DQCKET SECTION
OCA-T-500
Docket No. R97-1
DIRECT TESTIMONY
OF
JAMES F. CALLOW
ON BEHALF OF
THE OFFICE OF THE CONSUMER
DECEMBER
30. 1997
ADVOCATE
TABLE OF CONTENTS
STATEMENT
I. PURPOSE
OF QUALIFICATIONS
.._..____.__.___.__.......................................,,..,..,,....,. 1
AND SCOPE OF TESTIMONY
_________.._________..............................,..,.....,.
3
II. CURRENT POST OFFICE BOX FEES AND FEE GROUPS DO NOT
ADEQUATELY REFLECT THE HIGHER COSTS OF PROVIDING BOX
SERVICE IN LARGER CAG POST OFFICES, NOR THE LOWER COSTS
OF SERVICE IN SMALLER OFFICES
.._..._...._.._....,....,..,..,..,............,.,,..,..,..,..
A. Postal Service Costs Are Higher In Larger CAG Post Offices ‘Than In
Smaller Offices
.
1. Average postal rental costs are higher in larger post offices, as
measured by CAG
5
6
7
2. Other postal costs are higher in larger CAG post offices ,.,._.__.__.__._.,__. 8
B. The Postal Service’s Methodology For Allocating Certain Post Office
Box Volume-Variable
Costs Does Not Recognize Higher Costs In
Larger Post Offices And Lower Costs In Smaller Offices _.__.__.__._.._..___...... 9
1. Allocating volume-variable Space Provision costs to post office
boxes using average postal rental costs for fee groups masks
widely different rental costs by CAG in Fee Groups C ancl D
10
2. Allocating an average of All Other volume-variable costs to post
office boxes generates unit box costs that are too low for larger post
,...
offices and too high for smaller offices in all fee groups
12
C. Post Office Box Fees Based Upon Current Fee Groups And The Postal
Service’s Cost Allocation Methodology Results In Unjustifiably Higher
Fees In Smaller Post Offices And Fees That Are Too Low In Larger
Offices _...,,.,..._...._.__..............................................................................
13
Ill. CURRENT POST OFFICE BOX FEE GROUPS SHOULD BE
RESTRUCTURED
TO BETTER REFLECT DIFFERING COSTS; OF
LARGER AND SMALLER POST OFFICES ._......_.__._.._.._..................................... 14
A. Fee Groups C And D Should Be Restructured Based Upon The CAG Of
The Post Offices _,........__._______..........................................................................
1. Fee Groups C and D are similar in fundamental
14
ways . .. . . .. .. .. . .. . .. .. .. 14
2. Restructuring Fee Groups C and D based upon CAGs A-D, E-G and
H-L produces more rent-homogeneous
fee groups .._.........._.._.._....,,..,..... 16
B. The Development Of Base Year And Post-MC96-3 Estimates Of The
Number Of Boxes In Use Is Similar To The Approach Followed By The
Postal Service .. .._.._._.................................................................................,,.,,.,
1. Development of the Base Year estimates of the number of boxes in
use involves introduction of CAG groupings
.
18
18
2. The post-MC96-3 estimated number of boxes in use shows CAG
groupings ..___._____________.............................................................................. 26
C. The Test Year Before Rates And After Rates Estimates Of The Number
of Boxes In Use And Revenues Reflect The New Fee Groups
..______...
32
IV. POST OFFICE BOX VOLUME-VARIABLE
COSTS SHOULD BE
ALLOCATED SO THAT HIGHER COSTS ASSOCIATED WITH LARGER
POST OFFICES ARE DISTRIBUTED TO BOXES IN THOSE OFFICES............37
A. Space Provision Costs Should Be Allocated Based Upon Average
Rental Costs For The New Fee Groups To Better Reflect Costs In
Larger And Smaller Post Offices _.__.__._____._.._................................................... 37
B. A Portion Of All Other Costs Should Be Allocated To The New Fee
Groups Based Upon Groupings By CAG To Better Reflect Costs In
Larger And Smaller Post Offices ..__._.__.___.______.................................................42
C. Space Support Costs Should Be Allocated Using The Same
Methodology Used By The Postal Service ..____..__.__._.__....................................55
V. PROPOSED POST OFFICE BOX FEES SHOULD REFLECT THE
HIGHER COSTS OF PROVIDING BOX SERVICE IN LARGER VERSUS
SMALLER POST OFFICES, AND ENSURE A REASONABLE
CONTRIBUTION
TO INSTITUTIONAL COSTS ,,_,.._._.._.__.__._............................... 60
A. Proposed Fees And The New Fee Groups Constitute A Transition To
De-Averaged Allocated Costs And Further Restructuring Of Fee Groups.......65
B. The Proposed Post Office Box Fees Satisfy The Pricing Criteria Of The
Postal Reorganization Act ,..,..,..,..___.__.............................................................
66
C. The Proposed New Fee Groups Accord With The Classification Criteria
Of The Postal Reorganization Act ___________.__.__.__...............................................
76
ii
VI. CONCLUSION
. . .. . .. . .. .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. .. . .. 72
1
DIRECT TESTIMONY
2
OF
JAMES F. CALLOW
3
STATEMENT
OF QUALIFICATIONS
4
5
My name is James F. Callow.
6
Specialist.
7
and since February
by the Postal Rate Commission
1995 in the Office of the Consumer
I previously testified before this Commission
8
9
I have been employed
I am a Postal Rate and Classification
MC95-I.
My testimony
Advocate
since June 1993,
(OCA).
in Docket Nos. MC96-3 and
in Docket No. MC96-3 opposed the Postal Service’s non-
10
resident surcharge
on post office boxholders,
and proposed alternative
11
designed to equalize inter-group
12
coverages
by box size. In Docket No. MC95-1, my testimony
13
comments
of persons expressing
14
Consumer Advocate
cost coverages
box fees
and reduce the dilsparity in cost
views to the Commission
summarized
the
and the Office of the
on postal rates and services.
15
As Special Assistant
to former Commissioner
16
Nos. MC93-1, MC93-2 and R94-1.
17
for substantive
18
Recommended
19
Postal Service with respect to the estimation
20
evaluated
21
special postal services.
Specifically,
rate design proposals
in Docket
In the latter docket, I was assigned responsibility
subject areas considered
Decision.
Quick, I participated
by the Commission
in its Opinion and
I analyzed quantitative
testimony of the
of workers’ compensation
costs and
of the Postal Service and other parties related to
Prior to joining the Commission,
I held positions on the legislative staff of a
US Senator and a Member of Congress from Michigan, and served as an aide to the
Governor of the State of Michigan in Washington.
I am an accountant
accounting
by training.
from Georgetown
and auditing.
University.
In 1985, I earned an MS de!gree in
My course work included cost accounting
In 1977, I obtained my BA degree from the University of Michigan-
Dearborn with a double major in political science and history and a minor in
economics.
2
1
2
I.
PURPOSE AND SCOPE OF TESTIMONY
This testimony addresses
the post office box fee proposals
of the Postal
3
Service.’
4
Groups C and D into six new fee groups based upon the Cost Ascertainment
5
(CAG) of post offices.
6
from CAG A-D, E-G and H-L offices, respectively,
7
groups, D-l, D-II and D-III, would also be formed from the same CAG level offices in
8
Fee Group D. The new fee groups and proposed fees represent a proposed
9
transition to a further restructuring
10
11
I propose a classification
change that would restructure
current Fee
Group
Three new fee groups, C-l, C-II and C-III, would be formed
in Fee Group C. Three new fee
that would ultimately merge these parallel fee
groups into three fee groups.
The fees I propose are based on a new cost allocation
methodology
methodology.
The
12
Postal Service’s current allocation
results in higher volume-variable
13
unit box costs in smaller offices and lower unit costs in larger offices than if costs
14
were allocated according
15
Consequently,
16
portion of volume-variable
to office location and size, as measured
I propose a new cost allocation methodology
by CAG.
that distributes
post office box costs by CAG. My proposed
a
post office
’ My testimony consists of this document, OCA-T-500, and workpapers
which contain spreadsheets showing the development of my post office box fee
proposal, filed as library reference OCA-LR-10.
In addition, I sponsor the library
reference OCA-LR-2.
3
1
box fees are virtually the same as or lower than those proposed
2
Service in the new fee groups consisting
3
allocated costs are lower under the new methodology,
4
fee groups consisting
by the Postal
of CAG E-G and H-L offkes, where
while box fees are higher in
of CAG A-D offices, where allocated costs are higher.
4
II.
6
CURRENT POST OFFICE BOX FEES AND FEE GROUPS DO NOT
ADEQUATELY
REFLECT THE HIGHER COSTS OF PROVIDING BOX
SERVICE IN LARGER CAG POST OFFICES, NOR THE LOWER COSTS
OF SERVICE IN SMALLER OFFICES
The Postal Service proposes to increase fees for all post office boxes in Fee
7
Groups A-D.’
a
office box service and presents justifications
9
increases
10
The testimony
of witness Needham
(USPS-T-39)
describes
post
for the Postal Service”s proposed fee
The current post office box fee groups, designated
A-E, were established
in
11
Docket No. MC96-3 at the behest of the Postal Service.3 The testimony of witness
12
Lion (USPS-T-24)
13
number of boxes in use for each group.
14
office box fee groups “are now defined principally in terms of the fees paid.”
15
USPS-T-24
16
customer characteristics,
17
(OCAAJSPS-T24-2).
describes the current fee groups and develops estimates of the
According
to witness Lion, the five post
at 2. Fee groups generally “depend upon specified ZIP Codes,
and type of carrier delivery service.”
