: Formula for calculating these cast is described in Appendix I, page 10. equation 8.
Rav 20,: Formula for calculating these cost is destibed in Appendix I, page 9. equation 7.
Row2J: Row17+rau,9+row19.
-
1’
23.033.118
99.429.915
156.929.379
Percentage of intra-BMC cubic feet held out at the AO:
Avg. number of local legs traveled by an intra-BMC parcel:
Avg. number of intermediate legs traveled by an intra-BMC parcel:
Avg. number~of long distance legs traveled by an intra-BMC parcel:
costs
costs
costs
costs
$90.765
34.46636
4.46%
1.96
Transportation
Transportation
Transportation
Transportation
Long
Distance
23.033,118
99.429.915
156.929.379
Percentage of inter-BMC parcels entered at origin BMCs:
Avg. number of local legs traveled by an inter-BMC parcel:
Avg. number of intermediate legs traveled by an inter-BMC parcel:
Avg. number of long distance legs traveled by an inter-BMC parcel:
of DBMC par&s entered at destination SCFs:
of local legs traveled by a DBMC parcel:
of intermediate legs traveled by a DBMC parcel:
of long distance legs traveled by a DBMC parcel:
Intermediate
$97,,838
so
so
$90.765
$90.765
5,
6’
u
8,
2,
j-0,
2,
Lu
l_y
Jg
Jj/
rs/ Cl
le/
jg
g/
a/
/--
USPS-T-16
Appendix II
Parcel Post Cubic Foot and Cubic Foot Mile
Input Data
-
/---
Pages 1-2:
Pages 34:
Pages 5-6:
Pages 7-6:
Page 9:
Description of Appendix
Intra-BMC Cubic Feet by Zone and Weight increment
Inter-BMC Cubic Feet by Zone and Weight Increment
DBMC Cubic Feet by Zone and Weight Increment
Summary of Cubic Feet and Cubic Foot Miles
USPS-T-16
bumdix
II
Page 1 of 9
1
I.
INTRODUCTION
2
3
The purpose of Appendix
II of this testimony
is to calculate the test year cubic
4
feet and cubic foot miles by zone for each rate category of parcel post (inter-BMC,
5
BMC, and DBMC).
6
each rate category obtained from Ms. Mayes (Mayes WP I.A.) and the estimated cubic
7
feet per piece by weight increment for each rate category (Exhibit USPS-16B),
a
feet by zone and weight increment
9
summed over all weight increments
intra-
Beginning with test year pieces by zone and weight increment for
are calculated.
cubic
The cubic feet by rate cell are
to yield total cubic feet by zone.
Cubic foot miles
10
by zone and rate category are taken directly from USPS LR-H-135.
These results,
11
cubic feet and cubic foot miles by’zone for each rate category, are used in Appendix
Ill.
12
13
II.
CUBIC FEET
14
-,
Pages 3 and 4 of Appendix
15
II show test year intra-BMC
The cubic feet in each cell arecalculated
cubic feet by zone and
16
by weight increment.
by multiplying
the
17
number of pieces in each cell from Ms. Mayes (Mayes WP LA) by the predicted cubic
ia
feet per piece for each weight increment (Exhibit USPS-16B).
19
show inter-BMC
20
pages also shows the total cubic feet by weight increment
21
total cubic feet by zone in the bottom row.
Likewise, pages 5 and 6
cubic feet, and pages 7 and 8 show DBMC cubic feet. Each of these
in the rightmost column and
22
23
Ill.
SUMMARY
24
25
Page 9 of Appendix
II shows a summary of the data contained
in pages 3
26
through 8. The first table shows cubic feet by zone for each rate category and the
27
second table shows cubic foot miles by zone for each rate category.
28
show the total cubic feet or cubic foot miles by zone (across all rate categories)
Both tables also
in the
USPS-T-16
Appendix II
Page 2 of 9
1
rightmost column and total cubic feet or cubic foot miles for each rate category (across
2
all zones) in the bottom row.
3
The last table listed on page 9 shows the separation
of DBMC cubic feet into
4
those that are entered at a destination
5
at a destination
6
feet by zone from the first table on page 9. The second column shows DSCF cubic feet
7
by zone.
a
facility which serves the 3digit ZIP Code areas in which the parcels will be delivered,
9
cubic feet are in zone l/2.
P&DC.
BMC (regular DBMC) and those that are entered
The first column in the table simply restates total DBMC cubic
Since parcel post entered at a destination
The percentage
10
destination
11
cubic feet will be used in Appendix
12
the two types of DBMC parcels.
P&DC is actually entered at the
all
of DBMC parcel post that is entered at a
P&DC is obtained from Ms. Mayes (Mayes WP I.F.). This division of DBMC
Ill to calculate separate transportation
unitcosts
for
USPS-T-16
Appendix II
Page3of9
-,
Parcel Post Cubic Foot and Cubic Foot Mile Input Data
Intra-BYCCubicFeetby
LBS
2
3
4
5
6
7
a
9
10
11
12
13
14
15
16
17
18
19
20
21
27.
