PRC Finds Current Rate System Fails to Meet Objectives and Proposes Alternative

Posted by Bob Levi on 12/02/17

On December 1, the Postal Regulatory Commission (PRC) concluded that the postage rate-setting system created in the 2006 Postal Accountability and Enhancement Act has failed to maintain the financial health of the USPS as intended in the law, has weakened the high quality service standards and has not increased pricing efficiency. In sum, the decade-old statutory postage rate regime has not met many of the the criteria outlined in the 2006 postal legislation.

As a result, on December 1, the PRC proposed three changes in the way postage rates will be adjusted, in the future, to improve the USPS finances and operations. First, the PRC would grant the USPS 2 percent of rate authority per class of mail above the consumer price index (CPI) for each of the next 5 years. Additionally, the USPS would be provided up to 1 percent of rate authority per class of mail per year, contingent on the USPS meeting or exceeding specified efficiency and service standards. Second, the PRC would require a minimum rate increase of 2 percent for postal products that do not cover their attributable costs. And, third, the PRC would establish two rate adjustmen bands for work-share discounts "pass-throughs."

The PRC has established a three-month comment period, ending on March 1, 2018. UPMA intends to contribute comments. No doubt this proposal will generate considerable debate within the broad postal community, particularly among the major mailers. Moreover, this proposal may encourage Congress to accelerate the legislative process with regard to consideration of HR 756. Indeed, PRC Commissioner Marc Action wrote in his supplementary comments to the PRC announcement:

"The last few years have seen significant bipartisan efforts in Congress to craft such reform, and it has yet to come to fruition. The Commission does not have the ability to allow the Postal Service to re-amortize unfunded liabilities, administer employee benefits differently, change the frequency of delivery, or deliver profitable items restricted by statute. In short, there is no action the Commission can take to substitute for meaningful legislative reform, and I urge Congress to continue to work toward that goal."