.
RECEIVED
BEFORE THE
POSTAL RATE COMMISSION
WASHINGTON, D.C. 20268-0001
DEC28
4 29 hi ‘01
POSTA,,,
?,A”[?!:(!+!,‘;:,,CN
O~F[CE OF TiiC SECRETARY
Docket No. R2001-1
POSTAL RATE AND FEE CHANGES, 2001
UNITED STATES POSTAL SERVICE
NOTICE OF FILING ERRATA TO THE TESTIMONY OF USPS
WITNESS LARAINE B. HOPE (USPS-T-31)
The Postal Service hereby gives notice of the filing of errata to the testimony
of witness Hope (USPS-T-31).
These are summarized
below.
The errata on page 13 reflect the filing of errata to USPS LR-J-58 on
November 20,200l
The errata on pages 1 and 28 correct the attribution of dropship savings to
witness Mayes (USPS-T-23).
The errata on pages 37 and 38 show the implicit passthroughs
the use of parallel cost data in commercial
implicit passthroughs
ECR and NECR.
for NECR and comparison
resulting from
Discussion
of the
to the original passthroughs
filed
can be found on page 41.
The errata on page 38 also provide the correct attribution to witness Mayes
(USPS-T-23).
Copies of pages 1, 13, 28, 37, 38, and 41 to witness Hope’s testimony are
attached.
Respectfully
submitted,
UNITED STATES POSTAL SERVICE
By its attorneys:
Daniel J. Foucheaux, Jr.
Chief Counsel, Ratemaking
CERTIFICATE
OF SERVICE
I hereby certify that I have this day served the foregoing document
upon all participants of record in this proceeding in accordance with section
12 of the Rules of Practice.
Anthony Alvernd
475 L’Enfant Plaza West, SW.
Washington, D.C. 20260-l 137
(202) 268-2997; Fax -6187
December 28,200l
Revised
1
I.
PURPOSE
1
12/28/01
OF TESTIMONY
2
3
The purpose of my testimony
4
changes and rates for Standard
5
Enhanced
6
Nonprofit subclasses
7
Reference
8
This library reference
9
Mail Enhanced
Carrier Route subclasses.
are presented
USPS-LR-J-131
is to present the proposed
Rates for the commercial
cited throughout
Library
my testimony.
by reference into my testimony.’
subclass,
Enhanced
developed
11
Schenk (USPS-T-43)
12
been submitted by witness Moeller (USPS-T-28).
Carrier Route (ECR), are
using cost data from various cost witnesses,
including witnesses
Rate level requirements
and
Rates for the preferred subclass, Nonprofit Enhanced
14
(NECR), also are developed
15
accordance
16
Public Law No. 106-384,
17
Mail Regular and
by witness Moeller (USPS-T-32).
10
13
Carrier Route and Nonprofit
Rates for Standard
contains workpapers
is incorporated
classification
have
Carrier Route
from cost data provided by cost witnesses,
in
with the Revenue Forgone Reform Act (RFRA), as amended
by
114 Stat. 1460, which was enacted in October, 2000.
The ECR subclass was created in July 1996, consistent
Recommended
with the
18
Commission’s
Decision in Docket No. MC95-1, when the former
19
Third-Class
Mail Bulk Rate Regular subclass was divided into two commercial
20
subclasses,
Regular and Enhanced
Carrier Route.
Rate changes for both
21
’ For convenience and ease of reference, the workpapers
the acronym “WP” in lieu of the library reference number.
in the library reference are cited using
Revised
12/28/01
13
Table #3 - Revised
BEFORE RATES
AFTER RATES
Source: WPl, page Y for Revenue and
The “Before Rates” information
pound-rated
shows that the implicit coverage for
pieces exceeds that for piece-rated
coverage of the two groupings
pieces.
is not strictly necessary,
While equalizing
the information
cost
suggests
that a reduction in the pound rate can be made without distorting the relative
implicit coverage of the two groupings.
between piece- and pound-rated
The gap in the difference
pieces narrows somewhat
scheme with a lower pound rate (by approximately
both the 3.0 and 3.5 ounce
9
pound-rated
dividing
lines);
pieces is still significantly
however,
higher.
