BEFORE THE
POSTAL RATE COMMISSION
WASHINGTON, D.C.
20268-0001/to!
RECEIVE11
13 1024A/i '96
pssT:i ;,syy r;('-';);s‘::,'!,
OI'F,CC?i ~It!LSE"'iFl~r\‘f
Special
Services
Fees
Docket
and Classifications
No.
MC96-3
ANSWERS OF THE OFFICE OF THE CONSUMER ADVOCATE
TO INTERROGATORIES OF UNITED STATES POSTAL SERVICE
PAMELA A. THOMPSON (USPS/OCA-T200-10-17)
WITNESS:
(NOVEMBER 13, 1996)
The Office
answers
17,
of
dated
and is
of
Pamela
November
followed
the
A.
Consumer
Thompson
1,
by the
1996.
Advocate
hereby
to
interrogatories
Each
interrogatory
submits
the
USPS/OCA-T200-lois
stated
verbatim
response
Respectfully
submitted,
EMMETT RAND COSTICH
Assistant
Director
Office
of the Consumer
Advocate
NOY
i
3 Vi6
,
‘L(,
8.L
,.
.‘.l.--.~
,
,.r
~’
ANSWERS OF OCA WITNESS PAMELA A. THOMPSON
TO INTERROGATORIES USPS/OCA-T200-IO-17
Please
refer
to your response
to
USPS/OCA-T200-10.
interrogatory
USPS/OCA-T200-1,
where you state
that
"the terms of
[Resolution
No. 95-91 will
be met in both FY 96 and FY 97 without
any rate
increases."
I?lease refer
to the Attachment
to OCA/USPS-74
;and confirm
(a)
If you do
that
the FY 96 and 97 net incomes
are estimateis.
not confirm
please
explain.
I?lease
confirm
that
it is possible
for net revenue
to fall
(b)
If you do not confirm
please
explain
short
of estimates.
why this
is not possible.
Assume the Postal
Service
falls
short
of the nst revenue
(c)
Under
amounts
estimated
in the Attachment
to OCA/USPS-74.
such a scenario
is it possible
the Postal
Service
would need
additional
net revenue
in FY 1997 in order
to Imeet the Board
of Governors
equity
restoration
target
through
FY 97?
If
this
is not possible
please
explain
why?
(a).
A.
Confirmed.
(b)-(c)
that
net
revenue
Postmaster
Governors
$1.5
Anything
Postal
net
Service
order
the
Board
of
the
Postal
needs
to
eliminate
Governors'
file
that
should
the
in
possibility
restoration
specify
rate
for
October
end the
additional
equity
an omnibus
to
best
any
the
However,
at
second
income,
Service
and
stated
"We now expect
believes
needeNd in
it
Runyon
meeting,
including
possible,
estimates.
exceeds
General
lbillion
is
FY 96,
8,
year
Board
revenues
of
a
If
the
will
failure
target
for
be
to
meet
FY 97,
net
of
with
history."
how much additional
case.
1996,
fiscal
postal
net
possibility
then
revenue
ANSWERS OF OCA WITNESS PAMELA A. THOMPSON
TO INTERROGATORIES USPS/OCA-T200-IO-17
CONTINUATION
There
pay
what
Postal
projections
causal
OF ANSWER TO USPS/OCA-T200-10:
is
no basis
amounts
Service
to
of
in
connection
for
targeting
an insurance
the
FY 97.
with
risk
that
The cost
the
certain
premium
overall
of
targeted
speciarl
designed
net
removing
special
to
revenue:;
that
ri;sk
serviceis.
services
relieve
fall
has
to
the
below
no
ANSWERS OF OCA WITNESS PAMELA A. THOMPSON
TO INTERROGATORIES USPS/OCA-TZOO-lo-17
USPS/OCA-T200-11.
Please
refer
to your response
to
interrogatory
USPS/OCA-T200-2(a),
where you point
out that
Dockets
No. MC95-1 and MC96-2 used FY 95 as the test
year,
while
Docket
No. MC96-3 uses FY 96 as the test
year.
Do
you
believe
that
the
Postal
Service
should
have used FY
(a)
95 as its
test
year for Docket No. MC96-3?
Please
explain
your views on the selection
of the appropriate
test
year for
Docket
No. MC96-3 fully.
Is it your opinion
that
all
classification
reform
(b)
initiatives
filed
before
the next omnibus
rate
case should
use FY 95 as the test
year?
A.
