UNITED STATES OF AMERICA
Before The
POSTAL RATE COMMISSION
Postal Rate and Fee Changes
RECEIVEL)
JUN22 IO43 AH‘00
Docket No. R2000-1
)
ANSWERS OF THE OFFICE OF THE CONSUMER ADVOCATE
TO INTERROGATORIES
OF THE UNITED STATES POSTAL SERVICE
WITNESS: JAMES F. CALLOW (USPS/OCA-Tl-11-12)
REDIRECTED FROM WITNESS GERARDEN
(June 22,200O)
The Office of the Consumer
Callow to interrogatories
witness Gerarden.
Advocate
USPSIOCA-Tl-11-12,
Each interrogatory
hereby submits the answers
dated June 8, 2000, and redirected
is stated verbatim
Respectfully
EMMETT
Attorney
from
and is followed by the response.
submitted,
TED P. GERARDEN
Director
Office of the Consumer
1333 H Street, N.W.
Washington, D.C. 20268-0001
(202) 789-6830; Fax (202) 789-6819
of James F.
Advocate
RAND COSTICH
ANSWERS OF OCA WITNESS JAMES F. CALLOW
TO INTERROGATORIES
USPS/OCA-Tl-1
I-12
USPSIOCA-Tl-11
On page 6 of your testimony at lines 14-16 you state that, “Moreover, as proposed by
the OCA, there would be a ‘safety valve’ that would permit the SPFC rate to be
increased in two consecutive
rate cases if a failure to do so would create a severe
shortfall in the reserve account, or cause excessive shifting of First-Class Mail between
single-piece and workshare categories.”
(4
Please define “severe
(b)
Please define “excessive
(c)
Who would decide when circumstances
Cd)
On page 6 at lines 24 of your testimony, you state, “The Postal Service would
continue to decide when to file rate cases and what rates to propose for each
rate class and category.” On page 6 at lines l-2 of your testimony, you state, “It
[reserve account proposal] is designed to safeguard
the prerogatives
of the
Postal Service.
.” Does this mean that, under your proposal, the Postal
Service would decide when it is necessary to use the “safety valve”? Please
explain.
RESPONSE
(a)
described
Although
shifting” as used in this sentence.
justified
I do no use the phrase
in my testimony,
The
reference
causing the “calculated”
expected
as used in this sentence
using the “safety valve”?
TO USPSIOCA-Tl-11
respectively.
change
shortfall”
deficiency
OCA-T-6,
Part
in witness
Gerarden’s
non-integer
in the SPFC integer
II, at 45-46,
lines 22-23,
Account
generated
Account
is also
and
1-3,
is to circumstances
at a level at which, without
Consequently,
in the SPFC Reserve
this concept
testimony
rate, the SPFC Reserve
(e.g., more than the revenue
balance
shortfall,”
rate to be established
period) during the second rate case period.
as a negative
“severe
a
would accrue a large
in the first rate case
I define a “severe
estimated
shortfall”
for the end of the
second rate case period such that waiting until the third rate case to increase the SPFC
ANSWERS OF OCA WITNESS JAMES F. CALLOW
TO INTERROGATORIES
USPSIOCA-Tl-11-12
integer rate would produce “rate shock.”
(b) Although
I do not use the phrase
described
in my testimony,
“excessive
shifting”
and workshare
OCA-T-6,
shifting,”
this concept
Part II, at 46, lines 3-8 and 19-23.
as a circumstance
where
mail would be greater
occur at the point where
“excessive
the volume shifting between
than approximately
the “calculated”
non-integer
5 percent.
single-piece
is also
I define
single-piece
This is likely to
rate is 1.5 cents
above the SPFC integer rate.
(c) - (d)
described
Service
Although
I do not use the phrase
in my testimony,
OCA-T-6,
“safety valve,”
Part II, at 45-46.
could invoke the “safety valve”
in its request
In the first instance,
The Postal Service
mail through
the test year based upon its model of First-Class
time of the filing and to estimate the balance
period.
