,
UNITED STATES OF AMERICA
Before The
POSTAL RATE COMMISSION
WASHINGTON, D.C. 20268-0001
Postal Rate and Fee Changes,
2001
Docket No. R2001-1
)
OFFICE OF THE CONSUMER ADVOCATE
INTERROGATORIES
TO WILLIAM P. TAYMAN, JR. (OCA/USPS-T6-22-32)
October 19.2001
Pursuant
Commission,
requests
to Rules 25 through
28 of the Rules of Practice
the Office of the Consumer
for production
OCAAJSPS-1-21
of documents.
dated September
Advocate
Instructions
hereby submits interrogatories
included
submitted,
Acting Director
Office of the Consumer
Advocate
KENNETH E. RICHARDSON
Attorney
1333 H Street, N.W.
Washington, D.C. 20268-0001
(202) 789-6830; Fax (202) 789-6819
and
with OCA interrogatories
28, 2001, are hereby incorporated
Respectfully
of the Postal Rate
by reference.
-2-
Docket No. R2001-1
Please
OCANSPS-TG-22.
wherein
at page
46, lines 23-24,
you state that the annual capital need for network growth associated
provision
of additional
is approximately
(a)
turn to your testimony
service to approximately
with the
1.7 million new delivery points per year
$400 million.
Please provide the additions to annual revenues based on current and proposed
rates from the additional provision of mail service to the approximately
new
delivery
approximately
points
each
year,
assuming
that
the
capital
$400 million is invested (which was apparently
1.7 million
investment
of
not the case in FY
2001 due to the budget freeze).
(b)
Please provide the addition to annual operating
2003 that would be associated
(4
costs for FY 2001 through
with the $400 million of capital investment
to serve the approximately
1.7 million new delivery points every year.
For the additional
costs referenced
between
annual
amortization,
annual
costs resulting
depreciation,
income statement)
in (b), please
from the investment
and possibly
other
provide
of capital
costs
flowing
and direct costs (e.g., typically wages,
FY
needed
a breakout
(e.g., typically
through
supplres,
to the
etc., again
flowing through to the income statement).
OCANSPS-TG-23.
wherein
Please
turn to your testimony
you state that the investment
projects associated
at page 46, lines 24-25,
with the addition
of the 1.7
million new delivery points have not been funded due to the capital freeze.
(4
How has the Postal Service been able to deliver mail (assuming
case)
to the additional
investment
1.7 million
new delivery
points,
projects were in fact needed but not made?
that such is the
assuming
that the
Docket No. RZOOl-1
(b)
that the mail to the 1.7 million new delivery points was delivered
Assuming
2001
-3-
without
additional
incurring
the $400
million
investment,
how
much
annual cost was incurred to make those deliveries that would not have
been incurred had the additional investment
(4
of needed
in FY
been made?
Please explain how the annual cost incurred
in providing the additional
to the 1.7 million new delivery
points (but absent
capital
from what would
investment)
is different
capital projects been implemented.
the addition
service
of the desired
have been incurred
Please provide quantification
had the
in your answer
in addition to explanations.
(4
Assuming
without
that mail to the 1.7 million
the addition
increased
efficiency
sometimes
6-3
of capital projects,
new delivery
can it be assumed
by the Postal Service?
referenced
points is being delivered
that this is the result of
In the management
literature this is
as “Doing more with less.”
If you agree that the Postal Service delivery of mail to 1.7 new delivery points
without the addition of needed capital investment
Service efficiency,
is such increased
is the result of increased
Postal
Postal Service efficiency probably
likely to
occur in future years?
OCAIUSPS-TG-24.
associated
(a)
You
have
delineated
$400
million
of
capital
projects
capital costs that would be associated
with the
with the addition of 1.7 million new delivery points.
Are there any other additional
addition
million?
of the new delivery
Such
costs
points exclusive
might, for example,
of the already
be associated
mentioned
$400
with the need
for
Docket No. R2001-1
additional
-4-
mail processing
additional capital costs.
(b)
equipment.
If you
agree,
please
quantify
the
If you disagree, please explain.
If there are any additional
costs, please break out the additional
annual direct
costs similar to the request in OCANSPS-TG-22(c).
(c)
How many of the 1.7 million new delivery points, if any, represent
existing mail service to a new location concurrent
a transfer of
with the elimination
of the old
location?
(4
How much are annual
OCANSPS-TG-22(c),
capital
investment
decreased
and direct
costs,
as delineated
in
when the delivery point of mail is transferred
to
a new delivery point and the previ.ous delivery point eliminated?
may be aggregated
in terms
of a specific
quantity
The number
of sites rather than site
specific.
OCANSPS-TG-25.