(a)
test
year
arbitrary
I am not
in
to
However,
use.
determination
additional
net
because
a few
special
Such
(b)
reducing
the
issues
to
actua:l
cost
projections
used
<as the
no one
appearance
ye,?.rs
had
of
favoritism
Rate
changes
contributions
are
only
meaningful
beyond
the
Postal
the
Service
Postal
services
$339.4
the
certainly
or
the
to
of
coverages
expects
the
bad
Service's
with
an
simply
million
luck
what
to
be ready
for
filing.
an approach
reference
tell
special
requirement
be litigated.
year
target
services
reform
to
I do object
to
revenue
classification
in
a position
point.
same cost
test
year.
has
as well
back
when
There
solely
"in
the
are
such
as
as th'e number
designed
When rates
coverage
advantages,
line"
old
set
or
contribution
is
thus
test
for
no basis
to
of
bring
with
test
year
is
a test
to
for
year,
prevail
a
a
ANSWERS OF OCA WITNESS PAMELA A. THOMPSON
TO INTERROGATORIES USPS/OCA-T200-10-17
CONTINUATION
claim
between
that
OF ANSWER TO USPS/OCA-T200-11(b):
rates
are
a general
rate
-
‘out
of
case
line"
test
when
year
a comparison
and some later
is
made
year.
ANSWERS OF OCA WITNESS PAMELA A. THOMPSON
TO INTERROGATORIES USPS/OCA-T200-10-17
USPS/OCA-T200-12.
Please
refer
to your response
to
interrogatory
USPS/OCA-T200-2(a),
where you quote
from the Postal
Service's
Docket
No. MC95-1 Request,
at page 2, concerning
the
Postal
Service's
proposal
to m... establish
this
framework
as the
basis
for current
and future
classification
reforms..."
Please
confirm
that
the
"framework"
referred
to in this
(a)
quote has nothing
to do with the Postal
Service's
contribution
neutrality
goal for Docket No. MC95-1,
which
is
first
presented
two pages later
in the Request.
If you do
not confirm,
please
explain.
Assume that
the "framework"
for classification
reform
(b)
referred
to on page 2 of the Postal
Service's
Docket
NO.
MC95-1 relates
to defining
the classes
of mail
to reflect
different
service
levels
desired
by customers.
Under this
assumption
please
confirm
that
Docket NO. MC96-3 is
consistent
with
(or unrelated
to) the classification
reform
framework
presented
on page 2 of the Docket No. MC95-1
Request.
If you do not confirm,
please
explain
why?
A.
(a)
Request,
Not
goes
confirmed.
on to
The Postal
Service's
Docket
No.
MC95-1
state,
The Postal
Service
has also determined
that
within
this
framework
the criteria
used to define
sub#classes
of mail
should
be
.
The Postal
Service
has developed
the following
guiding
principles
for use in designing
specific
classification
reform
proposals:
Given this
systematic
approach
to classification
the Postal
Service's
classification
reform
redesign,
(effort
is, by necessity,
an ongoing,
evolutionary
process
which will
continue
over the course
of the next
This Request
addresses
those
reforms
that
,few years.
(are ready
for Commission
review
and implementation
now.
Others
will
be developed
.
volumes
and revenues
for the
Postal
costs,
reformed
subclasses
will
necessarily
change as a result
#of the classification
reform
and associated
rate
The proposed
rates
are designed
so that
the
changes.
ANSWERS OF OCA WITNESS PAMELA A. THOMPSON
TO INTERROGATORIES USPS/OCA-T200-IO-17
CONTINUATION
OF ANSWER TO USPS/OCA-T200-12(a):
Postal
Service
will
recover
approximately
the same FY
1995 institutional
cost contribution
from the reformed
subclasses
.
This contribution
neutrality
goal was established
From
Request,
were
it
that
is
designed
to
were
Postal
lull
the
that
and all
"framework,"
to
classification
which
Request
Decision
and Third-Class
of
the
Request
part
continue
over
United
States
Docket
addressed
neutrality
I have
interveners
principles,"
and
of
an
the
"ongoing,
course
Postal
Reform
No.
its
as a ruse
redesign,"
not
in
and revenues
participating
on Classification
Mail,
Should
"guiding
were
will
costs
Request
MC95-1.
MC95-1
the
goal"
the
Service
The contribution
No.
Service's
Postal
volumes,
that
review.
Commission
process
years"?
in
true
Docket
neutrality
A Recommended
Second-,
for
in
approach
evolutionary
few
also
ready
by the
changes
is
the
"contribution
provided
that
It
believing
"systematic
next
clear
was established
interpreted
into
information
anticipated.
reforms
goal
the
MC95-1,
of
of
Service
First-,
at
3
the
For
ANSWERS OF OCA WITNESS PAMELA A. THOMPSON
TO INTERROGATORIES USPS/OCA-T200-10-17
CONTINUATION
(b)
this
OF ANSWER TO USPS/OCA-T200-12:
I dispute
question.
survey
In
special
addressed
the
accuracy
Docket
No.
service
the
service
users.
did
survey
special
not
they
desired.