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
LOCal
422,910
241.224
170.251
121.804
93.046
46,975
59.96-i
20.653
15,297
44.371
16,619
13.757
11,590
4,849
23,936
13.862
6.037
3,576
17,543
6.014
6,674
7.984
4.113
15.303
7.228
1.861
2,076
3.598
11,547
7.139
3,560
2.o42
5.674
1.320
'i.326
1.576
1.068
937
2,386
761
649
893
383
914
724
196
528
807
1.163
Zones 182
3.237.736
2.892.930
2.212.298
1.515.609
1.088.767
963,377
597,387
579.901
559,464
513.565
566.818
365.76.9
235.785
281.695
148.782
259,713
179.304
191.574
208.726
95,886
143,211
100.497
104.974
143.434
175,271
83.512
99.087
59,350
125.543
77,180
78.736
48.506
61,784
68.294
40.285
70.422
68.496
22,568
29,442
43,833
34.063
35.968
54,354
15.342
9,822
20,977
5,724
4,513
9,023
zone3
339.802
316,618
227.271
215.975
222.895
120,911
95,423
107.342
39,673
58,268
60.386
45.828
36.883
59,546
35.009
18.280
16.861
19.030
19,226
19.718
16.873
21.312
10,920
8.369
8.812
12.801
23,447
3,596
9.147
33,159
5.298
12,019
4,578
2.626
5,339
8.189
9.781
5,059
9,313
952
32,338
15.818
3,351
1.712
7,459
2.257
1.312
1,261
3.584
zone4
45,791
66.444
48.937
28.070
22,767
27.937
28,962
12.750
15,665
15.926
1.733
9,546
6.083
1.993
6,427
5.215
3.291
3.850
6.714
869
2,559
2,025
2.604
1.826
19.760
917
75
3.586
192
878
15.724
7.036
0
0
a0
392
95
1.068
43
23,215
55
3.004
0
a
0
0
0
44
Q
ZoneandWeightlncrement
Zone5
3,253
30
2.146
777
2,768
363
1.849
0
287
115
0
0
0
0
1.151
0
1.236
243
1.301
0
0
390
1,750
407
0
392
399
1.543
0
0
460
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
zone 6
zone7
Zone 8
-
Total
4.049.492
3.517.246
2.660.903
1.882.235
1.430.243
1.161.561
783,586
720.646
630.386
632,245
645,555
434,899
290,342
348.083
215.305
297.070
206.729
218.303
253,511
122,487
169.317
132.208
124,362
169,339
211,071
99,482
125,064
71,673
146,429
118.355
103.778
69,603
72.035
72.240
47,030
80.580
79,439
29,633
41,184
fB.760
67,105
55.683
58.088
17,968
18.oo6
23.430
7,565
6,625
13.769
-
_
USPST-16
Appendix Ii
Page 4 of 9
Parcel Post Cubic Foot and Cubic Foot Mile Input
Intn-BMC
LBS
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
66
69
70
,--.
Total
Local
1,242
2,226
3.015
473
3&l
209
0
592
391
0
0
591
174
0
192
0
0
0
119
0
140.249
zones 1 a 2
19.620
15,356
6,432
7.606
7.3%
2,465
11,476
2,326
12.203
967
1,656
3.491
1.642
758
35,064
1.381
464
4,345
19,342
2,359
18.685.824
Cubic Feet by Zone and Weight
zone 3
2.406
9.839
3.192
1,734
1,363
2,643
0
0
0
0
570
441
0
0
0
1.041
617
588
0
3.240
2.383.554
zone 4
0
0
33.460
0
0
25
0
0
0
0
0
0
0
0
0
0
0
0
0
0
462,631
Zone 5
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
20.661
Increment
Data
(Continued)
Zone 6
zone 7
zone 6
-
0
0
0
Total
23.268
27,426
51.098
9.813
9.102
5,342
11,476
2.918
12.544
967
2,426
4,523
1.616
758
35,256
2,422
1,301
4,933
19.461
5,599
23.033.116
USP~C-T-IB
Appendix II
PageSof
-,
Parcel Post Cubic Foot and Cubic Foot Mile input Data
Inter-BMCCubic
LB6
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
Local
zones182
421.207
384.923
320.355
208.392
180.164
128.438
152,595
84.467
99,724
58,778
106.571
47.770
78.818
55.406
x3.648
18.717
30,366
22,746
9.851
28.202
21,433
19,984
7.078
11.581
9.021
24,736
4.341
2,342
4,419
1.925
10,347
1,669
1.071
9,674
12.992
6.495
10,291
9,225
3,776
0
905
0
39
3,052
423
340
702
0
345
zone3
807.413
795.070
664,299
437,374
404,420
330,121
231,395
173.599
183,m
143.598
151,703
106.179
372,523
57.137
62.171
30.965
49.198
118.697
94.116
47,744
70,316
16.301
45.123
21.075
38,412
11,499
14.341
26,310
14,130
10.319
3.819
4,145
10.817
6,102
809
13.684
1,167
4,135
4,242
9.990
6.804
2.596
0
2,538
370
0
0
486
786
Feetby
zone4
1.160.724
1.318.551
1.097.568
725.0%
567.783
522,630
484.291
325,508
258,681
225,829
245,703
191.182
129.870
126.477
130,464
93,431
50.784
63,322
330.846
80.469
57.606
6‘w94
33,666
33,259
18.264
42.052
77,054
26,316
10,069
17.868
38.966
27,785
38.811
13,452
29.722
17.868
14.236
14,443
29,607
28,629
32.923
5.871
5,040
10.226
1.872
0
23,566
6.535
4,787
Zoneand
Weightlncrement
zone 5
882,354
1.198.428
762,717
612.559
571,059
572.128
384,270
309.226
228.861
209.885
240.582
231,140
200.164
167.054
102.450
78,997
121.693
89.281
68,009
102.381
72,888
97,046
83.707
56,976
81,096
44.506
36,892
33.751
56.271
30.189
16.423
46,054
16.818
17,573
18.308
18.319
22.031
13.742
51,828
19.973
13.247
12.493
11,533
1,156
5,778
7,335
16.243
14.052
1,429
Zone6
498,567
401.252
291.083
273.780
219.197
201.882
195,494
154.000
111,414
134,623
113.810
107,877
73.205
94.934
57.033
71,551
140,340
32,475
23,852
50.486
108.470
75.294
21.561
29,166
15.324
13.074
15.543
12,920
22,457
25,360
22.821
37,935
14,298
8,697
10.046
16.856