Tr. :3/1064
* USPS-T-39, Table 11, at 59. Fee Group E boxholders, those ineligible for
any type of carrier delivery service, “pay” a fee of $0, and no fee increase is
proposed by the Postal Service for these boxholders.
3 See PRC Op. MC96-3 at 47-48.
5
1
The testimony
methodology
of witness Lion also presents the Postal Service’s
for allocating volume-variable
post office box costs to develop test year
before rates (TYBR) unit box costs. Witness Lion describes the allocation
methodology
generally:
5
three categories:
6
methodology
7
“Volume-variable
costs are allocated to post office boxes in
space provision, space support, and all other usirig the same
as in Docket No. MC96-3.”
USPS-T-24
at 3.
The current post office box fee groups, and the Postal Service’s allocation
8
methodology,
result in higher volume-variable
unit costs for boxes in smaller post
9
offices, and lower unit box costs in larger offices, than if costs were allocated to
IO
boxes with greater consideration
11
based upon the Postal Service’s unit box costs are higher for boxholders
12
post offices than would otherwise
be necessary
13
restructured
costs were de-averaged
14
15
16
A.
17
18
and volume-variable
to office location and size. Consequently,
fees
in smaller
if current fee groups were
based upon CAG.
Postal Service Costs Are Higher In Larger CAG Post Offices Than In Smaller
Offices
The Postal Service classifies post offices by Cost Ascertainment
Group
(CAG).4 Post offices are classified from A-L (excluding the letter “I”) based upon the
4 Glossary of Postal Terms, Publication
6
32, April 1988, at 16
1
amount of revenue generated,
2
offices, defined as offices with 356,250 or more revenue units, generate the greatest
3
revenues, while CAG L offices, with 35 or fewer revenue units, generate the least.6
4
as measured
by “revenue units.“’
C.AG A post
For Fiscal Year 1996, the most recent year available, a revenue unit equals
5
$306.65.’
Consequently,
6
$109,244,063
7
generate
($306.65
a CAG A post office would generate
l
revenues of at least
356,250 revenue units), and a CAG L office would
revenues less than or equal to $10,733 ($306.65
l
35 revmenue units).
Average postal rental costs are higher in larger post offices, as
measured by CAG
8
9
10
1.
11
Witness Lion acknowledges
that average postal rental costs are higher in
12
CAG A, B and C post offices than average postal rental costs in CAG K and L post
13
offices.
14
conclusion.
15
16
17
Tr. 3/l 173 (OCAIUSPS-T24-85).
Postal Service data support this
In Docket No. R90-1. Postal Service data revealed:’
there is a significanf relafionship between the CAG designation of a facility
and its associated square-foot rent (e.g. CAG A offices have higher rents
than CAG L offices). [emphasis added]
5 A revenue unit is “[T)he average amount of revenue per fiscal year from
postal rates and fees for 1,000 pieces of originating mail and special service
transactions.”
Id. at 54.
6 See US Postal Service Handbook F-4, June 1992, at 22; for the range of
revenue units defining each CAG.
’ Postal Bulletin 21940, February 27, 1997, at 51.
a Docket No. R90-1, USPS Library Reference
7
F-183, at 2, n. 2.
The Postal Service’s Library Reference
concluded
F-l 83, from that same do&et,
further
that “CAG A and B offtces tend to be located in higher-rent
while CAG K and L offices tend to be located in lower-rent
urban areas,
rural areas.”
Id. at 15.
More recently, in Docket No. MC96-3, when average rental costs were again
examined
for post offrces classified by CAG, the data revealed an almost uniform
decline in the average rental cost as the size of post office declinesg
7
8
2.
Other postal costs are higher in larger CAG post offices
9
Aside from average postal rental costs, other costs vary by CAG, and are
10
higher in larger CAG offices.
11
costs are not incurred in smaller post offices.
12
mailhandlers
13
ofices,
14
virtually no mailhandlers,
15
in CAG F-L offices.
16
H or below.
Two conditions
are uniform nationwide,
and proportionately
produce this result.
First, certain labor
While the salaries and benefits of
there are more mailhandlers
more costs, than in lower offices.”
and consequently
in higher CAG
In fact, there are
almost no mailhandler
Ibid. Similarly, there are virtually no supervisors
Ibid. Hence, virtually no supervisor
costs, to be found
in offices CAG
costs are incurred in such offices.
’ Docket No. MC96-3, Tr. E/2916. Response of United States Postal Service
to Interrogatory of the Office of the Consumer Advocate, OCA/USPS-88.
” Tr. 13/7040-46. OCAAJSPS-TS1 l-l 3, Attachment 1, at 1, revised
September 25, 1997. The cited material isn’t limited to information on mailhandlers.
but includes information on postmasters and supervisors, too.
8
1
Second, certain other costs, while present in all post offices, are incurred in
2
proportionally
3
postmaster
4
by CAG. Tr. 13/7069
(OCAAJSPS-T24-66b).
5
salary for postmasters
in CAGs K-L was $39,309, while the average salary for CAG
6
A-G postmasters
7
K-L postmasters.
8
9
10
11
12
B.
greater amounts in higher versus lower CAG offices.
salaries and benefits are dependent,
For example,
in part, on CAG and therefore vary
In Fiscal Year 1996, the average
was $55,220 -- 40 percent greater than the average salary of CAG
Tr. 13/7061
(OWVUSPS-T5-37).
The Postal Service’s Methodology For Allocating Certain Post Office Box
Volume-Variable
Costs Does Not Recognize Higher Costs In Larger Post
Offices And Lower Costs In Smaller Offices
In developing
unit box costs, the Postal Service allocates volume-variable
13
Space Provision costs to post office boxes utilizing an average postal rental cost for
14
fee groups, and assigns an average of All Other costs to all boxes
15
Space Provision costs, the use of an average rental cost to distribute such costs
16
does not recognize the wide variation in rental cost by CAG within Fee Groups C
17
and D. In the case of All Other costs, assigning
18
not recognize the fact that some costs are proportionately
19
post offices, or not incurred at all in smaller CAG offices.
9
In the case of
an average cost to all boxes does
greater in larger CAG
1.
5
Allocating volume-variable Space Provision costs to post office boxes
using average postal rental costs for fee groups masks widely different
rental costs by CAG in Fee Groups C and D
Volume-variable
Space Provision costs are allocated to boxes, in part, upon
6
the average postal rental cost for each fee group.
7
each delivery group is computed
8
each facility in each delivery group.
9
average rent for each fee group is calculated
First, the average rental cost for
as an average of the rental cost per square foot for
Tr. 311067 (OCAIUSPS-T24-5).
as the weighted
Second, the
average of boxes
IO
installed by delivery group, using the percentages
11
Space Provision costs are then allocated in direct proportion
to a measure of box
12
capacity and rental cost per square foot for each fee group.
USP,S-T-24 at 20.
13
in Table 5 of USPS-T-24.”
In the case of Fee Groups A and B, rental costs are computed from the
14
average of facilities’ rental costs per square foot in designated
15
Fee Group A consists of ZIP Codes in Manhattan,
16
consists of ZIP Codes in eight large cities and some surrounding
17
contrast, the city-other and non-city delivery groups, which form the basis of Fee
18
Groups C and D, respectively,
do not represent
high-cost ZIP Codes.
New York, and Fee Group B
rent-homogeneous
suburbs.‘2
groupings.
” See USPS LR-188, at 15, 15A and 15B, revised August 11, 1997
” See Section D910.5.3., DMM 52, July 1, 1997.
10
By
1
Table 1 shows the average postal rental cost by CAG for city-other and non-
2
city delivery offices.
For both delivery groups, there is a wide disparity in average
3
rental costs by CAG.
4
CAG A offices ($8.98) is more than double that of CAG L offices ($4.37).
5
non-city group, the average rental cost for CAG C offices is 32 percent
6
($7.46/$5.65-l)
7
is more than 49 percent ($8.43/$5.65-l)
In the city-other delivery group, the average rental cost for
In the
greater than for CAG L offices, while the average for CAG E offices
:able I. Average
CAG
A
B
C
D
E
F
G
H
J
K
L
TOTAL
greater when compared to CAG L offices.
Rental Cost by CAG for City-Other
Ciq Ieliveh Offices
City-Other
Offices
1,005
576
988
448
691
659
911
470
142
144
16
1 6,050
Average
tental Cosi
($lsq.ft.)
$8.98
$9.02
$9.41
$8.57
$7.80
$7.11
$6.01
$5.21
$4.77
$4.44
$4.37
$7.73
t
T
Non-City
Offices
0
3
12
16
87
268
1,166
2,431
3,517
5,971
699
14,170
and NonIverage
tental Cod
16kq.ft.)
1
$3
$7.46
$7.31
$8.43
$7.90
$7.07
$6.26
$5.82
$5.70
$5.65
$6.00
8
9
By contrast, average rental costs by CAG show greater similarity across
10
delivery groups.
Average rental costs vary in a range from 8 percent ($8.43/$7.80-
11
1) for CAG E offices to 29 percent ($5.65/$4.37-l)
11
for CAG L offices.
The
1
percentage
2
percent ($7.73/$6.00-l).
difference
in average rental cost for each delivery group is also 29
3
4
5
6
2.
7
All Other volume-variable
Allocating an average of All Other volume-variable costs to post office
boxes generates unit box costs that are too low for larger post offices
and too high for smaller offices in all fee groups
costs consist primarily of labor costs.
8
at 19. Under the Postal Service’s methodology,
9
proportionately
these cost are allocated
to the number of boxes since, it is reasoned,
10
depend upon box size or location.”