Box Price
to
Service
witness
Ellard
to
Postal
Service's
special
service
Service's
does
not
to
considering
to
with
the
consumers'
confirm
not
to
ask
eliminate
your
request.
on Post
users"
levels
Office
sensitivity
users
Another
example
service
return
"return
COCA-T-100
Service's
service
Postal
levels
claim
levels.
Even putting
how they
desired
of
the
by
The Postal
receipt.
which
users"
desired
service
service
the
Postal
the
be
Service
special
information,
of
Postal
desired.
consider
in
the
Research
fee.
not
coincidentally
levels
box
occurs
address
by nine-tenths
inconsistent
did
did
primarily
who may
examined
service
Service
Service
regarding
Market
a non-resident
users
include
the
underlying
Postal
MC96-3,
users
not
failure
decision
preferred
unable
service
No.
USPS-SSR-111,
changes,
response
the
The Postal
Docket
example,
level
assumption
MTAC members,
In
Sensitivity,
price
would
For
of
the
MC95-1,
users.
concerns
special
of
receipt
is
service
shown
at
to
ll),
that
be
is
they
Therefore,
aside
that
the
are
I am
ANSWERS OF OCA WITNESS PAMELA A. THOMPS0.N
TO INTERROGATORIES USPS/OCA-T200-lo-17
CONTINUATION
issue
that
OF ANSWER TO USPS/OCA-T200-12(b):
regarding
the
inconsistent
the
Postal
with
contribution
Service's
its
neutrality
request
Request
in
in
goal,
Docket
Docket
No.
No.
it
would
MC9EY-3 is
MC95-1.
seem
ANSWERS OF OCA WITNESS PAMELA A. THOMPSON
TO INTERROGATORIES USPS/OCA-T200-lo-17
USPS/OlZA-T200-13.
Please
refer
to your response
to
USPS/O'?A-T200-2(b),
where you state
that
"not all
future
classification
cases must be net revenue
neutral."
Please
provide
an example
of a classification
case that
(a)
would not need to be net revenue
neutral.
(b)
HOW would a "classification"
case need to be formulated
that
you would not consider
it to be part
of "classification
reform"
as begun in Docket No. MC95-l?
A.
(a)-(b)
knowledge,
classification
Please
Docket
see my response
No.
case
MC96-1
that
filed
was not
to
by the
part
of
USPS/OCA-T400-21.
Postal
Service
classification
so
To my
was a
reform.
ANSWERS OF OCA WITNESS PAMELA A. THOMPSON
TO INTERROGATORIES USPS/OCA-T200-IO-17
USPS/OCA-T200-14.
Please
refer
to your response
to
USPS/OCA-T200-2(b),
where you state
"if
the Postal
Service
had
wanted
to use classification
reform
to generate
revenues,
it
should
have done so from the beginning."
Assume that
the Postal
Service
had requested
additional
net revenue
in Docket
No.
MC95-1.
Would that
make the Postal
Service's
request
for
additional
net revenue
in Docket No. MC96-3 more acceptable
to
you?
If so, please
explain
why.
A.
F'lease
see my responses
USPS/OCA-T200-12.
net
revenues
revenues
such
in
were
a request
The request
remains
acceptable.
If
Docket
somehow
would
for
arbitrary
the
to
USPS/OCA-T400-21
Postal
Service
NO. MC95-1
attributable
be neither
additional
net
had requested
and the
to
need
the
and discriminatory
for
reformed
arbitrary
revenues
and
nor
in
additional
classes,
net
then
discriminatory.
Docket
and would
additional
not
No.
MC963
be any more
ANSWERS OF OCA WITNESS PAMELA A. THOMPSON
TO INTERROGATORIES USPS/OCA-T200-IO-17
USPS/OCA-TZOO-15.
Please
refer
to your responses
to
USPS/OCA-TZOO-6.
Is it your testimony
that
rates
determined
in an omnibus
(a)
rate
case are necessarily
fair
and equitable?
If your
answer
is other
than yes, please
explain
how unfair
and
inequitable
rates
can be established
in an omnibus
rate
case.
Is it your testimony
that
rates
determined
outside
of an
(b)
omnibus
rate
case are inherently
not fair
and equitable?
If
your answer
is other
than yes, please
explain
how fair
and
equitable
rates
can be established
outside
of an omnibus
rate
case.
A.
la)
(b)
Yes.
Please
see my response
to
USPS/OCA-T400-21.
ANSWERS OF OCA WITNESS PAMELA A. THOMPSON
TO INTERROGATORIES USPS/OCA-TZOO-IO-17
USPS/OCA-T200-16.
Please
refer
to your response
to
interrogatory
USPS/OCA-T200-6(d),
in which you state
that
as a
result
of the Postal
Service's
request
for an across-the-board
rate
increase
in Docket
No. R94-1,
"certain
cost coverages
that
were 'out of line'
did not get adjusted.