16.382
5,124
2,313
17,319
5.407
12,167
9.464
3,673
7.601
571
15.125
1.443
1,498
zone7
253,174
265,528
217,747
172.404
98,957
83.600
93.480
89,002
66.595
60,630
44.750
6%?66
42,266
37.256
27,482
51.267
a.137
34.154
27,879
28.250
20,684
31,843
27.383
15.741
22.405
12.951
19.710
33,646
25.058
12.077
27.157
20.926
15.219
21.546
1,767
17,893
2.620
6.007
4,623
4.473
5,355
2,522
1.557
18.414
2.842
1.826
982
12.273
2,600
Zone 8
494.064
453,166
321,165
250,107
159.571
120,123
93,225
72,878
46.263
59.581
49.001
65,657
57,514
53,916
32,636
19.559
53,974
23.705
20.399
28.402
30,284
31.819
28.811
24.612
24.376
34.182
21.423
30.929
29,654
22,637
20,636
27,432
21.318
20.633
10,131
17,559
39,371
13,782
7.367
19.944
28.849
7.002
9,278
10,298
5,692
6,581
28.923
5.417
7.000
TOtal
4.517.521
4.816.918
3.674.914
2.679.712
2.201.150
1.958.924
1.634.750
1.208.680
995.315
892,925
952.120
813.672
954,362
592.181
445.884
364,467
486.491
384.382
574.954
365.934
361.683
336.382
247,329
192.609
208.897
183SQ2
189.305
166,217
162,059
120,375
140.169
165.946
118.351
97,676
83,776
108,673
106.098
66,458
103,756
100,328
93,490
42,651
36,912
49,357
24,579
16.652
85,542
40.206
18.444
'-
.-
USPS-T-16
Appendix II
Page 6 of 9
Parcel Post Cubic Foot and Cubic Foot Mile Input Date
lnter-6MC
Las
Local
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
/---
TOM
0
Zones 1 6 2
0
0
0
47
0
0
193
0
0
357
0
0
0
0
11,267
0
0
0
0
0
2.661.211
Cubic Feet by Zone and Weight
Zone 3
871
24,611
1,930
5,134
345
36
0
1,230
0
0
2,272
1,407
1,451
0
0
0
0
0
0
0
5.641.102
Zone 4
4.244
4.371
1.958
700
379
2.397
78
5.327
1,246
3.185
867
1.726
2.506
.i
0
0
0
0
0
0
2,476
8.885.254
zone 5
9.512
1.577
1,875
23,542
3.421
7.569
358
0
1,300
2.354
0
3,428
891
0
217
0
1,071
0
459
332
8.108.805
increment
(Continued)
Zone 6
0
37
400
3.193
0
1,551
1,473
0
6,323
1.927
4,899
1,579
412
0
1.590
415
0
0
605
0
3.819.149
Zone 7
1,652
4.144
684
1.188
823
1,799
0
576
738
433
1.245
0
726
3,825
0
1.056
536
562
0
0
2.210.617
All data ace caalartated by muniplying the number of pieces in t%tdr rate ocll (Mayes WP IA. at 8-13) by t+ie mrrrsponding
estimated cubic feet per piece for intraBMC parcels Exhibit USPS 166).
Zone 8
15.567
5.196
4.274
3,621
1,573
10.588
1,365
1,419
9,262
1.157
8,764
988
3,291
695
1.596
-2,316
4,277
607
547
2.018
3.140.208
TOM
31.867
39,937
11.119
37,426
6,542
23.940
3.466
8,553
18.867
9.413
18.146
9,127
9,278
4.520
14.670
3,788
5,884
1.169
1,611
4,826
34.466346
USPS-T-16
Appendix II
Page7of9
Parcel Post Cubic Foot and Cubic Foot Mile Input Data
DBMCCubicFeetbyZoneandWeightlncrement
LBS
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
Local
ZorleslB2
8.662.407
13.671.876
11.425.249
8.712.360
6.807,020
5.935,723
4.517.369
3.370.170
2.532.243
2.277.740
1.828.739
1.658.235
1.198.290
961.037
807.697
609.257
554,337
496.477
621,171
547.613
598.860
w5.229
420,007
384.223
467.787
143.068
134.318
162.448
68,665
221.928
161.487
342,274
104.292
66.611
52.825
87,420
38,526
64.043
50.401
116.923
81.824
85,613
278,863
37.859
91,735
149.523
84,923
139.998
43,531
Zope3
I.315546
2.582.315
1.798.WO
1360.927
1.216.037
978.995
686.612
512.358
356.568
277,356
335.994
366.013
85.106
213,127
125,432
126.993
131.452
134.318
127.632
214.604
74,204
36,133
184,659
39,287
21.395
90.091
56,467
16,216
12,115
55,550
35,663
630
17.009
20,174
941
33,611
26.615
10,179
7,029
3.777
399
11,729
15.186
708
83.928
26,789
62,436
4,401
10,757
Zone4
248.197
359.137
250.580
225,032
133.441
239,647
165.051
50.554
63.153
65.330
50,590
12.228
35,998
26.691
21.131
24.810
59.850
35,651
5,839
14.869
7,365
21,842
19.208
3.592
1,134
21.228
1.175
3.861
0
909
0
0
0
0
24,447
0
24.140
3,297
391
0
0
8.390
21.584
25,197
0
0
Cl
0
10.2201
Zone5
140
2.713
950
261
977
0
295
1.426
0
0
756
0
0
2,226
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Zone6
zone7
All data are calculated by mutdpMng the number of pieces in each rate cell (Maycs W IA. at B13) by the corresponding
estimated arbic feet per piece for into-BMC parcels (Exhibit USPS 168).
Zone8
-
TOtal
10226.290
16.6i6,Wl
13.474.780
10.298.581
8.157.475
7.155.365
~5369.328
3.934.510
2.951.964
2,620,426
2.216.079
2.036.476
1.319.391
1.203.081
954.261
761,060
745,639
666,446
754,642
777.085
680.428
663.203
623,874
427,102
490,315
254.387
191,959
182.525
80.781
278,387
197.170
342,904
121.301
86,785
78.213
121,031
89.281
77,519
57.821
120.701
82,223
105,733
315.633
63.764
175.6s.
176,312
147.359
144,399
64.506
.-
-
USPS-T-16
Appendix II
Page 8 of 9
Parcel Post Cubic Foot and Cubic Foot Mile Input Data
DBMC Cubic Feet by Zone and Weight
LBS
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
,..-.
