Quiero saber acerca de...

Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Proposed Rules 3 are necessary to achieve the objectives of the PAEA, in conjunction with each other, and are focused on vital near-term improvements.
However, the objectives of the PAEA
related to maximizing incentives to increase efficiency and reducing costs as well as assuring financial stability including retained earnings set forth ambitious goals that are difficult to achieve instantaneously or simultaneously. See 39 U.S.C.
3622b1 and 5. These goals must also be achieved in conjunction with other priorities over time, such as maintaining high-quality service standards. See id. section 3622b3.
Consistent with the Commissions findings in Docket No. RM20173, Docket No. RM20212 is initiated to explore whether additional regulatory changes may be necessary to promote longer-term financial stability, increased efficiency and cost reductions, while maintaining high-quality service standards, and if so, how to best design these potential changes. See Order No.
5763 at 166. The Commission invites any interested party to submit comments on the following topics and asks the following questions to initiate a meaningful dialogue with stakeholders.

jbell on DSKJLSW7X2PROD with PROPOSALS

III. Substantive Areas for Further Refinement A. Incentive Regulation Performance-based regulation is a broad concept referring to a regulatory system that applies incentives to promote targeted behavior by the regulated entity.7 More specifically, a performance incentive mechanism PIM, also referred to as a targeted performance incentive TPI, is used by regulators to set a target for acceptable performance by the regulated entity in a specific area and attach financial consequences to ensure compliance. See Zarakas, supra. This rulemaking is initiated to explore whether and how to introduce any potential modifications to the design of the ratemaking system that would further enhance i.e., maximize over the longer-term the Postal Services incentives to increase efficiency and reduce costs. Achieving such efficiencies could benefit the Postal Service by improving its longerterm financial viability and could benefit the ratepayers by leading to improved service performance. At the 7 See William Zarakas, A New Face for PBR:
Aligning Incentives in the Electric Utility Ecosystem, PUB. UTILS. FORT., December 2017
Zarakas, available at: https www.fortnightly.com/
fortnightly/2017/12/new-face-pbr?authkey =e0a4230ee85eb602f123c1e633c0e5b5260f9bd3f 297c094c055e7868e5a4589.

VerDate Sep<11>2014

16:29 Feb 04, 2021

Jkt 253001

same time, the Commission remains mindful that further enhancing the Postal Services incentives to increase efficiency and reduce costs may weaken the incentive to maintain high-quality service standards. The Commission also acknowledges that ratepayers may have different preferences with respect to the speed and/or the consistency of delivery service for Market Dominant products.
Accordingly, to explore possible enhancements to the Market Dominant ratemaking system overall, through the introduction of direct financial consequences such as an upward or downward adjustment to rate authority using a PIM or a different method, the Commission raises the following discussion points:
1. Whether additional regulatory changes are needed to further enhance the Postal Services incentives to increase efficiency and reduce costs while maintaining high-quality service standards. Why or why not?
2. How to identify and evaluate potential types of regulatory changes that would introduce direct financial consequences that would further enhance the Postal Services incentives to increase efficiency and reduce costs while maintaining high-quality service standards? Are there any financial consequences that can be drawn from other postal systems or other regulated industries that should be considered?
3. How to identify and evaluate potential types of regulatory changes other than the connection of direct financial consequences that would further enhance the Postal Services incentives to increase efficiency and reduce costs while maintaining highquality service standards? Are there any non-financial incentives that can be drawn from other postal systems or other regulated industries that should be considered?
B. Mechanism for a Financial Incentive The Commission is interested in exploring whether a regulatory mechanism connecting direct financial consequences with increasing efficiency and reducing costs and maintaining high-quality service standards would benefit the Market Dominant ratemaking system, and how to connect the Postal Services behavior with the financial incentive introduced. The Commission acknowledges that every proposal has tradeoffs and that it is impossible to refine the connection to a level of absolute precision.8 This rulemaking 8 See Natl Assn of Broadcasters v. F.C.C., 740
F.2d 1190, 1210 D.C. Cir. 1984 But administrative action generally occurs against a shifting background in which facts, predictions, and
PO 00000

Frm 00023

Fmt 4702

Sfmt 4702

8331

does not aim for this level of precision.
Generally, the Commission seeks to identify an amount of a financial incentive that is both meaningful to the Postal Service i.e., would actually motivate it to engage in the desired behavior and would neither be excessive to the ratepayers nor threaten the financial integrity of the Postal Service.
Preliminarily, the Commission is interested in exploring whether and how to introduce a financial incentive by modifying the Postal Services authority to adjust its rates. Adjustments to rate authority could be upwards increase rate authority, downwards reduce rate authority, or both. See Zarakas, supra. An upward PIM would reward superior performance, whereas a downward PIM would penalize unsatisfactory performance. The PIM
may be designed to operate simplistically: For instance, a specific upward or downward incentive is either provided or not provided, based on the observed performance. On the other hand, a more nuanced PIM could be designed to provide a particular tier of financial incentive based on the observed performance: For instance, progressively increasing rewards or penalties.9 If any commenters have a basis for connecting particular requirements with particular amounts, they may include such proposals in their response to this Order.
One potential method to develop a PIM for both upward and downward adjustments would be to set a deadband around historical performance.10
This type of PIM would trigger a penalty when actual performance falls below the lower target unsatisfactory performance and trigger a reward when actual performance exceeds the upper target superior performance.11 The lower and upper targets could be derived by measuring the standard deviations from historical policies are in flux and in which an agency would be paralyzed if all the necessary answers had to be in before any action at all could be taken..
9 See Synapse Energy Economics, Inc., Melissa Whited, Tim Woolf, & Alice Napoleon, Utility Performance Incentive Mechanisms: A Handbook for Regulators, Prepared for the Western Interstate Energy Board, March 9, 2015 2015 PIM Handbook, at 4344 demonstrating quadratic versus step functions.
10 See 2015 PIM Handbook at 38; Paul L. Joskow, Incentive Regulation in Theory & Practice:
Electricity Distribution & Transmission Networks, January 21, 2006 2006 Joskow, at 8, available at:
https economics.mit.edu/files/1181.
11 See 2015 PIM Handbook at 38; see also 2006
Joskow, supra at 8.

E:FRFM05FEP1.SGM

05FEP1