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frustrate the act's policy of investing the Board with management authority.

The Service contends that evaluating efficiency cannot be an exercise taking place only when the Commission recommends a decision, but rather must be a primary and continuing concern of the Board of Governors in carrying out its oversight responsibilities. In this connection, the Service believes that its efficiency of operations as reviewed by the Board, is subject to "outside" inquiry only under specific statutory provisions, such as that authorizing audit by the Comptroller General and general and continuing inquiry by the Congress and its committees.

The Service also contends that if the Commission had jurisdiction it could result in the Commission disallowing, for rate-setting purposes, Service expenses perceived by the Commission as resulting from inefficiency. This could lead to the legally impermissible situation of rates being set at levels that would preclude revenues and appropriations from equaling costs.

Finally, the Service believes that the Congress could not have intended to prolong the Commission's ratemaking proceedings by enlarging the area of regulatory supervision to include reviewing the efficiency of operations and other management performance objectives.

Phasing of rates

Does the Commission have authority to recommend how rates should be phased over transition periods specified in the act? Neither the language of the act nor its history sufficiently outlines jurisdiction in this area.

To ease the impact of certain second-, third-, and fourth-class rate increases under the Postal Reorganization Act of 1970, the Congress provided for the gradual introduction of those increases over specified terms of years through the adoption of separate rate schedules "with annual increases as nearly equal as practicable." This procedure is termed "phasing." However, the statute does not state whether phased-rate schedules can be adopted unilaterally by the Service and its Board of Governors, or whether proposed schedules are subject to recommended decisions by the Commission.

The Commission argues that the act's legislative history indicates that the Commission has jurisdiction to issue a recommended decision on phasing. Both the House and Senate bills provided for unilateral adoption of phasing schedules by the Governors or a similar body. The conference substitute adopted the Senate version but deleted any express reference to the Governors. Thus, the act simply provides that "a separate rate schedule shall be adopted."

The Commission concludes from the conferees' omission of the reference to the Governors an intent to give the Commission the authority to recommend a phased-rate schedule. The Commission also contends that the further deletion from the Senate bill of a provision that phased rates could be adopted "notwithstanding the provisions of this chapter" is a clear signal that the conferees did not intend to exempt phased-rate setting from the provisions for recommended decisions from the Commission.

In addition, the Commission points out that the only language in the act which indisputedly grants to the Service unilateral power to set rates is found in the temporary rate provision in section 3641. The Commission argues that the clarity of that one express exception to the general ratemaking machinery strongly suggests that if the Congress had intended to preclude the Commission from the phasing area, it would have expressly done so.

The Commission further contends that it cannot meaningfully perform certain of its statutory tasks without review of the rate phases. For example, the Commission believes that it cannot truly assess the impact of rate increases on the general public and business mail users without some control over the rate phases. Finally, the Commission argues that the act, empowering the Commission to take "necessary and proper" action to carry out its statutory functions, is further evidence of the intention to invest it with responsibility in the phased-rate

area.

The Service resists Commission jurisdiction on a number of grounds. First, the Service argues that since the act gives it the responsibility to determine the amount necessary to be appropriated to offset revenue losses caused by phasing, it necessarily has the unilateral power to determine phasing schedules. Second, the Service contends that establishing phased rates is merely a mechanical and ministerial task designed for the Postal Service's management machinery, i.e., the Service and the Board. Finally, the Service contends that Commission jurisdiction will create undue delay, since the recommended decision procedure is often lengthy and involved.

Adjusted rates

Does the Commission have jurisdiction to adjust rates where the Congress fails to make an appropriation to cover revenues lost through phasing? 39 U.S.C. $2401(c) (1970) authorizes the appropriation to the Service of amounts equal to revenues lost because of the act's provisions for free and reduced rate mail. If the Congress fails to appropriate funds equal to such "revenue foregone," section 3627 permits the adjustment of rates to increase revenues and recoup the unappropriated amount "in accordance with the provisions of this subchapter."