Total
LOCSI
0
zones I a
2
139.225
52,553
33,220
25.370
51.954
11.953
11,399
5.505
15,537
14.431
59.205
28.866
7,410
40.811
21.348
0
0
0
0
0
83.000.009
zone3
23,527
0
4,259
24,365
21.017
57.366
399
401
0
0
7,174
190
21,091
0
892
0
0
7.786
0
17,539
14.089.492
Zone4
0
0
0
5,938
26,928
0
0
0
0
0
0
12,044
0
0
0
0
0
0
0
0
2.330.668
Increment
Zone 5
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
9,746
(Continued)
Zone6
zone7
Zonc8
Total
162.752
52,553
37,479
55,673
99.900
69,329
11,798
5,906
15,537
14,431
66,379
41,100
28.500
40.811
22.240
0
0
7,786
0
17,539
-
0
0
All data are calwlated by multiplying the number of pieoes in each rate cell (Mayes W IA. at .%13) by the mnespOnding
estimated c&ii feet pet pita for intra-MAC parocts (Exhbi USPS 168).
0
99.429.915
USPS-~-16
Appendix II
Page 9 of 9
Parcel Post Cubic Foot and Cubic Foot Mile Input Data
Summary
of Cubic Feet and Cubic Foot Miles by Rate Category
and Zone
TY98 Cubic Feet by Zone
111
zone
PI
Inter-BMC
Local
l-2
3
4
5
6
7
8
TOhl
Total excluding
0
2.651.211
5.641.102
8.885.254
8.108.805
3.819.149
2.210.617
3.140.208
W486.346
local
(31
Intra-BMC
1.460.249
18.685.824
2383.554
482,631
20.861
0
0
0
23.033.118
21.572.869
141
DBMC
0
83.000.009
14.089.492
2.330.668
9.746
0
0
0
99,429,915
Total
1.460.249
104.347043
22.114.149
11.698.554
8.139.412
3.819.149
2.210.617
3.140.208
156,929.379
FY96 Cubic Foot Miles by Zone
161
151
Zone
Local
l-2
3
4
5
6
7
8
Total
m
Illba-BHC
Inter-BYC
0
276.755.600
1.543.791.760
4.924,129.550
7.849.611.410
5.701,197.000
4,727.315.130
8.377.045.930
33.399.846,380
0
841.369.CGO
529488.250
2cw61,460
17.915.540
0
0
0
1.564.834.250
DBMC
0
3.243.988,990
2.268.014.880
759,160.840
5.724540
0
0
0
6,276,889,250
PI
Total
0
4.362.113.590
4,341.294.890
5.889.351.850
7.873.251.490
5.701.197.000
4.727.315.130
8.377.045.930
4~,271.569.880
-
DSCF Cubic Foot Calculations
PI
ZOll.3
Local
l-2
3
4
5
6
7
8
Total
Column
Column
Column
co,“rn”
Column
Column
Column
Galumn
Column
Column
Column
1101
Total DBMC Cubic Feet
0
83900.009
14.089.492
2330.668
9.746
0
0
0
99.429.915
11II
DSCF Cubic Feet Regular
0
7066.584
0
0
0
0
0
0
7,066,584
[1]: Appendix Il. page 6. WA cubic feet for each zone.
[2]: Appendix II, page 4, total cubic ket for each zone.
(31: Appmdk 11,page 8. total cubic feet for each zone.
141: c4l”rn”
1 + col”rn”
2 l cdumn 3.
IS]: USPS LR-H-135.
[6]: USPS LR-H-135
m: USPS LR-H-135
[.51: Column 5 + cd”rrm 6 + cotuin” 7.
[9]: Column 3.
[lo]: Append* I, page 13. row 14. multiplied by total DBMC cubic feet.
[t 1): Column 9 - ml~mn IO.
-
.----
DBMC Cubic Feet
0
75.933.425
14.089.492
2.330568
9,746
0
0
0
92.363.332
.-
USPS-T-$6
Appendix Ill
Parcel Post Transportation
Costs by Rate Category
and Zone
Pages 1-5:
Page 6:
Page 7:
Page 8:
Page 9:
Description
Calculation
Calculation
Calculation
Calculation
of
of
of
of
of
Appendix
Inter-BMC Costs Per Cubic Foot by Zone
Intra-BMC Costs Per Cubic Foot by Zone
DBMC and DSCF Costs Per Cubic Foot by Zone
DDU Avoided Costs Per Cubic Foot
USPS-~-16
Appendix
Ill
Page 1 Of 9
1
I.
INTRODUCTION
2
The purpose of Appendix
3
III of this testimony
is to show how transportation
4
per cubic foot estimates by zone are developed
5
First, the total costs by function for each rate category from Appendix
6
zone.
7
Appendix
8
inter-BMC,
9
DBMC entered at the destination
cost
for each parcel post rate category.
I are distributed
to
Next, the costs in each zone are divided by the cubic feet per zone from
II to calculate unit costs.
intra-BMC,
Unit transportation
DBMC entered at the destination
P&DC.
cost estimates are developed
for
BMC (normal DBMC), and
Finally, an avoided transportation
10
calculated
11
delivery unit (DDU).
12
zone for each rate category, are also shown in Exhibit USPS-16A.
cost is
for a new rate category of parcel post, parcel post entered at the destination
The results of this appendix, transportation
cost per cubic foot by
13
14
II.
INTER-BMC
TRANSPORTATION
COSTS
15
16
Page 6 of this appendix shows how cost per cubic foot estimates
17
developed
18
BMC parcels are listed by function:
19
discussed
20
further categorized
21
discussed
22
parcel post are not related to GCD, all intermediate
23
the majority of long distance costs are related to GCD.’
24
for inter-BMC parcels.
earlier in this testimony
First, the total transportation
local, intermediate,
earlier (pages 6-10 of this testimony),
Next, the four pools of inter-BMC
and long distance.
related.
distance related, and long distance - nondistance
26
of page 6, are distributed
27
are distributed
As, was
cost pools is
Again, as was
all local costs incurred by inter-BMC
costs are not related to GCD, and
cost (local, intermediate,
25
to zones.
costs incurred by inter-
(pages 3-10) each of the functional
as being GCD related or non-GCD
by zone are
long distance -
related), shown in rows 1 through 4
For each cost pool that is not related to GCD, costs
to zones based on the percentage
of inter-BMC
cubic feet in each zone
’ As explained in Appendix I, page 4. the commercial air terminal handling, network air, and western air
cost elements of long distance ttansportation costs are the only elements treated as nondistance related.
