Hi

On December 5th, two years after receiving a flurry of comments from its first crack at a 10-year review of postal ratemaking, the Postal Regulatory Commission announced a revision aimed at modifying the system for regulating rates and classes for Market Dominant products, including catalogs.

The process is far from complete at this time. The PRC has set a Feb. 3rd deadline for initial comments and a March 4th deadline for reply comments. Since this matter has been open for some time, there was concern that the Commission might simply issue a decision. We are fortunate that the PRC has decided to go through another full round of comments and reply comments so the mailing industry will have an opportunity to weigh in and influence the ultimate outcome.

What Matters Most To You
Chief among the proposals, the PRC has modified the proposed supplemental rate authority mechanism to address drivers of the Postal Service’s inability to achieve net income since the 2006 Postal Accountability and Enhancement Act (PAEA). Instead of a singular, fixed amount of supplemental rate authority, the revision targets declining mail density and statutorily mandated amortization payments for particular retirement costs.

The PRC said the revision aims to improve the postal ratemaking process by:

  • providing additional rate authority to address costs largely outside of the Postal Service’s control (such as increased/decreased competition, economic disruptions);
  • placing the USPS on a path to having fully compensatory products and classes, as well as improving the financial integrity of the system while allowing for the continued achievement of goals relating to pricing flexibility, and establishing and maintaining just rates;
  • incentivizing workshare discounts to adhere as closely as possible to Efficient Component Pricing principles in order to help the ratemaking system maximize incentives to increase efficiency;
    • The ACMA sees an opportunity for the USPS to develop more incentives designed to drive efficiencies throughout the entire supply chain which are made possible by increased volume in efficient workflows, etc.
  • adjusting performance-based authority to retain the 1 percentage point of rate authority benchmark but modify how the specific performance-based requirements for operational efficiency and service will be measured;
  • revising the rules for non-compensatory products and classes, proposing that the use of an additional 2 percentage points of rate authority for non-compensatory classes be optional and removing the requirement that determinations be made in the Annual Compliance Determination proceeding;
    • The USPS will not be automatically held to an artificial and/or arbitrary acceptance of additional 2% postage increases in cases where the Annual Compliance Determination concludes that a product, such as Marketing Mail Flats, is under water. The ACMA and others have argued for years that driving mail volume out of the system will not improve the USPS’s bottom line. It seems we are making progress on this front.
  • revising the rules for worksharing discounts that dispense with the 3-year grace period;
  • proposing new reporting requirements for costs and cost-reduction initiatives in response to commenter concerns and in light of the revised proposals for additional rate authority.

Next Steps
Our main focus is to first fully assess the full 354-page filing, report back to members further findings if need be, then draft comments for the PRC. Part and parcel of that, we encourage member input ASAP. Meantime, for background, click here for our original announcement of the 10-year review and click here for a highlighted and redacted compilation of all of ACMA’s comments (filed both alone and with partner organizations) objecting strongly to the original PRC proposal.