11
regard to office location or size, results in $6.69 ($104,580,000
12
being distributed
13
“labor costs do not
Id. at 20. This proportional
alllocation, without
/15,620,769
by the Postal Service to all boxes in the TYBR.
The Postal Service’s proportional
USPS-T-24
boxes)
Id. at 24.
allocation of All Other cos.ts to boxes
14
ignores the fact that certain costs do vary by CAG. As discussed
15
postmasters
16
supervisor
17
Nevertheless,
18
costs even to those offices that have no mailhandlers
19
them. The effect of allocating
20
increases
21
larger CAG offices.
costs vary by CAG, and it is not reasonable
costs in offices in which they are not located.
the Postal Service’s approach
Ipreviously,
to expeci, mailhandler
See supa,
allocates mailhandler
or supervisors
and
II. A. 2.
and supervisors
working in
an average cost to all post office boxes unfairly
unit box costs in smaller CAG offices and reduces such costs relative to
12
C.
5
Post Office Box Fees Based Upon Current Fee Groups And The Postal
Service’s Cost Allocation Methodology Results In Unjustifiably Higher Fees In
Smaller Post Offices And Fees That Are Too Low In Larger Offices
The Postal Service’s methodology
of averaging
higher cost, high CAG post
6
offices with lower cost, low CAG offices has the effect of inappropliiately
7
volume-variable
8
variable unit box costs for larger offices.
For Fee Groups C and D, the use of
9
average postal rental costs for allocating
Space Provision costs to boxes masks
unit box costs in smaller offices and concomitantly
raising
lowering volume-
10
differences
11
average rental costs than lower CAG offices.
12
methodology
13
unjustly increases unit box costs in smaller CAG offices and reduces such costs for
14
larger CAG offices.
15
in average rental costs by CAG. That is, higher CAG offices have higher
Similarly, the Postal Service’s
of allocating an average of All Other costs to all post office boxes
Post offtce box fees based on these average costs would nlscessarily mean
16
that box fees are too high in smaller CAG post offices, while box fees are too low in
17
larger CAG ofices.
13
5
6
7
III.
CURRENT POST OFFICE BOX FEE GROUPS SHOULD BE
RESTRUCTURED
TO BETTER REFLECT DIFFERING COSTS OF LARGER
AND SMALLER POST OFFICES
A.
Fee Groups C And D Should Be Restructured
Post Offices
I propose to restructure
8
9
groups.
Based Upon ‘The CAG Of The
post office box fee groups by creating six new fee
Three new fee groups would be formed from the current Fee Group C and
10
three from current Fee Group D, based upon CAG. CAG A-D post offices in Fee
11
Groups C and D would become new Fee Groups C-l and D-l, respectively.
12
G post offices in each fee group would become new Fee Groups C-II and D-II,
13
respectively.
14
new Fee Groups C-III and D-III, respectively.
15
the current fee groups would serve as a prerequisite
16
groups, and thereby eliminating
17
a future proceeding.
CAG E-
The remaining CAG H-L post offices in each fee group would become
This parallel grouping
of CAGs from
to merging the six new fee
a separate fee structure for Fee Groups C and D, in
18
19
1.
Fee Groups C and D are similar in fundamental
20
There is a general recognition
ways,
that Fee Groups C and D are fundamentally
21
similar.
In Docket No. MC96-3, the difficulty of pricing post office boxes with a single
22
rate structure where costs are essentially
the same was stated succinctly:
14
1
2
3
4
5
When areas are categorized and prices are set to reflect average cost
differences some of the resulting prices may seem irrational, as when a
suburban area and a rural area are in close proximity and have essentially
the same costs, but have different rates.13
6
In this docket, the Postal Service’s fee proposal for Fee Groups C and D is
7
premised, in part, on a recognition
8
respect to costs and service
9
Needham,
that there are “similarities
.” USPS-T-39
in Groups C and D with
at 65. According
to witness
Fee Groups C and D are similar in that both consist of offices providing
10
carrier delivery service, either city or rural. Tr. 3/688-89.
Moreover, “there really is
11
no difference
12
costs for these
13
are evident in the testimony
14
costs for providing box service in Fee Group D are approximately
15
than in Fee Group Cl4 Table 1 shows similarities
16
Average rental costs by CAG show greater similarity between the city-other and
17
non-city delivery groups, which form the basis of Fee Groups C and D. than within
18
these delivery groups.
in the type of box service and very minimal differences
two fee groups.”
in the type of
Tr. 3/691. These “minimal differences”
in costs
of witness Lion, which shows that Postal Service unit
‘IO percent less
in cost from another perspective.
See supra, II. B. 1.
‘3 Docket No. MC96-3, Tr. 7/2296-97, Direct Testimony of OCA Witness
Roger Sherman, OCA-T-100.
‘4 USPS-T-24, Table 13, at 27, revised October 1, 1997.
15
1
These similarities
establishing
in cost suggest that merging Fee Groups C and D, and
three fee groups based upon CAGs A-D, E-G and H-L, would produce
more rent-homogeneous
fee groups than the current fee groups.‘!’
However, I did
not take this step at this time because of my concern about substantial
increases for affected boxholders.
fee
See infra. V. A.
6
7
8
2.
9
In the alternative,
10
creating more rent-homogeneous
11
cost for offices in the city-other and non-city delivery groups displayed
12
D, E-G and H-L. The first two columns under the headings “City-Other”
13
City” offices replicate the same office and average rental cost data1 by CAG from
14
Table 1. The last column under each heading shows the “Weighted
15
Cost ($ISq.Ft.)” when offices are grouped by CAGs A-D, E-G and H-L.
Restructuring Fee Groups C and D based upon CAGs A-D, E-G and
H-L produces more rent-homogeneous
fee groups
Fee Groups C and D were separately
fee groups.
restructured
by CAG,
Table 2 shows the #average rental
16
Average rental costs for each grouping
17
than the average for the delivery group as a whole.
by CAGs Aand “Non-
Average Rental
by CAG are more rent-homogeneous
For city-other offices, the
” See OCA-LR2 at 15, which shows the average rental costs when the cityother and non-city delivery offices are combined by CAG.
16
Table 2. Weighted
Averaae
Rental Cost for City-Other and Non-City
I
s by CAG I
1 on-Citv Offices
1
Weighted
Average
Average
t
Flental Cos tF tental Cost
1 ($/Sq.Ft.)
cMites
($ISq.Ft.)
(WSq.Ft.)
$2.99
0
$1.72
8E3
3
$7
$3.08
12
$7.46
$2.89
I
16
$7.31 _
$3.77
31
$7.24
87
$8.43 $0.48
268
$7.90
$1.39
$2.42
1,166
$7.07 _
$5.42
1,521
$6.88
$7.30
2,431
$6.26 $3.17
$1.21
3,517
$5.82
$1.62
$5.70
5,971
$2.70
699
$5.65 $0.31
12,618
$5.84
1
CAG
A
B
C
D
E
F
G
CLffices 1 ($/Sq.Ft.)
1,005 I
$8.98
576
$9.02
988
$9.41
--911
2,261
470
H
J
K
L
,$6.01
$5.21
2
3
weighted
4
for the smallest offices, CAGs H-L. This compares to an average rental cost for all
5
city-other offices of $7.73.
6
average rental cost for the largest offices, CAGs A-D, is $9.07, and $4.96
In restructuring
See Table 1.
Fee Groups C and D, the grouping of offices according to
7
CAG A-D to form new Fee Groups C-l and D-l was suggested
8
grouping
9
determined
of CAG offices in the “City-B” delivery group.
the other two groupings
to me by the same
See OCA-L.R-2 at 11. I
of offices by CAG, which form new Fee Groups
17
1
C-II and D-II, and C-III and D-III, by dividing the remaining “Average Rental Costs
2
($ISq.Ft.)”
3
4
B.
by two dollar increments.
The Development Of Base Year And Post-MC96-3 Estimates Of The Number
Of Boxes In Use Is Similar To The Approach Followed By The Postal Service
5
1.
6
7
Development of the Base Year estimates of the number of boxes in
use involves introduction of CAG groupings
8
9
Table 3 shows the estimated number of boxes installed by the type of carrier
10
delivery service offered.
11
carrier delivery group as, Table 1 of USPS-T-24.‘6
Table
Box
Size
1
2
3
4
5
TOTAL
City-A
35,535
1,987
1,162
118
51
38,853
Table 3 is analogous
3. Estimated
Carrier
City-B
58,079
16,525
5,899
1,154
747
82,404
Number
Delivery
City-Other
4,201,907
2,028,034
718,205
170,547
40,696
7.159,389
to, and uses the sarne definition of
of Boxes
Group
Installed
Non-city
3,577,136
1,548,797
411,307
35,300
6,680
5,579,220
” The totals by box size and for each carrier delivery group are similar to the
figures in Table 1 of witness Lion’s testimony. I used data contained in Postal
Service Library Reference H-278, which was provided in response to OCAWSPST24-86, Tr. 3/l 174. The data in LR-H-278 reflects the September 1997 Delivery
Statistics File (DSF), the most recent data available. Consequently. the data by box
size and delivery group are different from those contained in the testimony of
witness Lion, who utilized the June 1997 DSF. See USPS LR-H-278 at 2.
18
1
2
Table 4 shows the estimated number of boxes in use by carrier delivery
group, and is analogous
to witness Lion’s Table 2
Table 4. Estimated Number of Boxes in
Carrier Delivery Group
Box
Size
1
2
3
4
5
TOTAL
City-A
26,350
1,644
922
96
28
29,040
City-B
49,829
11,966
4,309
674
678
67,456
City-other
3,498,063
1,483,084
491,133
104,946
21,979
5,599,205
Non-city
2,928,396
1,217,569
318,872
25,503
2 829
-2.