USPS-T-16
Appendix III
Pagezof9
F.
1
(calculated
2
costs are distributed
3
each zone (again, calculated
4
percentage
5
Columns 3 through 6 show the distribution
6
by multiplying
7
distance relation.
8
Inter-BMC
9
,-‘.
using data from Appendix
II). For each cost pool that is related to GCD, the
to zones based on the percentage
using Appendix
II data).
of inter-BMC
cubic foot miles in
Columns 1 and 2 show the
of inter-BMC cubic feet and cubic foot miles in each zone respectively.
of each cost pool to zone and are calculated
one of the four cost pools by column 1 or column 2, depending
costs per cubic foot by zone are calculated
on
for each cost pool simply
by dividing the total costs in each zone (columns 3 through 6) by the total number of
10
cubic feet in each zone. The unit costs by cost pool and zone are shown in columns 7
11
through 10. Each of the unit costs for a particular zone are then added to develop a
12
total inter-BMC
13
and are simply the sum of columns 7 through 10. Finally, a check is made to ensure
14
that total unit costs are calculated.such
15
5. The total unit costs by zone are multiplied by the total cubic feet in each zone.
16
result is shown in column 12. As expected, the sum of column 12 across all zones was
17
equal to the total inter-BMC costs which are distributed
unit cost for each zone. These total unit costs are shown in column 11
that they recover total inter-BMC
costs from row
This
to zone (row 5).
18
19
Ill.
INTRA-BMC
TRANSPORTATION
COSTS
20
./-’
21
Intra-BMC
unit transportation
costs by zone are calculated
22
manner than inter-BMC
23
parcel post differs significantly
24
other zones, a distinction
25
local zone and the cubic feet in all other zones are listed separately
26
7. The cubic foot estimates come from Appendix
27
number of local and intermediate
28
of intra-BMC
parcel post. Local zone parcels travel an average of one local and
29
intermediate
leg of transportation
unit costs. Because the transportation
depending
in a slightly different
pattern of intra-BMC
on whether the piece is in the local zone or in
is made for local zone intra-BMC.
transportation
First, the cubic feet in the
in column 1 of page
II. Next, column 2 lists the average
legs traveled by the two different types
based on the assumption
that half of the local zone
USPS-T-16
Appendix Ill
Page 3 Of 9
1
parcels are held out at the origin post office.
2
travel an average of two local and intermediate
3
average number of legs to yield an estimate of average cubic foot legs traveled by
4
parcels in the local and non-local zones.
5
traveled by local and non-local zone parcels (column 4) the local and intermediate
6
transportation
7
additional adjustment
8
local transportation
9
at the AO. This portion reflects transportation
parcels in non-local zones will
legs. Cubic feet are multiplied
by
Based on the percent of cubic foot legs
costs are divided between local and non-local zone parcels.
is made to the local transportation
One
costs. A certain portion of
costs will be incurred by local zone parcels even if they are held out
10
(intra-city and box route transportation).
11
non-local zone intra-BMC
12
Intra-BMC
that is incurred below the level of the A0
This cost (row 5) is allocated to both local and
parcels.
Unit costs by zone for intra-BMC parcel post are calculated
as follows.
Local
13
costs for local zone intra-BMC parcels are calculated
14
costs incurred by local zone parcels by the number of local zone cubic feet. Then the
15
intra-city and box route unit costs are added.
16
by dividing the local transportation
17
number of non-local zone cubic feet. Again the unit cost for intra-city and box route
18
transportation
19
dividing the intermediate
20
zone (cubic feet,. Similarly, the intermediate
21
intermediate
22
number of non-local cubic feet. Column 9 shows the total unit transportation
23
each zone of intra-BMC
24
reconciled to total intra-BMC
25
by multiplying the total intra-BMC
26
expected, the sum of column 10 is equal to total intra-BMC transportation
is added.
Intermediate
costs for local zone parcels are calculated
by
costs incurred by local zone parcels by the number of local
transportation
--
Non-local zone unit costs are calculated
costs incurred by non-local zone parcels by the
costs for non-local zone parcels are
costs incurred by non-local zone parcels divided by the
parcel post. Finally, the total intra-BMC
transportation
costs for
unit costs by zone are
costs. This reconciliation
is accomplished
unit costs by total intra-BMC cubic feet by zone. As
27
.-
by dividing the local transportation
~---
costs (row 4).
USPS-T-16
Appendix Ill
Page 4 of 9
1
IV.
DBMC TRANSPORTATION
COSTS
2
3
DBMC unit transportation
costs by zone are calculated
in a similar manner as
4
inter-BMC unit transportation
5
are listed (rows 1 and 2 on page 8). Next, the local costs are distributed
6
on the percentage
7
are nondistance
8
also because the local leg is incurred by all DBMC parcels (those entered at the DBMC
9
and those entered at the destination
10
costs.
First, total DBMC transportation
of total DBMC cubic feet in each zone because
related.’
Local costs are distributed
P&DC).
costs by function
i:o zone based
DBMC local costs
based on total DBMC cubic feet
The percentage
of DBMC wbic feet by
11
zone is shown in column 1 and the
._ resulting local costs by zone are shown in column 3.
The intermediate costs are distributed to zone based on the percentage of D_BMC cubic
12
foot miles in each zone because DBMC intermediate
13
percentage
14
resulting intermediate
15
costs are clistance related.’
The
of DBMC cubic foot miles in each zone is shown in column 2 and the
costs by zone are shown in column 4.
Local unit costs are calculated
by dividing the costs shown in column 3 by total
16
DBMC cubic feet by zone. These local unit costs represent the local costs incurred by
17
DBMC entered at a destination
18
by DBMC entered at a destination
Intermediate
unit costs are only incurred by
19
DBMC entered at a BMC; therefore, they are calculated
by dividing the costs in wlumn
20
4 by regular DBMC cubic feet by zone.