The Postal Service contends that computing the level of a rate adjustment is a ministerial and mechanical exercise which the court approved the Postal Service's performing in Direct Mail Advertising Association v. United States Postal Service, 458 F.2d 813 (1972).

The Commission responds that the court in that case did not approve the Service's making unilateral adjustments but expressly declined to pass on the question in its footnote 9. Moreover, in the statutory provision's explicit wording, "this subchapter" can only be subchapter II, in which section 3627 appears. Since the procedure in subchapter II for changing rates provides for Commission input in the form of a recommended decision, it is clear that the Service cannot institute rate adjustments without first submitting its proposed adjustments to the Commission. The Commission also disagrees

that adjustments are merely ministerial and mechanical tasks, which involve no discretion. To determine whether circumstances justify an adjustment, a finding must be made that the Congress has failed to make certain appropriations for revenue foregone, which should be made by the Commission as an impartial tribunal.

We believe the provision in section 3627 that rates may be adjusted "in accordance with the provisions of this subchapter" contemplates using the recommended decision procedure.

Conditions of mailability

Does the Commission have jurisdiction to determine conditions of mailability of various classes of mail? Although the Commission has the authority to make determinations on size and weight, it is not clear which other conditions of mailability, or to what extent such conditions of mailability, are subject to the Commission's jurisdiction. In general, mailability encompasses mail preparation, mail acceptance (deposit of mail, postage payment, and separation of mail), and mail characteristics (address and markings, size, and weight). These factors are detailed in mail classification schedules and enable the postal patron to evaluate rates and alternative conditions of mailability and service to the extent an alternative exists within or outside the Postal Service. The act requires the Service to request a recommended decision from the Commission before establishing or changing a mail classification schedule.

The Service contends that only the essential factors of the classification schedule necessary to define the several classes and subclasses of mail are subject to the recommended decision procedure and that the Service retains the authority to define detailed conditions of mailing. The Service argues that this flexibility is necessary to enable the Service to insure that mail will be prepared and accepted under conditions that promote processing and administrative efficiency, protect postal revenues, and result in minimum cost to users of postal services.

The Commission, however, contends that all conditions of mailing (as distinguished from operational regulations)

detailed in mail classification schedules are subject to Commission recommendations.

The act does not clearly define which conditions of mailing are subject to the recommendation procedure. In section 404 (1) the Service is given the specific power to provide for the "collection, handling, transportation, delivery, forwarding, returning and holding of mail, and for the disposition of undeliverable mail." However, section 3682(c) authorizes the Service to establish size and weight limitations for letter mail in the same manner that is prescribed for changes in classification, i.e., by first requesting a recommended decision from the Commission.

Thus, it would appear that certain conditions of mailing (size and weight) which seem to be included in the grant of power to the Service in section 404 (1) are specifically made subject to Commission jurisdiction by section 3682(c). It is not clear whether other factors of mailability detailed in mail classification schedules are removed from the Service's independent authority by reference to the Commission's jurisdiction over mail classification schedules in section 3623.

CONCLUSION

The legislative history of the Postal Reorganization Act makes it clear that in creating the independent, bipartisan Postal Rate Commission, the Congress intended the Commission to serve as a "true partner" of the Governors of the Postal Service. The Senate Post Office and Civil Service Committee noted that if a bureaucratic struggle developed between the Commission and the Service, then the whole theory of independent ratemaking will have failed.

The jurisdictional disputes discussed here indicate that something less than a true partnership exists between the Postal Service and the Commission. Furthermore, with three rate cases completed, two distinct philosophies concerning the role of the Commission in ratemaking have evolved. The Commission views its authority under the act as being much broader and requiring a more indepth review than the Postal Service's more narrow view.

The fundamental assumptions underlying the Postal Reorganization Act and the wisdom of creating an independent, financially self-sufficient Postal Service are being reexamined by the Congress. The Postal Reorganization Act

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