4,493,169
3
4
Table 5 presents the “expansion
factors” by carrier delivery group that are
5
used to estimate the number of boxes in use, pre-MC96-3.
6
witness Lion’s testimony,
7
each grouping by CAG in the city-other, non-city and nondelivery
8
groups.
9
The expansion
Unlike Table 3 in
however, Table 5 also shows the expansion
factors for
carrier delivery
factors, based on the number of boxes installed from two data
10
sources, the Delivery Statistics File (DSF) and the Post Office Box Survey (POB
11
Survey), are calculated
12
then used to “expand” the number of boxes in use obtained from the POB Survey in
13
Table 4 to estimate the number of boxes in use prior to Docket No, MC96-3
as the ratio of column [a] to column [b].17 These factors are
” See USPS-T-24
at 6-7
19
roup
Expansion
Factor
GRAND TOTAL
ITotal
1
1
1,709,8701
19,857,0641
[cl -~_.
2.68664
2.46606
1.656%
1.32457
1.19272
1.50433
1.56726
1.42562
~_____ 1.20248
1.26721
2.40962
1.45768
1.24114
1,331,0991
1.28456
1.39928
14,190,9651
1
2
Table 6 displays the results of applying the expansion
factors to the
3
estimated number of boxes in use from Table 4. Totals are presented for each CAG
4
grouping within the city-other,
5
the total for each carrier delivery group.
6
USPS-T-24,
non-city and non-delivery
carrier delivery groups, and
This table is analogous
with the addition of CAG groups.
20
to Table 4 in
p, Pre MC96-3
Total
5,252,863
2,249,833
747,219
161,947
34,646
8,446,508
Total
3,711,735
1,555,055
408,233
33,525
3,729
5,712.278
Box Size
1
2
3
4
5
Total
GRAND TOTAL
1
2
3
CAG A-D
6,361
4,595
1,523
164
53
12,696
Nondelivery
CAG E-G
200,871
62,785
16,268
2,294
197
282,415
Table 7 presents the assumptions
CAG H-L
747,141
247,869
58,3i i
2,811
319
.,..1,056,451
Total
954,373
315,249
76,102
5,269
569
1,351,562
15,754,314
for allocating post oftice boxes to fee
groups resulting from Docket No. MC96-3.
As in Table 5 of witnes.s Lion’s
21
1
testimony,
2
classified post offices and contract stations who are ineligible for carrier delivery
3
service, and thus entitled to a post office box at no fee. Table 7 also extends the
4
subgroup
5
etc.) used by witness Lion to indicate eligible and ineligible customers,
6
these assumptions
naming convention
are used to estimate the number of customers
in
(e.g., “C” and “E-O;” “D-l” and “E-l;” “D-2” and “E-2;”
In the non-city delivery group, Table 7 shows the percent of eligible and
7
ineligible customers
a
For example, “D-l” represents
9
CAG A-D classified offices in the non-city delivery group, while “D..2” represents
10
subgroup
in classified offices and contract stations by C:AG groupings.
the subgroup
of customers
eligible for delivery from
of eligible customers from CAG A-D contract stations
11
22
the
1
Because offices are grouped by CAG, separate estimates of the percentage
2
of eligible and ineligible customers from classified offices and contract stations are
3
necessary.
4
Table 7A.
These percentages,
shown in column [a] of Table 7, are developed
Table 7A. Development
of Assumptions
Offices and Contract
in
on Percent of Boxes at Classified
Stations by CAG
G
T
5
6
Tables EA-C show the estimated
number of boxes in use, pre-MC96-3.
7
tables result from applying the percentages
8
boxholders
to the estimated
The
for eligible and ineligible delivery service
boxes in use found in Table 6. Table 8A summarizes
23
1
the number of boxes in use for Fee Groups A, B and C. Fee Grou,p C is the sum of
2
three subgroups
3
which is the sum of nine subgroups.
4
Group E.
by CAG. Table 8B provides the same information for Fee Group D,
Table EC shows the same information
24
for Fee
Table 8A. Estimated
Box I
Size
1
I
; 1
3
4
5
Total
I
A
I
1
1
I
B
7"7911
751
78,0201
Boxes in Use, Pre-MC96-3
Fee Groups
1
C [A-D]
I
I
I
1
C[E-G]
1
1~908~5191
744,6191
238,557(
44.5121
6,145/
2.942,351/
C[H-L]
1
'I0C-G
46,646
15,088
4 WV,
"5%
212.4731
173SR71
31431flnI
I;6681
165.9461
1,436,070
486,102
114.234
27,6331
5,207.2181
Total C
z='nn'qb
2,227.334
739,747
,G"
1754
- 1, -34,300
8,362,043
Table 86. Estimated
Box
Size
1
2
3
4
5
Total
I
I
D-l
32,678
20,025
6,889
1,044
152
60,788
I
I
D-3
1,005.613
474,611
127,523
14,370
1.603
1,623.721
D-2
0
0
0
0
0
0
I
D4
14,070
6,640
1,784
201
22
22.718
Table 8C. Estimated
Box
Size
1
2
3
4
5
Total
I
I
E-O
52,529
22,498
7,472
1,619
346
84,465
I
E-l
667
409
141
21
3
1,241
I
E-2
0
0
0
0
0
0
Boxes in Use, Pre-MC96-3
Fee Groups
I
I
I
I
D-5
D-6
D-7[A-D]
D-7[E-G]
2.403.846
5,865
4,453
140,610
941,724
2,298
3,217
43,950
242,377
591
1,066
11,387
15,108
37
115
1,606
1,640
4
37
136
3,604.695
8,795
8.887
197,691
D-7[H-L]
522,999
173,508
40.818
1,968
223
739,516
60 xes in Use, Pre-MC96-3
Fee Groups
I
I
E-3
20,523
9,686
2,603
293
33
33,137
I
E-4
126.629
59,764
16.058
1,810
202
204,462
25
4,946
308
4
5,322
332
36
79,155
--t
E-7
286.312
94,575
226,8301
59,373
5,964
824
881,494
4
I
Total D
4.130,134
1,665.973
432,435
34,449
3,820
6,266.811
1
2
3
2.
4
Tables 9A-E show the estimated
The post-MC96-3
groupings
estimated
number of boxes in use :shows CAG
number of boxes in use resulting from fee
5
changes in Docket No. MC96-3.
6
the Commission’s
7
the results for Fee Groups A and B. Table 9B presents the estimate for Fee Group
8
C, with the results displayed
9
the estimates for Fee Group D. maintaining
elasticities
The post-MC96-3
estimate is derived by applying
for each box size in each fee group.lE Table 9A shows
separately
for each grouping by CAG. Table 9C shows
separate estimates for the effects of
10
price increases for each grouping by CAG. Table 9D presents the results for Fee
11
Group E. Table 9E summarizes
12
boxes, and for caller service and reserve call numbers.
the estimates by fee group in terms of paid and free
‘* See PRC Op. MC96-3, Appendix D, Schedule
No. R97-1, USPS-T-24, Tables 7A-D, at 12-15.
26
3, at 17. See also Docket
tr
Table 9A. Estimated
Boxes in Use I:
e
A
2
3
4
5
$74
$128
$210
$348
1
2
3
4
$44
$66
$112
$190
$74
$128
$242
$418
0%
0%
15%
20%
$44
$66
$112
$218
0%
0%
0%
15%
67
77,992
122.582
291437
10,600
1,532
Total A
B
-
29,437
10,600
1,658
-0.603
-0.517
-0.517
I
1
Table 9B. Estimated Boxes in Use by Fee Group, Post-lklC96-3
Fee Group C
Box 1 Pre 96-3 1 Post 96-3 1 Pet. 1 Pre 96-3 1 Elasti- 1 Post 96-3
744,619
238,557
44.512
-0.605
-0.517
-0.517
744,619
238,557
44.512
Subtotal C[E-G]
1.502 I
15,088
TotalC
1
:
27
-0.517 I
1.562 I
15,088
Fee Group
CAG
D-l
Classified
eligible
-- Subtotal
D-2
Contract
eligible
Subtotal
D-3
Classified
eligible
Fee Group D
Box 1Pre 96-3 1Post 96-3 1 Pet.
Size1 Fees 1 Fees
IChangc
1 I
$121
50%
$81
1
b
A-D
110441 -0.1521
'152 -0.152
60,788
-0.054
--
‘9631
0
A-D
--
E-G
Subtotal
D-4
Contract
eligible
6,640
1,784
201
E-G
--Subtotal
D-5
Classified
eligible
--Subtotal
D-6
Contract
eligible
H-L
--
H-L
--
Subtotal
28
-0.069
-0.036
-0.024
2,507
690
76
22,7:i~ij;<~
23403.846
-0.085
.941;724
-0.136
242,377
-0.152
15,108
-0.152
2.301.744
.872;844
223,931
13,925
Table 9C.
t-r
D-7
Nondelivery
eligible
1
A-D
2
3
4
5
$13
$24
$35
$55
$20
$36
$53
$83
1
5::
$12
$20
$36
$53
583
50%'-'
54%
50%
51%
51%
512
520
$36
553
$83
50%54%
50%
51%
51%
I,,,,,,--
D-7
Nondelivery
eligible
2
3
4
5
E-G
$24
$35
555
1
2
3
4
5
51$!