21
(column 7) and destination
22
reconciled to total DBMC transportation
23
DBMC unit costs were multiplied by regular DBMC cubic feet in each zone and
24
destination
25
entered DBMC cubic feet. Column 8 shows the sum of the unit costs mull:iplied by
26
cubic feet. As expected,
BMC as well as all of the transportation
P&DC.
costs incurred
Regular DBMC unit transportation1 costs
P&DC entered DBMC transportation
costs (column 5) are
costs (row 3) in the following manner.
P&DC entered DBMC unit costs were multiplied by destination
Regular
P&DC
the sum of column 8 is equal to row 3.
2 See pages 4-11 of this testimony For a discussion
distance For each rate category of parcel post.
’ Ibid.
--
of the relationship
between cost pools and GCD
USPS-T-16
Appendix III
Page 5 of 9
1
2
v.
DDU TRANSPORTATION
COST AVOIDANCE
3
4
Parcel post entered at the destination
delivery unit can be expected to avoid all
5
but a small portion of purchased
6
incur the same purchased
7
P&DC.
8
destination
9
highway transportation,
and inland water.
IO
testimony
it is poss!ble to identify certain portions of local transportation
I1
costs which would be avoided by DDU parcel post. Specifically,
12
contains a breakdown
13
parts by contract.
14
types of contracts:
15
The purchased
transportation
transportation
transportation
costs as DMBC entered at the destination
costs associated
P&DC have three components:
(USPS-T-13)
costs. At most, DDU parcel post will
with DBMC entered at the
postal owned vehicle service, intra-SCF
Using information
of intra-SCF highway transportation
The intra-SCF highway transportation
from witness Bradley’s
Exhibit USPS-13B
costs into its component
account includes the following
intra-SCF van, intra-SCF trailer, intra-city, and box route.
Of the four components
of intra-SCF highway transportation
listed above, two will
16
be avoided by DDU parcel post: intra-SCF van and intro-SCF trailer contracts.
17
two types of contracts are primarily for transportation
18
city and box route contracts often account for transportation
19
delivery unit and therefore are not included in the avoided cost calculation.
highway transportation
between
P&DCs and AOs.
Intra-
below the level of the
20
Using the intra-SCF
21
intra-SCF costs potentially
22
This percentage
cost breakdown,
23
postal owned vehicle costs to yield the DDU avoided transportation
24
calculations
the percentage
of
avoided by DDU parcel post in the base year is calculated.
is applied to test year local parcel post highway transportation
described
These
above are shown on page 9 of this appendix.
and
costs. All of the
USPS-T-16
Appendix Ill
Page 6 of 9
Parcel Post Transportation
/--
Calculation
of Inkr-BMC
Costs By Rate Category
Tnnsporktton
Cork
and Zone
per Cubic Foot by Zone
Inkr-BMC parcel trmsportation costs by function and distance relation
Local costs incurred by inter-EKE parcels @x-distance
related)
lntemwdiate casts incurred by inter-BMC parcels (nondistance
related)
Long distance casts incurwed by inter-BMC parcels (distance related)
Long distance costs incurred by inter-BMC parcels (nor&distance related)
Tokl inter-WC
parcel cask
IV
zone
Local
l-2
3
4
5
6
7
6
Total
100.00%
m
zone
LO&
l-2
3
4
5
6
7
8
Tokt
,/I---
PI
Percentage of
Percenkge
of
inter-WC
cubic Inkr-BMC cubic
feet
foot mites
0!33%
0.00%
7.72%
0.83%
16.37%
4.62%
14.74%
25.78%
23.53%
23.50%
11.08%
17.07%
6.41%
14.15%
9.11%
25.08%
LOUI
unit cask
(SICF)
N/A
so.7815
$0.7815
$0.7815
$0.7815
$0.7815
SO.7815
SO.7815
100.00%
181
tnkrmediak
unit costs
WCF)
N/A
$0.9361
SO.9361
$0.9361
$0.9361
$0.9361
so.9361
$0.9361
I31
$26,934
$32.263
$88.617
$2.148
S149.962
141
Local cask
WO)
so
12.080
S4.408
$6.943
S&337
$2.985
$1.728
$2.454
526,934
M
Long disknce
DR unit cask
(WCF)
NIA
so.2759
So.7261
$1.4704
s2.5684
$3.9607
$5.6738
$7.0779
Intermediate
costs (000)
so
92.491
$5.281
$8.317
$7.590
53.575
$2.069
s2.939
$32.263
[101
Long distance NDR unit costs
W-1
N/A
SO.0823
SO.0623
SO.0623
SO.0823
$0.0623
SO.0623
SO.0623
(51
Long disknce
costs - DR
WJ)
so
$734
S4.096
s13.065
520.827
$15.127
512,543
S22.226
$88,617
161
Long disknce
cork - NDR
WJ)
$0
5186
$352
$554
$505
$238
$138
$196
52,148
(111
ktai
unit costs
W’W
N/A
s2.0558
$2.5060
$3.2502
54.3483
$5.7406
$7.4536
S8.8578
Row 11: Appendii I, page 13. rcw 20.
ROW_u: Appendix I, page 13. row 20.
Row &‘: Appendix I, page 12. rcw 13.
Row$ Appendix I, page 12. row 14.
Rowe: Rcw1+rw2+rau3+mw4.
Column [t]: Appends: II, page 9. a~lumn 1. inter-BMC cubic feet in the given zone divided by total inter-BMC cubic feet.
Column 121:Appendix II. page 9, column 5. inter-BMC cubic fool miles in the given zone divided by total inter-BMC cubic foot miles,
Column 19: Row 1 * mlumn 1.
Column [4]: Row 2 * column 1.
Column [5]: Rw 3 * column 2.
Col”mn 15,: HOW4 - col”rn” 1.
Column m: Column 3 a IWO I Amendi II. pale 9. column 1 OntergMC cubic feet by zone).
Column (81: Column 4 * 1000 /Appendix II, page 9. column 1 (interBMC wbic feet by zone).
Column (9): Column 5 * loo0 I Appndb: II, page 9. column 1 (inter-BMC cubic feet by zone).