Please turn to your testimony at 49, lines 21-26, wherein you
state that the Postal Service’s overall revenue and expense projections
must be at least
99.5 percent
not to be fully
consumed
accurate
by adverse
reasoning
in order
variances.
and computations
appropriate,
for the three
Please
including
Please
the
underlying
mathematical
references to specific exhibit pages and lines, if
turn to your testimony
wherein you state that the break-even
common
provide
contingency
that lead to this conclusion.
OCANSPS-TG-26.
through
percent
the contingency
knowledge
provision.
that companies
requirement
51, lines
13-19,
allows no margin of safety other than
Based on information
frequently
at page
announce
in the financial
press, it is
major and substantial
cuts in order to achieve lower costs during times of financial difficulty.
budget
-5.
Docket No. R2001-1
(4
Is it your testimony that such an approach
W
If your answer
is inapplicable
to the Postal Service?
is “yes”, please explain the unique characteristics
that produce
such a situation for the Postal Service.
(4
If your answer
is “no”, please explain how much of the currently
projected
costs
could be cut in the interim years and test year during economic adversities.
Please turn in your testimony
OCANSPS-TG-27.
state that inflation can accelerate
Service’s
labor.
costs.
It is understood
It is further understood
beyond
projections
at 53, lines 20-21, wherein you
and negatively
affect the Postal
that over 76 percent of the Postal Service’s
that these costs are set by contract or by management
policy and are not subject to inflation except to the degree that economic
such as inflation impact the terms of the contract or management
(4
Assuming
that accelerated
aforementioned
management
costs are
inflation is an important
conditions
policy.
issue to consider,
would the
76 percent of costs be subject to inflation once the contracts
policies had been determined?
If your answer
or
is other than no,
please explain.
lb)
Assuming
that accelerated
inflation is an important
issue to consider,
interim year and test year revenue and cost projections
have the
taken this possibility
into
account?
(c)
Have you quantified the potential levels of accelerated
impacts?
inflation and their potential
Is so, please furnish the studies.
OCANSPS-TG-28.
You state at page 53, lines 27-29,‘that
WEFA scenarios
have less economic growth through the test year.
two alternate
DRI-
Docket No. R2001-1
(4
-6-
Does this mean that you have used a forecast that is optimistic
but has only a
55% chance of occurring as a probability?
@I
Does correct budgeting
all reasonably
(c)
Was there
downside
W
and planning suggest that you should take into account
prudent possibilities?
any consideration
implications
and
more
realistic
numbers,
allowing
for
in preparing the revenue and cost projections?
What part of the requested
inflation
of using
adverse
three percent
economic
contingency
conditions,
is expected
and what
percent
to cover
is for other
contingencies?
OCA/USPS-TG-29.
Please
turn
to your
testimony
on page
54, lines
1-2,
Is it your testimony that a more pessimistic economic
discussing
the economic
outlook.
possibility
is appropriate,
suggesting
that the use of the June estimate of the economy
was incorrect?
OCAIUSPS-TG-30.
Please turn to your testimony
page 61, line 15. Are there any potential situations
at page 58, line 1 through
under which costs could be lower
than expected?
OCAIUSPS-TG-31.
Please turn to your testimony
page 62, line 2. You have discussed
potential revenue variances
Please indicate the types of changes in each of the variables
forecasts
downwards.
of one percent and
.
three percent.
(a)
at page 61 line 18 through
that would
result in a one percent
revenue
in the DRI-WEFA
variation,
upwards
or
-7.
Docket No. R2001-1
lb)
Please indicate the types of changes
forecasts
that would
in each of the variables
result in a three
percent
revenue
in the DRI-WEFA
variation,
upwards
or
downwards.
OCANSPS-TG-32.
(4
You
testify
past
and
expected
Productivity
(TFP) of 2.5 percent
accounting
period 12, 1.1 percent
lower
than
assumption
(b)
Please turn to your testimony on page 62, lines 7-26.
assumed
in Postal
Service
in FY 2000, 2.0 percent
Total
Factor
in FY 2001 through
in FY 2002, and at least 0.5 to 1.0 percent
in the test year
after rates.
Please
state
the TFP
for the test year.
In many cases, programs
dollars or percentages
relates
increases
to lower costs are stated in terms of cutting specific
of costs.
to the TFP projections
Please indicate how a percentage
you present.
For example,
cut in costs
assuming
overall level of cost is cut by one percent, how much does TFP increase?
state all assumptions.
that the
Please
CERTIFICATE
OF SERVICE
I hereby certify that I have this date served the foregoing
participants
of record in this proceeding
practice.
Washington, D.C. 20268-0001
October 19.2001
in accordance
document
upon all
with Rule 12 of the rules of