524
535
555
54%
50%
51%
51%
._-,,.-
4,453,
3,217
1,066,
1158
-0.054
-0.069
-0.036
-0.024
4,334
3,097
1,047
113
-0.069
-0.036
-0.024
421313
11,182
1.586
n-l
43,9501
11,387
1.606,
..___.
_-~~
1
1,665,973
432,435
34,449
2
3
4
5
-
29
1,547,132
401,341
31,865
Table 9D. Estimated
Boxes in Use by Fee Group,
Post-MC&3
sticity
30
Post 96-3
Boxes
52,529
22,498
7,472
1,619
346
84,465
667
409
141
21
3
1,241
0
0
0
0
0
0
20,523
9,686
2,603
293
33
33,137
126,629
59,764
16,058
1,810
202
204,462
49,058
19,219
4,946
308
33
73,565
3-3(continued)
4
5
5,964
824
881,494
TOME
1
31
52,786
20,679
5,322
332
36
79,155
286,312
94,575
22,831
1,581
171
405,469
588,503
226,830
59,373
5,964
824
881,494
1
2
C.
The Test Year Before Rates And After Rates Estimates Of The Number of
Boxes In Use And Revenues Reflect The New Fee Groups
3
4
Table 10 reconfigures
5
groups.
6
computed
7
USPS-T-24
the post-MC96-3
fee groups into the iproposed new fee
The test year before rates (TYBR) number of boxes in use is also
by applying the Postal Service’s 1.9 percent growth facbor. See
at 16.
Total C-l
Total C-II
32
5
Total D-III
E
Total E
GRAND TOTAL
1
2
3
4
5
1,736
4.137,645
588,503
226,830
59,373
5,964
824
881,494
15,431,749
1,769
4,216,260
599,685
231,140
60,501
6,078
840
898,243
15,724,952
1
2
Fee Groups A and B are the same as the post-MC96-3
into the proposed
fee groups.
3
Groups C and D are reconfigured
4
C-III and D-l, D-l, and D-III. C-l and D-l consist of CAG A-D post offices,
5
representing
new Fee Groups C-l, C-II and
the largest post offices in the current Fee Groups C and D,
33
Fee
respectively.
New Fee Groups C-II and D-II consist of medium-sized
post offices,
CAG E-G, while C-III and D-III consist of the smallest post offices, CAG H-L.
Tables 1 IA and B show the development
revenues in the TYAR.
of the estimated boxes in use and
Table 1 IA shows the proposed fees, and presents the
TYAR boxes in use, revenues, and the change in revenues from the test year before
rates to the test year after rates for the new fee groups.
Table 11 El summarizes
the
7
estimated boxes in use and revenues in the TYAR by paid and free boxes, and for
8
caller service and reserve call numbers.
9
million to a total of 5690 million.
Revenues are estimated to increase 573
34
Table Ilk
Estimated
Boxes
in Useb
aa,279,34a
fi ,912,715
5165,564,lll
D-H
1
2
3
4
I2
I
3
4
5
TotalE
512
520
536
553
50
50
50 -?
516
530
564
560
id
50
50
1.131.135
493,926
132,154
15,190
50%
50%
50%
51%
I
-0.054
-0.069
-0.036
-0.024
231:1401
60,501
6,076
840
898,243
1,100,637
476,645
129,769
15,001
I
231;1401
898,243
35
513.573.626
59,878,524
54,75?,533
5605,066
SOI
5477,900
5109,370
--$6,676,302
$6,056,375
$2.756.664
$1.598.978
5277,319
5153,165
$10.844.702
5624,544
$621,696
5524,117
5113,376
529,495
52.313.232
50
50
50
50
50
50
$388,936
5360.320
5252,247
555,270
514,517
51.091.292
$19.815.069
514.305.336
57.007.536
51.200.115
56.241.444
54.426.614
52.250.003
5395,027
501
501
New Fee
Groups
BOX
Size
IPaidBoxes
Free Boxes (E)
TOTAL BOXES
Caller Service
Reserve Numbers
GRAND TOTAL
Table 116. Estimated Boxes in Use by Fee Groups, TYAR
All Fee Groups plus Caller Service and Reserve Numbers
Current
Proposed
Pet.
OCA TYBR ElastiOCA WAR
F-S
Boxer
city
FeSS
Chg.
Boxes
I
I
I
I
I
I
1
1
I
1 14.826.7091
1 13.251.562i
5570.671.113~
898,243
898,243
5oj
15.724.952
14.149.825
5570.671,113,,
540.926.917;
90,747
-0.431
82.161
$451
5550
22%
33%
530
MO
162,113
-0.517
150.749
55.463.379:
15.997.812
14.362,735
$617.061.409~
1
36
5636.617.3321
so
$636.617.332
$45,166,466
56.029.976
5690.035.776
568.146.219 I
'~'50
568146,219
$4261.551
$566,597
572.974.367
IV.
POST OFFICE BOX VOLUME-VARIABLE
COSTS SHOULID BE
ALLOCATED SO THAT HIGHER COSTS ASSOCIATED WITH tARGER
OFFICES ARE DISTRIBUTED TO BOXES IN THOSE OFFICES
A.
9
POST
Space Provision Costs Should Be Allocated Based Upon Average Rental
Costs For The New Fee Groups To Better Reflect Costs In I-arger And
Smaller Post Offices
In developing
unit box costs, I allocate Space Provision costs in direct
10
proportion to both a measure of box size (capacity) and the particullar average rental
11
cost per square foot for each respective fee group.
12
approach followed by witness Lion. See USPS-T-24
13
is formed by the product of the average postal rental cost for each fee group and the
14
equivalent
15
This is the same general
at 20. However, my allocation
capacity by box size.
Table 12 shows the allocation of Space Provision costs to derive the total
16
cost by box size and the unit box costs in the TYBR.
17
in column [e], “Rent x Equivalent
Capacity.”
37
The distribution
key is shown
Table 12. Allocation
.I.~~~ I
I
NBR
Boxes
I
14
1 5
Total A
B
II
I
of Space Provision Costs by New Fee Groups, NBR
New Fee Groups
Average
CaDacitv
Eauivalent
Rent
1 Fktor*
1 damcihr
1 ($/sq. ft.)
2421
69
79,474 124,912
61
12
1.12
1
1,453)
824
88,739
124,912
$23.491
$23.49
$23.49
$16.74
34.1;!61
$410 $288.99
--$5,155
$30,54
538.884
Sl2,14
$26:6i9
%18,21
$18,041
$36,42
$8,4791 $ 72.84
1
1.5
1 I : 1 ~~~:i~:I;I
1,486 013
698;4261
$9.07
$9.071
I
3
6
12
1.50
1
33.1031
22,656
6,578
2,165
100,803
1,131,135
$7.231
$7.23
$7.23
$7.23
$7.23
$7.29
121
I.341
19.8621
2.379,4901
1
2
3
4
5
Total D-l
D-II 1 1
I
1 5 1
Total D-II
22:0691
7:552
1,096
180
67,198
1.131.135
;:6551
) 1.774,0611
1.51
$461 $188.691
‘:;;j;;:fl;l
239,317l
163,768
47,557
15,655
728,749
8,241,234
$3201 $14.521
$219
$29,04
$64
$58,07
$21 $116.14
$976
$14.52
$11,033
$9.75
$7.227
$14.63
i29.26
Y
1
The development
of the “Average Rent ($/sq.fl.)” in Table 12: is shown in
Tables 12A-B. Table 12A presents,
installed, the conversion
weighted
based upon the estimated
number of boxes
of the average postal rental costs by delivery group into the
average rental costs for the new fee group.
Table 12B develops the
number of boxes installed for each new fee group, using the percentages
Table 7. The average rents for the new fee group are simply the weighted
shown in
average
of boxes installed by delivery group, which are shown on the last row of Table 12A.
39
CARRIER DELIVERY
GROUPS
I
I
Classified
Contract
Classified
Contract
NONDELIVERY
CAG
CAG
CAG
CAG
l----i
I
j6,542,08i
ICAG A-D
I
3,790,060
330,202
6,542:087
3,790,060
330,202
$9.07
$6.88
$496
949:911i
512:9611
19.857,064[
$7.191
$7.19
E-G
E-G
H-L
H-L
i
CAG A-D
CAG E-G
CAG H-L
I
3,790.060/
$23.4!
$6.88
40
I 949.9111
330.2021
$4.96
I
1 512.9611
80,208~2.160.591]5.552.455~1,094.359~
$7.23
$7.29
$6.07
$6.98
A
B
104,384
202,719
D-l
Boxes
lnsta.lled
Boxes
Installed
107,700
6,542,087
3,790,060
D-3
D-2
69,019
E-O
Table 128. Estimated
Fee Groups
C [A-D]
C[E-G]
D-4
0 1,898,222
E-l
1,409
26,559
Boxes Installed
Total C
C[H-L]
330,202
-Fee tiroups
^
D-5
4,591,342
Fee Groups
E-3
E-4
E-2
0
38,739
by CAG by Fee Group
10,662,349
I
D-6
11,202
E-5
239,028
41
93,701
DJ[A-D]
11,188
E-6
100,821
D-7[E-G]
235,810
E-7
512,961
D-7[H-L]
949,911
Total E
1,094,359
Total D
7,793,253
1
2
3
4
B.