Column (IO): Column 6 * IWO l&qmdLix II, page 9. column 1 (inter-BMC cubic feet by zone).
Column [II]:
Column
7 + column
8 + column
9 l cdumn
10.
Column
1121: Column 11 *Appendix II, page 9. mlumn 1 (inter-BMC cubic feet by zone).
WI
Reconcile to
total costs
wJ)
N/A
$5.471
$14,136
$28.879
$35.259
$21,924
$16,477
$27,815
$149,962
1,
3
3/
”
2,
USPS-T-16
Appendix Ill
Page 7 Of 9
Parcel Post Transportation
Calculation
of Inba-BMC
Fkkd
Costs By Rate Category
and Zone
Parcel Costs per Cubic Foot by Zone
Inba-BMC parcel tansportation
cask by function and distance relation
Local costs incurred by intra-BMC parcels (nondistance related)
Intermediate casts incurred by intra-BMC parcels (non-distance related)
Long distance costs incurred by inba-BMC
Total intra-BMC parcel costs
parcels
I21
VI
Avenae
PI
Zone
Local
1-2
3
4
5
6
7
a
Total
Local
unit costs
(SICF)
SO.4615
so.7952
so.7952
so.7952
so.7952
NIA
N/A
N/A
141
Avenge
Cubic
foot-legs
1.460.249
43.145.739
Percent
3.27%
96.73%
44605.987
100.00%
2’
PI
m
-.
Local I
Cubic feet
1.460,,249
21.572,,669
Local zone
NoMocal zone
lntlacity I box route adjustmeni
23,033,116
Tokl
$17,626 1,
Intermediate
unit costs
WCF)
$0.4766
so.9575
$0.9575
so.9575
so.9575
N/A
NIA
N/A
191
Total
unit costs
WV
$0.9402
$1.7527
$1.7527
$1.7527
$1.7527
N/A
N/A
NIA
$21,355 _U
so ;I
$39,163 g
I51
WI
Local
T~nsportation
COSk
S487
$14,396
$2.942
Sl7,EtE
-
lnkrmediate
Transporbtion
COSk
$699
$20.656
521.355
WI
Reconcile to
total costs
ww
$1,373
$32.750
S4,176
SS46
$37
N/A
N/A
NIA
$39,183
-.,
USPS-T-16
Appendix III
Page 8 of 9
Parcel Post Transportation
Calculation
Costs By Rate Category and Zone
of DBMC Rated Panxl Costs per Cubic Foot by Zone
DBMC parcel transportation
costs by distance relation
Local costs incurred by DBMC parcels (non-distance related)
Intermediate costs incurred by DBMC parcels (distance related)
Long distance costs incurred by DBUC parcels
Total DBMC parcel CO&
PI
Ill
Z0n.Z
Local
1-2
3
4
5
6
7
l-2
3
4
5
6
7
8
Total
Ye”
83.46%
14.17%
2.34%
0.01%
0.00%
0.00%
0.00%
100.00%
Percentage of
DBMC cubic foot
miles
0.00%
51.68%
36.13%
12.09%
o.ds%
0.00%
0.00%
0.00%
100.00%
(51
Local I DSCF
Unit Costs
(YCF)
N/A
so.3997
So.3997
so.3997
$0.3997
NIA
N/A
NIA
161
Intermediate
Unit Costs
(S/CF)
N/A
so.3010
$1.1340
$2.2947
S4.1376
N/A
N/A
N/A
Percentage of
DBMC cubic feet
0.00%
$39.739 y
$44.219 _u
so 31
S83.959 g
131
LOcal costs
(000)
so
$33.173
$5.631
$932
$4
SO
SO
so
$39,739
m
Total DBMC
Unit Costs
(SICF)
N/A
so.7005
$1 s337
$2.6943
54.5374
N/A
N/A
N/A
I41
Intermediate
costs (000)
so
$22.653
$15.976
$5.346
$4
so
so
so
w4,219
WI
Reconcile to
TOtal costs
ww
N/A
$56.026
$21,609
S6,260
w-l
NIA
N/A
N/A
$83.959
Row 11: Appendix I, page 13, row 18.
Row/: Appendb: I, page 13, mu, 18.
Rw -y: Appendix I. Page i3. ,cw 18.
Row4/: Rnwl+mw2+row3.
Column [l]: Appendix Il. Page 9. column 3. DBMC cubic feet in the given TOM divided by total DBMC cubic feel.
Column (21: AppndL II, page 9. mlumn 7. DBMC cubic fcot miles in the given zon divided by total DBMC cubic foot miles.
Column PI: Row 1 . mh-nn 1,
Column [4]: Row 2 * column 2.
USPS-T-16
Appendix Ill
Page 9 of 9
Parcel Post Transportation
Calculation
Test year local parcel post banspo~tion
Highway and POV
W&2,
Tohl
Total inbaSCF
highway
Intra-SCF vans
Intm-SCF trailers
Intra-city
Box-mute
Total
tnnsporktion
Percentage
of inbaSCF
highway
Percentage
of local b-ansfmrktion
‘DSCF transportation
and Zone
Costs per Cubic Foot
costs
cask
by contract
and POV costs avoided
cask
avoid&by
cost per cubic foot (S/cf~
DSCF - DDU banspoftation
Costs By Rate Category
of DDU Avoided
cost difference
(Slcfj
Rowe/: Appendix I, page 11. total lotal highway SewiCe costs.
Row 21: Appendh I, page 11, total local domestic water costs.
ROW31: Row 1 + row 2.
Row/: Exhibti USPS-13B~
Rowg,: Exhiba USPS13B.
Rw 6/: Exhibit USPS-13B.
Row 1,: Exhibit USPS-13B.
Rw~/: Row4+rcw5+row5+row7~
Row 2,: (Row 4 + row 5) I rcw 8.
Row x,: (Row 9 - row 1) I row’ 3.
Rw xi: Appendix 1l1.pagt. 8, column 5.
Rovl2/- Row10*rw,l.
