DOCKET SECTION
BEFORE THE
POSTAL RATE COMMlSSlON
WASHINGTON, DC. 20268-0001
\
POSTAL
RATE AND FEE CHANGES,
1997
;
,
,:; !
Docket No. R97-1
NOTICE OF FILING AND SERVICE OF ERRATA
TO PREPARED TESTIMONY OF MAJOR MAILERS ASSOCIATION
WITNESS RICHARD E. BENTLEY
(MMA-T-1 and Exhibit MMA-IC)
Major Mailers Association
(MMA) hereby notes that it is filing and serving revised
pages to its witness Bentley’s prepared testimony and exhibits, tiled on December 30, 1997
in order to correct two errors.
MMA-T-l.aaae
On line 7 of this page, MMA has eliminated an incorrect citation
to “USPSIMMA-T32-23.”
MMA-T-1.e
percent”
& On lines 2-3 of this page, MMA has changed the words, “69
to “39 percent.”
Corresponding
changes have been made in a bar graph on
Figure 1 on page 5A and in Exhibits MMA-lC,
pages 1, 2 and 3 The reasons for this
change are explained in Mr. Bentley’s Response to Interrogatory VP-CW/MMA-T1-4,
on February
filed
1.0, 1998. Copies of the changed pages are attached, and a new disk has
been filed with the Commission.
February 13, 1998
Riclf;ard-Littell
Suite 400
1200 Nineteenth St., N.W.
Washington, D.C. 20036
(202) 4668260
Counsel for MMA
Revised
(2/11/98
1
contribute
2
contrast, Commercial
3
percent of weight, is being asked to provide only 20 percent of total mail revenues (Id.).
4
Although First-Class Mail and Standard A mail are processed differently in some respects,
5
any differences
6
costs, and First-Class
7
revenue as commercial
8
9
10
55 percent of total mail revenues (See Figure 1 and Exh. LIMA-IC,
p.1).
ln
Standard A mail, which accounts for 34 percent of volume and 39
in costs between the two mail types are already reflected in affr?bufab/e
Mail is required to generate almost three times as much to total
standard mail. (Id.).
The Postal Service accomplishes
its overcharging
that class with an excessive share of institutional
In past cases, the Commission
of First-Class Mail by burdening
(or overhead)
costs.
has condemned this practice.
In Docket No. R87-
11
1, the Commission
12
to the system wide average,” while third-class
13
move towards a cost coverage “near average” (R87-1 Op., pp. 367, 380). In Docket No.
14
R90-1, the Commission expressed displeasure about”perpetuat[ing]”
15
First-Class mailers are providing revenues which more properly should be provided by
16
third-class mailers.... (R90-1 Op., pp. IV 33-34).
17
rejected a proposed settlement
18
types’ contribution
19
MC95-1, the Commission
20
Class and Standard
21
MC951,
22
articulated its “general goal” to set “First-Class cost coverage...close
to institutional
bulk mail (now Standard A Mail) should
a “situation in which
In Docket No. R94-1 the Commission
that “would only amplify the distortion”
costs (R94-1 Op., p. IV 16).
in the two mail
Finally, in Docket No.
reaffirmed its “view that the largest volume subclasses in First-
Mail should have roughly equivalent
markup indices” (Docket No.
pp. l-8).
In these past cases, the Commission
has used a number of Imeasurements
to
Revised
(2/U/98)
1
C.
2
In past studies, the Service’s technical staff has uniformly found that the cost of
The Service’s Own Studies
3
processing two-ounce
4
that staff has stated that the additional charge for two-ounce letters is excessive and should
5
be eliminated.
6
provide data on the costs of additional-ounce
7
that it has performed
a
9
IO
D.
letters is no more than the cost of processing one-ounce
But, although the Commission
no new studies.
has repeatedly
requested
letters, and
the Service to
letters, the Service has not done so, saying
(See Tr.4:1438-46.)
Postal Service Witnesses Assume That Weight Has
No Impact On Processing Cost
Finally, Postal Service witnesses
implicitly assume that weight
has no bearing
11
whatsoever
on labor costs in their mail flow analyses that support rates proposed for First-
12
Class and Standard A. Both USPS witnesses Hatfield and Daniel simply assumed identical
13
labor productivity rates for average letters within each class. Yet, Standard A letters weigh
14
on average over 50% more than First-Class letters. Therefore, the Service has assumed
15
in this situation that processing costs do not change if a letter weighs between one and two
16
ounces or under one ounce.
Comparison
17
E.
18
In Docket
Wii
Previous Proposal
No. MC95-1,
I offered
19
additional-ounce
20
testimony,
21
objections to my Docket No. MC95-1 proposal.