5
6
A Portion Of All Other Costs Should Be Allocated To The New Fee Groups
Based Upon Groupings By CAG To Better Reflect Costs In Larger And
Smaller Post Offices
I allocate a portion of All Other costs to boxes by CAG. Tablle 13 summarizes
the allocation of All Other costs and the development
Table 13. Summary
of Allocation
I
INew Fee 1 Box 1
Groups
Size
A
1
I5
Total B
C-l
I 1
2
3
4
5
Total C-l
C-II
1
2
3
4
MBR
Boxes
--la]
Post-
1 “:%s
WO)
__
72,130
1,524
168,795
3.202.901
1,463,355
495,338
116,404
28,158
5,306.156
1.944.781
758,767
243,090
45,357
of TYBR unit box costs
of All Other Costs by New Fee G~~DUPS,TYBR
New Fee Groups
I
I
I
I
1SupervisorI~ailhandlerlNOdb;CtsAGI
Costs (000) Costs (000)
[cl
Lb1
50
50
50
50
50
SO
$2
50
50
53
5105
$48
$16
$4
51
5173
5336
$131
542
$8
1 Cost per 1
WI
852
$3
$2
50
50
$50
591
$22
$154
510
55
51
50
$170
$266
$64
51
$122
$2.321
$1.060
$359
$84
$20
$3,845
$1,409
5550
$176
533
$3
$361
56.859
42
$11,363
$8
$878
516.667
$27,611
$12
$1,365
525.951
$8.08
$8.08
58.10
TYBR Icontinued)
$294
5179
$61
59
$1
$545
$6,839
$2,986
$799
592
510
$10,725
$16,034
$5,928
$1,505
590
510
$23,568
$3,470
$1,341
5351
535
55
$5,210
5104,580
There are two types of costs to be allocated.
One type of cost is allocated
$8.11
$8.11
$8.11
$8.11
%E.ll
$8.11
$6.05
$6.05
$6.05
$6.05
5605
$6,05
$5.59
$5.59
$5,59
$5.59
$5.59
$5.59
$5.80
$5.80
$5.80
55.80
$5.80
$5.80
$6~65
by
CAG. The second type of cost, which cannot be allocated by CAG, is allocated
proportionately
to the number of boxes in the same manner as performed by witness
Lion. See USPS-T-24
6
7
Postmaster
at 24.
costs are allocated according to the distribution
CAG. Table 13A presents the allocation of postmaster
43
costs.
,of postmasters
by
44
1 Table 13A. Distribution
of Postmaster
(continued)
Costs to Boxes
$133
$58
$16
$2
$2::
1,108
$410
$104
$6
$1
1,628
$358
$138
$36
$4
$1
$536
3,183
1
2
Table 138 begins the process of allocating postmaster
costs by CAG
3
Column [a] displays the number of offices by CAG in each fee group, and column [b]
4
computes the percent of offices by CAG in each fee group to the total number of
5
offices by CAG. For example, the data show 29 CAG A offices in Fee Group A,
6
which represents
2.55 percent (2911,136) of the total number of offices in CAG A
7
The percentages
computed
6
employees
9
example for postmasters,
in column [b] are used to distribute the number of
in each CAG to the CAG levels in each fee group.
Continuing
I estimate that there are two CAG A postmasters
45
the
in Fee
Group A, as shown in column [cl. This represents
postmasters.
The resulting percentages,
0.01 percent (2/26,403)
displayed
in column [d], od postmasters
each CAG level are then used to distribute total postmaster
each CAG level in the fee groups.
group and transferred
of all
costs of $3,163,000
The amounts so distributed
at
to
are totaled by fee
to Table 13A, where the totals are allocated
proportionately
by box size in each fee group.
‘able 138. Distribution
New
Fee
koups
CAG
of Postmasters
Percent
ofTotal
CAG
Level
Number
of
Offices
lb1
[al
Costs by CAG, and Index of Supervisors
by-CAG
Postmasters
Supervisoic -
Number
by CAG
Level
ICI
Percent
at CAG
Level
WI
Total
Costs
(000)
Index of
Employment
at
CAG Levf!l
[el
IfI
1
$1
$0
$3
1
1
1-
-
$8
$66
5173
1
1
1
1
1
-
$161
$176
1
1
A
9
2
0.73%
0.30%
-109
CAG K
CAG L
Total
5
2
21
0.02%
0.01%
1,053
637
1,213
638
92.53%
92.99%
97.74%
96.96%
68
163
661
545
1,437
0.26%
0.62%
2.50%
2.06%
1,228
1.264
91.23%
79.25%
1,334
1,456
5.05%
5.51%
136
23
809
1.68%
2.04%
151
28
946
0.57%
0.11%
520
580
518
53
$114
46
0
0
0
-
and Mailhandlen
Mailhandlers
Index of
Employment at
-. CAG Level
[91
‘able 138. Distribution
D-l
1
of Postmasters
I
I
Costs by CAG, and Index of Supervisors
by CAG (continued)
New Fee Groups
I
I
I
and Mailhandler
I
1
t
-2 1049
1,449
1,276
1,729
43.06%
4.83%
$154
$206
1
1
0
0
CAG A
CAG B
CAG C
CAG D
CAG E
CAG F
CAG G
CAG H
CAG J
CAG K
CAG L
Total
RAND TOTAL
0
1
5
1
12
37
149
314
712
2,219
462
3,912
25,484
The allocation
different method.
costs.
0.00%
0.15%
0.40%
0.15%
0.89%
2.32%
6.12%
10.40%
17.26%
27.35%
41.07%
0
0
3
1
13
43
181
374
813
2,456
561
4,445
26,403
of supervisor
0.00%
0.00%
0.01%
0.00%
0.05%
0.16%
0.69%
1.42%
3.08%
9.30%
2.12%
50
50
50
1
1
1
:;
1
5;;
1
0
0
0
0
0
$45
598
5296
566
5536
53,183
and mailhandler
1
1
1
1
1
0
0
0
0
0
costs by CAG is based on a
Table 13C shows the allocation of supervisor
and mailhandler
In order to allocate such costs, however, I used an index to represent the
employment,
or the absence thereof, of supervisors
CAG levels. This “Index of Employment,”
consisting
47
and mailhandlers
at certain
of a “1” to indicate employment,
1
and a “0” to indicate no employment,
2
Where a 1 is assigned to all CAG levels in a fee group, a 1 is also assigned to the
3
fee group.
4
also assigned to that fee group.
5
by the TYBR number of boxes in each fee group to determine
6
“supervisor”
7
Table 13C. The percent of total “supervisor”
a
volume-variable
9
determined
10
is shown in Table 13B, columns [fl and [g].
Similarly, where a 0 is assigned to all CAG levels in a fee group, a 0 is
The index number for each fee group is multiplied
boxes and “mailhandler”
supervisor
volume-variable
boxes, as shown in columns [:b] and [d] of
boxes in column [c] is used to allocate
costs of $7,531.000.
mailhandler
of Cost Segment 3 volume-variable
the number of
With respect to mailhandlers,
costs to be $12,039,000,
I
or 16.63 percent,
post office box costs of $71.527,000.‘9
Volume-
” See USPS LR-H-9 at 19-20. Total costs for Cost Segment 3 are $16.456
billion, of which 16.63 percent ($2.770/$16.456)
are mailhandler costs.
48
1
variable mailhandler
2
“mailhandler”
costs are then allocated based upon the percent of total
boxes shown in column [e].
49
Table 13C. Distribution
of Supervisor and Mailhandler
New 1
I
I
I
I
I
Fee
BOX
NBR
“Supervisor’
“Mailhandler”
Groups
Size
Boxes
Boxes
Percent
Boxes
[b]
[al
WI
1I
0:69%
72,138
A
1
72,138
72,138
4,501
0.04%
4,501
2
4,501
2,524
0.02%
2,524
3
2,524
242
0.00%
4
242
69
0.00%
5
69
0.76%
Total A
79,474
79,474
1.20%
B
11
124,912
124,912
Total B
C-l
1
2
3
1,561
1,524
168,795
3.202.901
1.463.355
495,338
I;561
1,524
168,795
3,202,901
1.463,355
0.02%
0.01%
1.62%
30.82%
14.08%
15
Total C-l
C-II I 1
28,158
5.306,156
1,944,781
28,158
5,306,156
1,944,781
0.27%
51.05%
16.71%
1 5
6,262
2.998256
151,459
47,532
15,375
1,612
532
216,510
36,301
22,069
7,552
1,096
180
1
67,198l
6:262
2.998,256
0
0
0
0
0
0
36,301
22,069
7,552
1,096
180
67,198l
0.06%
28.85%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.35%
0.21%
0.07%
0.01%
0~00%
065%1
4
5
Total C-II
C-III
1
2
3
4
5
Total C-III
D-l
1
2
3
4
5
Total D-1.
50
3,202.901
1.463,355
0
0
0
36,301
22,069
7,552
1,096
180
67,1981
Costs lo Boxes
I
I
56.97%
26.03%
0.00%
0.00%
0.00%
0.65%
0.39%
0.13%
0.02%
0~00%
1.20%1
$144
2
3
4
5
Total E
GRAND
TOTAL
231,140
60,501
6.078
640 _...~~
696,243
15,724,952
0
0
0
0
0
10.393,939
0.00%
0.00%
0.00%
0.00%
0.00%
100.00%
0
0
0
0
0
5,621,622
0.00%
cl.ao%
0.00%
0.00%
0.00%
100.00%
$0
$0
ii
$0
$0
$0
$0
$7,531
$12,039
1
The remaining costs, referred to as “non-CAG
2
3
proportionally
4
include $59,488,000
5
CAG costs is consistent
6
costs
costs,” are allocated
to the total number of boxes, as shown in Table 13D. Non-CAG
costs
of clerk costs from Cost Segment 3. The allo’cation of nonwith the methodology
51
used by witness Lion for All Other
52
Table 13D. Distribution
of Costs by Box Sk
1
2
Table 14 shows the development
3
and the TYAR unit box costs.