984,367
$134
s84.501
1’
2,
J/
$190.632
S83.552
516.298
$37,419
S328.101
9,
s/
E/
1,
5,
83.63%
2,
83.50%
lo,
50.3997
c,
so.3337
I_u
type
by DDU parcels
DDU parcels
-
.-
,,--.
USPS-T-76
Appendix IV
Parcel Post Cube-Weight
Pages 14:
-__---
Description
~-
of Cube-Weight
._.---
Relationship
Relationship
Estimation
USPS-T-16
Appendix IV
Page 1 Of 4
-,
1
I.
INTRODUCTION
The purpose of Appendix
3
IV of this testimony
4
feet per piece by weight increment
5
rate category of parcel post. Using data from USPS LR-H-135,
6
feet and volume by weight increment for each rate category and the econometric
7
described
8
increment for each rate category were estimated
9
method of estimation.
by the Commission
(cube-weight
is to show how the estimated
relationships)
in its R94-1 Decision,’
are calculated
cubic
for each
showing the total cubic
model
the cubic feet per piece by weight
using the weighted
least squares
10
11
II.
INPUTS
12
The only input data necessary
13
to estimate the cube-weight
relationship
for each
14
rate category are the total cubic feet and total volume by each weight increment for
15
each rate category of parcel post. Again, the input data was obtained from USPS LR-
16
H-135.
17
Using these data, several calculations
18
in the estimation.
19
their source:
A complete
listing of the input data can be found in USPS l-R-H-176
at 8-10.
are made to develop the variables that are used
Table IV-l describes each of the variables in the input data sets and
20
21
22
Variable
Name
LBS
CF
PCS
CFPERPC
CUBE-WEIGHT
Description
TABLE IV-1
RELATIONSHIP
INPUT VARIABLES
Source
Weight increment.
Total cubic feet in the given
weight increment.
Total volume in the given
weight increment.
Cubic feet per piece in the g
iven weight increment.
’ PRC Op., Docket No. R94-1. page V-l 16,
N/A.
All data are from USPS LR-H-135.
All data are from
CF I PCS.
_-
USPS-T-16
Appendix IV
Page 2 Of 4
LNLBS
LNLBS2
LNCFPPC
The natural log of
increment.
The natural log of
weight increment,
The natural log of
per piece.
the weight
LN(LBS).
the
squared.
cubic feet
LN(LBS)*.
LN(CFPERPC).
1
All of the above data serve as inputs into the estimation
and are shown on pages 12 and 13 (inter-BMC),
of the cube-weight
relationship
pages 18 and 19 (intra-BMC),
and
pages 24 and 25 (DBMC) of USPS LR-H-176.
III.
ESTIMATION
._
-
As discussed
relationships
in Section Ill of this testimony, three separate cube-weight
are estimated;
one for each rate category of parcel post.’ The model used
to estimate each relationship
Commission
is the same as the model recommended
by the
in Docket No. R94-1 .3 The model is a translog model with the dependent
variable being LNCFPPC
and the independent
variables being LNLBS and LNLBS2.
Thus the model has the form:
ln(cf I&)
15
= u + z7[ln(,,,)] + cjln(Zbs;)]
(1)
16
17
Where the ‘r” subscript represents
18
dependent
19
increment, ‘cf/pc~ can be written as:
variable represents
the weight increment (2 through 70). Because the
the average cubic feet per piece fol: a given weight
20
21
(2)
2 For a discussion of why three separate relationships
3 PRC Op.. Docket No. R94-1. page V-l 16.
were estimated, see USP:S-T-16 at 12-14.
USPS-T-16
Appendix IV
Page 3 Of 4
1
2
Where “pcs~ is the total number of pieces in weight increment “r”. ‘c$” is the number of
3
cubic feet for the “p parcel in weight increment
4
per piece in weight increment ‘r is the sum of the cubic feet of all the parcels in weight
5
increment ‘r” divided by the number of pieces in weight increment ‘r”.
6
When estimating
7
variable represents
8
the proper estimation
9
as the weighting
the average cubic feet
a relationship where each observation
of the dependent
an average of data (in this case pieces in each weight increment),
technique
variable.4
is a form of weighted
least squares using volume @cs,)
For example, the average cubic feet per piece for a parcel in
10
the two-pound
11
parcels.
12
increment is the average of only thousands
13
from which each average is calculated
14
“P. Therefore,
weight increment is determined
by taking the average of millions of
The average cubic feet her piece for a parcel in the 70-pound
Using weighted
of parcels.
The relative number of pieces
needs to be accounted
for in the model.
least squares is relatively straightforward.
15
equation must be weighted
using the appropriate
16
squares (OLS) can be used to estimate the weighted
17
weight relationship
18
transformed
in parcel post using weighted
weight
variable.
First, the regression
.-
Then, ordinary least
model.
In estimating
least squares, Equation
the cube1 is
to the following:
19
20
(3)
21
22
The parameter
estimates for the inter-BMC,
intra-BMC,
23
are shown on pages 14, 20, and 26 of USPS LR-H-176
24
relationships,
25
the 99 percent level.
all of the dependent
variables,
and DBMC regressions
respectively.
including the intercepts,
In all three
were significant
at
’ For a discussion of why weighted least squares is appropriate when dealing with pooled data, please see
J. Johnston, Econometric Methods 293-296 (McGraw-Hill 1984).
USPS-T-16
Appendix IV
Page 4 Of 4
r-
1
Pages 15-16, 21-22, and 27-28 of USPS LR-H-176 show the results of the inter-
2
BMC, intra-BMC,
3
23, and 39 of USPS LR-H-176 show a plot of the actual values of cubic feet per piece
4
by weight increment and the predicted values of cubic feet per piece by weight
5
increment for inter-BMC.
6
and DBMC regressions
for all observations
Pages 17,
intra-BMC and DBMC respectively.
Finally, pages 30-31 of USPS LR-H-176
show a summary of the estimated
7
feet per piece for all three rate categories.
8
were used 1:oproduce the estimates of the cube-weight
9
category are included in pages 32-39 of USPS LR-H-176.
IO
respectively.
cubic
The SAS program code and log file that
output are available on diskette in USPS LR-H-176.
relationships
for each rate
All input data, programs,
and