22
23
24
rates for First-Class
a somewhat
I have now modified
letters.
that proposal
VI.
different
As explained
proposal
for reducing
in Attachment
2 to this
in ways that obviate the Commission’s
CONCLUSION
In previous rate cases, the Commission
has made some reductions
in First-Class
Mail’s burden of institutional costs, but it has also had to defer greater psductions because
20
(Revised
Comparison of Selected N AR First-Class and Commercial Standard A Data
(Millions)
(1)
TY AR Data
Volume (Pieces)
% of Total Volume
Weight (Pounds)
% of Total Weight
Revenues
% of Total Revenues
Attributable Costs (USPS)
% of Total Attrib Costs (USPS)
Attributable Costs (PRC)
56 of Total Attrib Costs (PRC)
Institutional Costs (USPS)
% of Total lnst Costs (USPS)
Institutional Costs (PRC)
% of Total lnst Costs (PRC)
Unit Revenue
Unit Attributable Cost (USPS)
Unit Attributable Cost (PRC)
Unit Contrib to lnst Costs (USPS)
Unit Conttib to lnst Costs (PRC)
First-Class
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
r/ AR Data
Volume (Pieces)
Revenues
Attributable Costs (USPS)
Attributable Costs (PRC)
Unit Revenues
Unit Attributable Costs (USPS)
Unit Attributable Costs (PRC)
Unit Contrib to lnst Costs (USPS)
Unit Contrib to lnst Costs (PRC)
First-Class
20
21
22
23
24
25
26
27
28
I etters
95.551
b9%
4,075
17%
$33,615
55%
$16,806
49%
$20,250
51%
$16.609
62%
$13,365
61%
$.35
$.16
$.21
$.18
$.14
(2)
Commercial
Std A
66.314
j4%
9,095
39%
$12,326
20%
$7.077
21%
$7.780
20%
$5,249
19%
$4,546
21%
$.19
$.ll
$.12
$.06
$.07
Commercial
95,551
$33,615
$16.806
$20,250
9.35
$.18
$.21
$.18
$.14
66,314
$12,326
$7,077
$7,700
$.19
$.ll
$.12
$.06
$.07
(3)
First-Class and
Standard Mail A
IQtal
161.665
(2/11/98)
Exhibit MMA-IC
Page 1 of 5
(4)
194,387
Exhibl, USPS30G (Rev. WZW)
13,170
23,489
$45,941
$61,630
$23,083
$34,486 ExblbWUSPSdOS (Rev. 9119197)
$28,030
$39,697
$22,058
$27,044
Line 5 -Line 7
$17,911
$21,933
Line 5 -Line 9
5.28
$.15
$.17
$.14
s.11
Fwst + Stan&@
161,865
$45,941
$23,003
$28,030
5.28
s.15
$.17
$.14
$.ll
Colored 3D Graphs for testimony
Exhibil USPSISJ. pp. 15.
Exhibit USPS-308 (Rev. 9119197)
Exhibit PRC-308 (Rev.fOi23197)
$.32 line 5 I line I
$. 18 Line 7 I Line 1
$.20 Line 9 I Line 1
$.14LlnellILlne1
$.ll
Llne13/Line,
AlLMail
194.387
Exhibit USPS30G (Rev. 8/22197)
$61,630
Exhibit USPSJOS (Rev. 9,19/97)
$34,486
Exhibit USPS-308 (Rev. 9,19/97)
$39,597
Exhibit PRC-308 (Rev.10/23197)
$.32 line 21 /Line 20
$.18 Line 22 I Line 20
$.20 Line 23 I Line 20
5.14 Line 24 - Line 25
$.l 1 Line 24 -Line 26
TY AR Data
Figure 1: Comparison of First-Class and Commercial
Using PRC Cost Methodology
(Docket No. R97-1, TY AR)
Standard
(Revised 2/l 1198)
A
-
60%-
50%G
40%
30%
20%
10%
0%
1
% of Total Volume
% of Total Weight
of Total
Revenues
% of Total Attrib
Costs (PRC)
% of Total mst
Costs (PRC)
Comparison
70%
of First-Class
and Commercial Standard A Using USPS Cost Methodology
(Docket No. R97-1, TY AR)
Ii
60%
49%
50%
40%
30%
20%
10%
0%
6 of Total Volume
(Original Filed In Color)
56 of Total Weight
% of Total
Revenues
56 of Total Attrib
costs (USPS)
% of Total lnst Costs
(USPS)
Exhibit MMA-1 C
Page2of
5
Revised (2/i l/98)
70%’
,
Comparison
of First-Class
and Commercial Standard A Using PRC Cost Methodology
(Docket No. R97-1, TY AR)
__---__l_---_l__l--~------~~.-~~--”~--~
-_._
60%
50%’
40%,
30%
20%
10%
O%,
% of Total Volume
(Original Filed In Color)
% of Total Weight
% of Total
Revenues
% of Total Attrib
Costs (PRC)
% of Total lnst Costs
WC)
--._.
Exhibit MMA-IC
Page3of
5
(Revised Z/l l/98)
CERTIFICATE
OF SERVICE
I hereby certify that I have this day served the foregoing document,
Class Mail, upon the participants
February 13,1998
in this proceeding.
by First-