4
the TYAR of 1.002067747.
of the TYAR All Other costs by box size,
I assumed a volume variability for All Other costs in
See Tr. 13/7338-39
53
Table 14. Allocation
New
Fee
Groups
of All Other Costs to Boxes in New
New Fee Groups
Elasticity = I .002067747
Box OCA TYBR OCA NAR
Size
Boxes
Boxes
[al
A
1
72,138
4,501
2,524
242
69
79,474
124,912
29,996
10,802
1,561
1,524
168,795
3,202.901
15
Total B
C-l
1 1
NBR Total
uw
PI
50,960
3,186
1,892
197
57
56,293
96,390
22,055
8,410
1,295
1,285
129,434
2,534,252
NBR
TYARTotal
Cost Der All Other
ICI
$582,342
$36,333
$20,376
$1,955
$555
$641,561
$1,009,877
$242,513
$87,330
$12,620
$12.321
$1,364,661
$25,951,183
9,005,466
3.174,294
$750,108
$181,391
33,633,577
10,934,106
4,193,554
1,364,937
$255,063
$35,248
16.782,908
$867,950
$272,387
$88,106
$9,240
Total C-III
(
5321
216,5101
5321
216,510(
All
Other
cost
$3,0481
$1,240,731(
54
$8.10
$8.10
$8.10
$8.10
$8.10
$6.10
$6.10
$6.10
$6.10
$6.10
$6.10
$5.73
$5.73
$5.73
$5.73
C.
Space Support Costs Should Be Allocated
Used By The Postal Service
Using The Same Methodology
4
5
6
I allocate Space Support costs on the basis of equivalent
the same allocation
methodology
as presented
55
capacity.
This is
by witness Lion in IJSPS-T-24,
and
1
in Docket No. MC96-3.
2
the development
Table 15 shows the allocation of Space Support costs and
of NBR
Table 15. Allocation
unit costs.
of Space Support Costs to Boxes by New F
56
~Table 15. Allocation
2
3
4
5
Total D-III
E
1
2
3
4
1 5
Total E
GRAND
TOTAL
2
3
of Space Sup
1,060,532
269,261
16,184
1,769
4,216,260
599,685
231,140
60,501
6,078
840
898,243
15,724,952
Table 16 summarizes
1.5
3
6
12
1
1.5
3
6
12
1.31
Boxes by New Fee Groups,
NBR
1,590,798
807,784
97,105
21,228
5,385,429
599,685
346,709
181,502
36,467
10,080
1,174,442
21,723.555
the unit volume-variable
the test year before rates
57
box costs for the fee groups in
-ee Groups,
Cost Per
Box
14
$52.41
$74.58
$141.08
$274.08
$540.09
$57.58
$43.39
$61.04
$113.99
$219.89
$431.70
$56.18
$33.13
$45.64
$83.18
$158.26
$308.42
$45.46
$28.20
$39.25
$72.39
$138.68
$271.26
$36.76
$25.26
$35.03
$64.33
$122.93
$240.13
$31.44
$30.68
$41.96
$75.81
$143.50
$278.89
$41.96
58
1
59
V.
PROPOSED POST OFFICE BOX FEES SHOULD REFLECT THE HIGHER
COSTS OF PROVIDING BOX SERVICE IN LARGER VERSUS SMALLER POST
OFFICES, AND ENSURE A REASONABLE CONTRIBUTION TO INSTITUTIONAL
COSTS
6
Under my proposal, post office box fees would increase for Fee Groups A, B,
7
C-l, C-II, D-l, D-II and D-III. No fee increase is proposed for Fee Group C-III, or the
a
$0 fee for Fee Group E boxholders.
9
Group A range from 32 to 56 percent, and from 30 to 46 percent in Fee Group B
Proposed fee increases for boxholders
in Fee
10
Proposed fees for new Fee Groups C-l and C-II would increase by 40 percent and
11
15 to 16 percent, respectively.
12
percent.
13
percent, respectively
24
For new Fee Group D-l, fees increase by 100
For new Fee Groups D-II and D-III, fees increase 50 to 51 percent and 25
I propose fee increases for caller service averaging 22 percent, and I propose
15
a 43 percent increase for reserve call numbers.
16
annual fees, the fees proposed
17
percentage
Table 17 presents the current
by the Postal Service, and my proposed fees. The
change in fees is also presented.
60
OCA
Percent
Change
[el
56%
49%
48%
36%
32%
48%
44%
43%
33%
30%
40%
40%
40%
40%
40%
__.-_-
15%
16%
15%
15%
15%
0%
0%
0%
0%
0%
100%
100%
100%
100%
100%
61
wed)
50%
50%
50%
51%
51%
25%
25%
25%
25%
25%
2
3
4
5
,
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
0%
0%
0%
0%
0%
0%
0%
0%
0%
Total E
1
2
Collectively,
3
revenues of $94.3 million.
4
cost coverage for my proposal are shown in Table 16,
these changes result in a cost coverage of 116 percent and net
The before rates and after rates revenues, costs and
62
I
Table 18. Summary
New
FW
Groups
A
OCA
NER
Current Proposed
Boxes
Fees
Box Fees
72.138
548
575
BOX
Size
1
1 5
TotalA
1
(
s
1
1 1
of Revenues
691
79.4741
124.912(
$5501
544)
$651
571
$28.7131
1 56,2g31 $420’“o”l
96.3901
I
1
I1.944.7811
5401
.--.- _,““”
,__-
C-Ill
Toy
0-i
T-6,
1
2
3
4
5
c 111
151,459
47,532
15,375
1,612
532
*.e c.n
2
3
4
5
n-1
22:oi9
7,552
1,096
180
c7 <on
5104
5172
5288
553
583
54611.792.5311
540
558
5104
$172
520.3
$106
5166
NBIR
and NAR
537.1001
531.6171
.a a-0 zqc, -, rvF _..“I +
35.393
0,85
541.238.949
526.147,755
1.41
1.4,
$37 010
55.49
-, - - - - - - - -, -, -- $84.874.580
$81 1.112.183
C-II
New Fee Groups,
OCA
NAR
Boxes
50~960
54181
I
and Costs. Proposed
.I _.. r-- ^..~~--
..-..918.088
590.086.804
5106,108,004
566.790.269
$100.679,139
563,939,049
577.79
PIIV,L”I.II,
II”Y,Y”I,V”~
YIY.%d”-,III
L.,.,I,-y,
151,459
47,632
15,375
1.612
532
-'- -.-
20,642
7,279
1.070
170
El I*=
$6.056375
52.756.864
Sl.598.978
5277.319
5153.165
-'"%44.702
-435,608
5441,377
5271,869
558.107
$14.978
e. 114 m‘n
63
56.058.375
52.756.864
11.598.976
5277,319
$153,165
510.844.702
5824,544
$821,696
5524,117
S113.378
529,495
'",313,232
53826.400
51.665,052
5989,052
5198,200
5127,705
$6.806.408
5l.ll3.576
5925.982
5572,479
$157,328
550,327
52.819.693
Table 18. Summary
D-II
I
Rf?SWW
Number
GRAND
TOTAL
1
I 1.131.1351
162,113
of Revenues
$121
Wtll
$30
540
15.997.612
and Costs, Proposed
New
1.100.6371 313.573.1
New Fee Groups,
150.749
$5.463.379
56.029.976
14.362.735
$617.061.409
$690.035.776
TYBR and NAR
(continued)
Tz?-trl
$607.734.000
$595.694.00,
$94.341.775
1
2
3
Table 19 compares
the revenues, costs and cost coverage for the Postal
Service’s proposal and my proposal.
1 Table 19. Comparison
Post Office Box
and Caller Service
of Postal Service
TYAR
USPS Proposal
I
$683,362,079
costs
$589,954,455
Net Revenues
$93,407,624
Revenues
Cost Coverage
and OCA Prla
$690,035,776
I
116%
64
116%
1.16
A.
Proposed
Averaged
Fees And The New Fee Groups Constitute A Transition To DeAllocated Costs And Further Restructuring Of Fee Groups
The proposed
fees for boxes in new Fee Groups C-l, C-II and C-III and D-l,
D-II and D-III constitute
grouping comprising
a transition to a uniform fee by box size for each CAG
the new fee groups.
As stated previously,
combining
Fee
Groups C and D to create three fee groups out of CAG A-D, E-G and H-L offices
8
was tabled for the present.
9
combined fee groups would cause large percentage
To propose a uniform fee for each box size for such
increases for boxholders
from
10
Fee Group D. For example, if a new fee group, comprised
11
offices from Fee Groups C and D, were formed, a uniform fee of $56 for all size 1
12
boxes would represent
13
Fee Group C. However, a $56 fee for a size 1 box from Fee Group D would
14
represent a 367 percent ($56/$12-l)
increase.
15
shock” for Fee Group D boxholders,
I decided to move toward merging Fee Groups
16
C and D in separate stages.
17
Consequently,
a 40 percent ($56/$40-l)
of boxes in CAG A-D
increase for size 1 boxholders
from
Because of my concern about “rate
I formed three new fee groups from Fee Group C and three
18
from Fee Group D. This permits differential fee increases for boxes by CAG within
19
Fee Groups C and D until such time as Fee Groups C and D are merged and
20
restructured
by CAGs A-D, E-G and H-L. In so doing, the proposed fees result in
65
1
more gradual fee increases for boxholders
2
Fee Group D.
3
4
5
B.
