Price Volatility, Cost of Production and Chronic Insufficiency of
Price, and the Failure of Price To Adjust for Inflation

1. Price Volatility
    The concern with price volatility is described in detail above. The
Commission concludes that this price volatility can and should be
addressed directly by Compact Over-order price regulation. Compact
Over-order price regulation can minimize and even eliminate price
volatility by establishing a level, Class I, floor price that combines
the Federal Order minimum price with a ``floating'' Over-order price.
Such a combined floor price will serve to eliminate the volatile swings
in federal Class I pricing.
    More specifically, the precise amount of the ``floating'' component
of the Compact Over-order Price Regulation will be the difference in
amount between the federal, regulated, price that is announced monthly
and the amount of Compact Over-order Price Regulation itself. As
explained below, the Commission is adopting a combined, federal Order
and Compact Over-order, Class I price of $16.94 (Zone 1). The
``floating'' or ``Over-order'' component of the Compact price
regulation will be the difference between the announced Federal Order,
Class I, Zone 1 price for each month and $16.94.