It is
in coverage
in the “After Rates”
10 percentage
the implicit
points under
coverage for
percentage
points higher
IO
than piece-rated
11
points higher under the 3.5 ounce dividing line. If a goal of rate design were to
12
have equal implicit coverage,
pieces
under the 3.0 ounce dividing
line, and
percentage
and the pound rate were the only variable under
Revised
entry are presented
28
The following chart
by witness
compares the current measured
those presented
12l28lOl
cost savings in dollars presented
with
by
in Docket No. R2000-1 by witness Crum (USPS-T-27).
Table #9
COMPARISON OF DESTINATION ENTRY
COST SAVINGS IN R2000-1 and R2001-1
Difference
Cost Savings Per Pound
(Percentage)
R2001-1
(Cents)
R2000-1
DBMC
DSCF
DDU
i
0.117
0.147
0.185
0.114
0.140
0.173
2.6%
5.0%
0.003
0.007
0.012
6.9%
Source for R2000-1: Moeller, WP lat 7
Source for R2001-1:
i:
12
To maintain the integrity of the rate design, and to facilitate a smooth
13
transition from minimum-per-piece-rated
14
must be uniform destination
15
pieces at each of the respective destination
16
breakpoint,
17
rated discounts.
18
BMCs is x percent, then the per piece passthrough
19
also be x percent, and the discount must assume a 3.3 ounce piece.
20
docket, the Postal Service proposes an 85 percent destination
21
for all subclasses
22
23
24
25
delivery passthroughs
entries.
Also, a standardized
In other words, if the per pound passthrough
of Standard
analysis
pieces, there
for pound- and piece-rated
3.3 ounces, must be used as the weight for calculating
I cost savings
destination
rates to piece-pound-rated
at destination
at destination
Mail. This percentage
and results in increased
the piece-
BMCs must
In this
entry passthrough
is applied to witness
savings for mailers at all
entry points.
It is difficult to compare the passthrough
percentages
proposed
Postal Service in Docket No. R2000-1 with those recommended
by the
by the
Revised
2
LettedNonletter
b.
1
As in its commercial
37
12/28/01
Differential
counterpart,
in NECR the Basic tier rate design helps
3
to establish a rate relationship
between the Basic and 5-digit automation
4
that favors 5-digit automation.
Thus, following the recommendation
5
Commission
6
proposed.
7
percentages
shape passthroughs
are proposed
(0.9 cent), respectively.
(0.8 cent) and
of the
a zero percent letter-flat passthrough
The High Density and Saturation
8
9
in Docket No.R2000-1,
rates
are lower than the Commission’s
is
at
Although these
recommendation
in Docket No.
10
R2000-1, the measured cost passthroughs
11
the Commission
12
proposed shape passthroughs
13
design in this docket: to preserve or increase the measured
14
wherever feasible, without unduly raising the overall rate increases or changing
15
established
calculated
its passthroughs
are each 0.1 cent higher, because
from a different base. These
illustrate a basic tenet of the proposed
rate
cost passthroughs
rate relationships.
16
4.
17
18
The proposed
Automation
passthrough
for the Automation
discount is
19
This results in a discount of 1.5 cents, an increase from the current level of 1.3
20
cents. (In Docket No. Fi2000-1, the Commission recommended a 24 percent
21
automation
passthrough,
which translated
to a discount of 1.3 cents.)
Revised
Given the shape passthroughs
2
3
passthroughs
4
and
5
Density Tiers
5.
1
38
12l28lOl
for nonletters
percent between
This translates
described
above, the resulting density
percent between Basic and High Density,
are
High Density and Saturation.
into measured cost passthroughs
for nonletters
of 1.6
6
cents for the High Density tier and 0.6 cent for the Saturation
7
can be compared
8
1, of 44.1 percent, or 1.6 cents, for the High Density tier, and 118.2 percent, or
9
0.5 cent, for the Saturation
to the Commission’s
recommendations
tier. (These figures
in Docket No. R2000-
tier.)
10
12
13
Destination Entry
6.
11
Destination
entry discounts
are determined
manner as the other standard subclasses.
for this subclass in the same
The cost study presented
by Witness
, which was discussed above in the Section lll.D.7,
14
15
measures savings for all subclasses
16
subclass, since the passthroughs
*‘See discussion
of Destination
combined.
Discounts do not vary by
selected are the same for each:
Entry discounts in ECR, Section lll.D.7.
85 percent.27
Revised
1
2
3
4
5
6
7
8
9
10
11
12
13
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