This information
be “drawn”
determination
single-piece
case
period.
establishing
volumes.
in the SPFC Reserve
through
the Postal
the duration
rate
First-Class
I would also
Account
at the
of the first rate case
would in turn permit an estimate of the amount of revenue
from the SPFC Reserve
as to whether
Account
balance
increase
the “calculated”
estimates,
non-integer
in the “calculated”
non-integer
be an increase in the SPFC integer
in the SPFC Reserve
Of course,
to
during the second rate case period, and a
the requested
rate is such that there should
avoid a negative
the volume of single-piece
to know the balance
is also
at the time of the second
proceeding.
expect the Postal Service
would estimate
this concept
rate to
Account at the end of the second
projections,
single-piece
and all other
factors
involved
rate and the SPFC integer
rate
in
rate
ANSWERS OF OCA WITNESS JAMES F. CALLOW
TO INTERROGATORIES
USPSIOCA-Tl-II-12
would be subject to litigation
the estimates
and information
make an independent
the SPFC integer
Board of Governors
Moreover,
collectively
by all parties.
submitted
recommendation
rate.
Ultimately,
I would expect the Commission
by the Postal Service,
as to whether
however,
I would
hope
the
Postal
be able to agree on the circumstances
integer rate would be warranted.
the “calculated”
single-piece
as it does now, and to
there should be any changes
this would
acting upon the Commission’s
be a policy decision
recommended
Service
and
of the
Commission
under which an increase
in the SPFC
in circumstances
rate in the second rate proceeding
would
where
is expected
to increase by more than 1.5 cents above the existing SPFC integer rate, a change
the SPFC rate could be warranted.
See OCA-T-6,
Part II, at 46.
in
decision.
the
As I suggest in my testimony,
non-integer
to review
in
ANSWERS OF OCA WITNESS JAMES F. CALLOW
TO INTERROGATORIES
USPS/OCA-Tl-11-12
USPSIOCA-Tl-12
In the initial implementation
of the proposed reserve account, is the intention of the
OCA to build up a surplus in the early years that would then be drawn down in the later
years as the second rate case period ends?
(4
If so, have you evaluated, either quantitatively or qualitatively, how consumers
feel about the tradeoff between essentially overpaying postage for approximately
two years in return for possible rate stability in later years? Please explain and
provide any documentation
and supporting information.
0))
Do you see any conflict between this proposal and the statutory requirements
under which the Postal Service operates, for example, that it breakeven and
cover its costs?
RESPONSE
TO USPSIOCA-Tl-12
More precisely, the intent is to generate
reported
balance
the SPFC integer
sufficient
revenues
to produce a positive
in the SPFC Reserve
Account
in the first rate case period to permit
rate to be maintained
through
the second
the second rate case period, where maintenance
likely cause a revenue
“deficiency,”
rate case period.
During
of the same SPFC integer rate would
the existing positive
balance in the SPFC Reserve
Account from the first rate case would be used to make up this deficiency.
See OCA-T-
6, Part II, at 38.
(a) No. See my response
(b) I am not a lawyer.
this question
otherwise
requirement
seeks one.
interfere
with
to USPSIOCA-TG-2
Consequently,
I cannot give a legal opinion to the extent
That said, however,
Postal
Service’s
my proposal
obligations
or cover the costs of postal services.
to
would
meet
As envisioned
not preclude
the
or
“breakeven”
here, my proposal
ANSWERS OF OCA WITNESS JAMES F. CALLOW
TO INTERROGATORIES
USPS/OCA-Tl-11-12
would simply permit a longer period of stability for the single-piece
generating
sufficient
SPFC integer
rate through
Class mail “breakeven”
rate is in effect.
revenues
in the first rate case period
two rate case periods.
First-Class
rate by
in order to maintain
The intent is that single-piece
the
First-
over the two rate case periods in which the same SPFC integer
DECLARATION
I, James
interrogatories
F. Callow,
USPS/OCA-Tl-1
declare
G-2-r
-00
penalty
of perjury
that the answers
I-12 of the United States Postal Service
correct, to the best of my knowledge,
Executed
under
information
and belief.
to
are, true and
CERTIFICATE
I hereby certify that I have
participants
this date served
of record in this proceeding
Practice.
Washington, DC 20268-0001
June 22,200O
OF SERVICE
in accordance
the foregoing
document
upon all
with Section 12 of the Rules of