To what cost coverages
are you referring?
(a)
Please
confirm
that
the Postal
Rate Commission
in Docket
No.
(b)
R94-1 rejected
the Postal
Service's
proposed
across-theboard rate
increase.
PRC op.,
R94-1,
par.
4OOE;. If you do
not confirm,
please
explain
fully.
that
any cost coverages
are "out of line",
Cc) To the extent
please
confirm
that
it is not as a result
of the Postal
Service's
request
for an across-the-board
rate
increase.
If
you do not confirm,
please
explain
fully.
A.
percent
In
(a)
Please
see my response
(b)
Confirmed.
Cc)
Not
confirmed.
across-the-board
PRC Op.
R94-1,
the
to
The Postal
increase
Commission
in
part
(c)
below.
Service
rates
proposed
in
Docket
a 10.3
No.
R94-1.
stated,
The Postal
Service's
across-the-board
filing
is
inconsistent
with
cost-based
ratemaking.
The request
ignores
changing
differences
in costs
between
the
includes
no analysis
of changing
cost
classes
of mail,
patterns
within
subclasses;
and would result
in
substantial
changes
in the allocation
of institutional
The Service's
rate
costs
among the subclasses
of mail.
proposal
ignores
changes
in attributable
costs.
It
would substantially
increase
the institutional
cost
burden
on First-Class
letters
and Priority,
and greatly
decrease
the burden
on second-class
regular
rate
and
fourth
class.
PRC Op.
R94-1,
para
1017.
Further,
ANSWERS OF OCA WITNESS PAMELA A. THOMPSON
TO INTERROGATORIES USPS/OCA-T200-IO-17
CONTINUATION
OF ANSWER TO USPS/OCA-T200-16(c):
The Commission
is concerned
that
data deficiencies
in the Postal
Service's
filing
reflect
a reduced
commitment
to the task of developing
and providing
reliable
data for parties
in Commission
proceedings.
Sufficient
and accurate
cost,
volume,
and revenue
data
are essential
to determine
fair
and equitable
rates.
Reliable
data would be necessary
to support
proposals
to restructure
the Postal
Service's
product
line.
Id.
‘fait
all
para
1028.
accompli"
rates
into
The Commission
(PRC Op.
line
with
found
R94-1,
previously
para
itself
presented
1034)
and could
articulated
with
not
principles.
a
bring
ANSWERS OF OCA WITNESS PAMELA A. THOMPSON
TO INTERROGATORIES USPS/OCA-TZOO-lo-17
USPS/OCA-200-17.
Please
refer
to your response
to
interrogatory
USPS/OCA-T200-8(b),
where you state
"it
is
inappropriate
to assume that
the cost coverages
established
in
Docket
No. R94-1 are appropriate
for Docket No. MC96-3."
Please
make two assumptions:
(1) the Postal
Service
had
(a)
selected
FY 95 as the test
year for Docket No. MC96-3,
and
(2) the cost coverages
in the Commission's
Recommended
Decision
were not determined
by the Postal
Service's
acrossthe-board
proposal.
In
your opinion,
would the cost
coverages
established
in Docket No. R94-1 then be
"appropriate"
for the special
services
at issue
in Docket
No. MC96-3?
Please
explain
your response.
If your answer to part
(a) is not "yes",
please
explain
what
(b)
cost coverages
would be "appropriate"
for the special
services
at issue
in Docket No. MC96-3.
A.
(a)-(b).
Please
hypothetical
does
Commission
in
u
reason
with
the
address
other
PRC Op.
R94-1,
and it
rate
changes
for
that
either
above
with
involves
focusing
the
things
to
starting
beyond
general
all
be appropriate
are
not
previous
assumes
test
see my response
rate
were
address
or
those
below
that
on the
year
is
would
to
USPS/OCA-TZOO-11.
issues
appears
to
bring
rates
adequately
the
are
R94-1
test
year
"out
test
be expected
assume
back
cost
that
"in
if
addressed,
Commission's
most
to
by the
However,
case.
actual
raised
Your
the
line"
your
scenario
then
it
coverages
would
that
recommendations,
of
year,
to
line."
since
This
cost
be different.
still
coverages
DECLARATION
Pamela
I,
the
answers
States
Postal
knowledge,
Executed
to
A.
Thompson,
declare
interrogatories
Service
information
are
under
penalty
of
USPS/OCA-T200-IO-17
true
and belief.
and correct,
to
perjury
of
the
best
the
of
that
United
my
I hereby
document
accordance
upon
with
certify
all
CERTIFICATE
OF SERVICE
that
this
I have
participants
section
3.B(3)
date
of
record
of
the
in
special
served
this
the
proceeding
rules
EMMETT RAND COSTICH
Attorney
Washington,
DC
20268-0001
November 13, 1996
foregoing
in
csf practice.