6
in CAGs A-D, E-G and H-L from current
The Proposed Post Office Box Fees Satisfy The Pricing Criteria Of The
Postal Reorganization Act
The pricing criteria for postal rates and fees are enumerated
7
3622(b), paragraphs
8
the proposed fees for post office boxes, I considered
9
The proposed fees reflect my judgment
10
1 through 9, of the Postal Reorganization
in Section
Act. In developing
the relevant pricing criteria.
as to the application
Criterion number one refers to “the establishment
11
and equitable schedule.”
12
for Fee Groups A and B are higher than those proposed
13
reflecting the higher allocation
14
that comprise these fee groups.
of those criteria.
and maintenance
The proposed fees are fair and equitable.
of a fair
Proposed fees
by the Postal Service,
of All Other costs to boxes in the larger CAG offices
For the other fee groups, current post office box fees are misaligned with
15
16
costs.
Under current fees, boxholders
who are similarly situated in terms of CAG
17
pay vastly different rates. That is, boxholders
18
in Fee Group C pay much higher rates than size 1 boxholders
19
$40 and $12, respectively.
20
boxes are much closer together,
Nevertheless,
with size 1 boxes in CAG A-D offices
in Fee Group D, i.e.,
unit box costs in the TYSR for size 1
i.e., $33.13 and $30.68, respectively.
66
1
The proposed fees begin to reduce this inequity with higher fees for
2
boxholders
3
These boxholders
4
A-D offices from Fee Group C face a smaller increase of 40 percent.
5
boxholders
6
Groups C-II and C-III, respectively,
7
E-G and H-L offices from Fee Group D. which form new Fee Groups D-II and D-III,
8
respectively.
9
by 15 to 16 percent and 0 percent, respectively,
in CAG A-D offices from Fee Group D, forming new Fee Group D-l.
face a 100 percent increase.
In comparison,
boxholders
Similarly,
in CAGs E-G and H-L offices from Fee Group C, which form new Fee
Fees for boxholders
face smaller increases than boxholders
in CAGs
in new Fee Groups C-II and C-III would increase
while fees in new Fee Groups D-II
10
and D-III would increase 50 to 51 percent and 25 percent, respectively.
11
the Postal Service’s proposed fees increase between
12
boxholders
13
Fee Group D.
14
in CAG
By contrast,
11 and 13 percent for all
in Fee Group C, and between 50 and 53 percent for all boxholders
Moreover, the proposed fees permit a more gradual transition to a further
15
restructuring
16
I, D-II and D-III, and comparatively
17
would, over time, ease the transition for boxholders
18
CAG A-D, E-G and H-L offices from merged Fee Groups C and D in a future
19
proceeding.
20
21
in
of the classification
schedule.
Higher box fees for new Fee Groups D-
lower fees for new Fee Groups C-l, C-II and C-III
The second criterion directs that consideration
mail service actually provided.”
into fee groups; consisting
be given to “i:he value of the
Post office box service is an alternative
67
of
form of
1
delivery service that is valued by some customers.
2
security and the generally earlier availability of box mail vis-a-vis c,arrier delivery
3
service are valued features.
The value of service to boxholders
4
recognized
adopted by the Commission
5
and utilized in developing
6
in the elasticities
Box features such as privacy,
is explicitly
in Docket No. MC96-3,
my after rates volumes and revenues,
The third criterion -- recovery of attributable
costs -- requires that revenues
7
for each mail class or service be at least equal to the attributable
8
or service.
9
coverage of 107 percent.‘O
My proposed fees for post office boxes alone results in an implicit cost
Including caller service and reserve call numbers results
10
in combined
11
(without the 1 percent contingency).
12
Service’s proposed
13
call numbers, i.e., 116 percent (without the 1 percent contingency).
14
Criterion number four concerns “the effect of rate increases”
15
public.
16
boxholders.
c:osts for that class
net revenues of $94.3 million, with a cost coverage of 116 percent
Considerable
This cost coverage is identical to the Postal
cost coverage for post office boxes, caller service and reserve
on the general
attention was given to the effect of proposed fee increases on
Combining
Fee Groups C and D to form three new fee groups by CAG
” Under the Postal Service’s proposal, witness Needham claims post office
box revenues “make a small contribution with a 106 percent proposed implicit cost
coverage.” USPS-T-39 at 66.
68
1
was tabled at this time because of the significant
2
could attend a uniform fee by box size for certain boxholders
3
In order to limit such percentage
percentage
fee increases that
now ill Fee Group D.
fee increases, three new fee groups were
4
created from Fee Group D, with proposed fee increases limited to ‘100 percent for
5
boxholders
6
D) offices that comprise the new Fee Group D-l. In all, fee increases of this
7
magnitude
8
for boxholders
9
D-II. are limited to 51 percent, nearly the same percentage
in CAG A-D offices in Fee Group D -- boxholders
are limited to only 63,425 boxholders.
in the larger (CAG A-
Similarly, proposed fee increases
in CAG E-G oftices in Fee Group D, which comprise new Fee Group
10
proposed
11
in the smallest offices (i.e., CAG H-L) in Fee Group D, which comprise new Fee
12
Group D-III. are limited to 25 percent.
13
by the Postal Service.
fee increase as
Boxholders
At the same time, fee increases for all boxholders
in new Fee Groups C-III and D-III experience
14
percentage
15
Groups C and D, respectively,
16
smaller offices that comprise new Fee Groups C-III and D-III.
17
fee increases,
as compared
to other boxholders
reasonable
19
most feasible alternative
20
considered
from current Fee
because of the lower allocated costs to boxes in the
The fifth criterion directs consideration
18
the lowest
cost. For boxholders
to the role of available alternatives
subject to the proposed box fee increases,
is free carrier delivery service, if the proposed
too high or private sector alternatives
69
prohibitive.
at
the
box fees are
Criterion number seven refers to the “simplicity of [the] structure for the entire
schedule and simple, identifiable
relationships
between the rates or fees charged.”
For Fee Groups A, B and E, there is no change in the fee structure.
However, the
proposed fee group structure is more complex than the current fee group structure
for Fee Groups C and D. Fee Groups C and D are proposed to be replaced by six
new fee groups, C-l, C-II and C-III, and D-l, D-II and D-III, as a transition to a further
restructuring
represents
of the fee schedule.
a balance between substantial
a temporarily
10
11
12
13
C.
Consequently,
the proposed fee schedule
fee increases for certain boxholders
and
more complex fee structure for the Postal Service to administer.
The Proposed New Fee Groups Accord With The Classification
The Postal Reorganization Act
The classification
criteria for changes in mail and special service
14
classifications
15
Reorganization
16
to my development
17
groups reflect my judgment
18
Classification
are found in Section 3623(c), paragraphs
Act. I have considered
of the proposed
1 through 15,of the Postal
the relevant classification
new fee groups.
as to the application
fair and equitable
classification
20
are fair and equitable
21
group structure,
criteria in relation
Establishmerlt
and maintenance
system for all mail.” The proposed
in that they maintain the basic distinction
i.e., that between boxholders
70
of the new fee
of those criteria.
criterion one refers to the “establishment
19
Criteria Of
of a
new fee groups
in the existing fee
eligible for carrier delivery service and
1
those not eligible for carrier delivery, with boxholders
2
fees, and those not eligible paying no box fees, Establishing
3
by CAG from Fee Group C that parallel three new fee groups from Fee Group D
4
begins the process of eliminating
5
where boxholders
6
delivery, respectively,
7
groups in terms of box service, the availability of carrier delivery service, and costs.
8
9
Classification
the dichotomy
pay differing fees depending
and explicitly recognizes
eligible for delivery paying box
three new fee groups
between Fee Groups C and D,
upon their elrgrbrlrty for city or “rural”
the similarities
criterion five concerns “the desirability
between these
of special classifications
from the point of view of both the user and the Postal Service.”
From the point of
10
view of boxholders,
the new fee groups better reflect the costs of providing box
11
service in post offices of comparable
12
Service, the fact that boxholders
13
services provided by either city or rural carriers would, in the future, no longer lead
14
to significantly
size. From the point of view of the Postal
in Fee Groups C and D are eligiblle for delivery
different post office box fees.
71
1
VI.
CONCLUSION
2
Current post office box fees and the existing fee groups do not adequately
3
recognize the higher costs of providing box service in larger offtces nor the lower
4
costs in smaller offices.
5
methodology
6
for boxholders
in smaller offices and inappropriately
7
larger offices.
As a result, current fees, and the Postal Service’s proposed fees,
8
produce fees that are too high in smaller CAG offices and too low iin larger CAG
9
offices.
for allocating certain post office box costs results in unfairly high costs
The restructured
10
The existing fee group structure and the Postal Service’s
low costs to boxholders
in
post office box fee groups and the new cost allocation
11
methodology
proposed
12
Restructuring
Fee Groups C and D based upon CAG produces more rent-
13
homogeneous
14
Similarly, my new cost allocation
15
variable post office box costs by CAG, better reflects costs in larger and smaller
16
offices.
17
herein provide a more reasonable
cost-basis
for setting fees.
fee groups that better reflect cost in larger and smaller offices.
The proposed
criteria.
methodology,
that distributes
a portion of volume-
post office box fees satisfy the relevant statutory pricing and
18
classification
My proposed
box fees, combined with caller service and
19
reserve call number fees, provide virtually the same net revenues as proposed
20
the Postal Service, and a reasonable
contribution
72
to institutional
costs. The
by
1
proposed
2
post office boxes by creating a more rational structure of fee groups based upon
3
CAGs.
classification
changes establish a more fair and equitable classification
73
for