Following a year-long process mandated by the 2006 Postal Accountability & Enhancement Act (PAEA), the Postal Regulatory Commission today announced some modifications to the CPI-price cap system of postal ratemaking. While the price cap-based system will be retained to create predictability and stability, the commission is proposing a number of incremental price increases upon concluding that the system has largely failed to achieve most of the objectives from PAEA. Parties will be permitted to comment on the proposal. ACMA will certainly file comments.
Below are the key highlights from what is termed its Statutory Review of the System for Regulating Rates and Classes for Market Dominant Products:
- USPS gains an additional 2 percentage points of pricing authority above the CPI for next five years after which the PRC will evaluate its financial health.
- USPS may gain as much as an additional 1 percentage point of pricing authority if service and operational targets are met.
- Postal products that are not covering attributable costs (eg: underwater) must have price increases at least 2 percentage points more than the average for their class. (ACMA note: This will lead to greater increases for Standard Flats.)
- For all mail products, passthroughs must be between 85% and 115%; for periodicals only, the range is between 75% and 125%.
- Non-compliant workshare discounts will be subject to a three-year grace period.
In making the announcement out of the PRC’s Washington headquarters, Chairman Robert Taub noted that all these findings are proposals only. As with other PRC rate-making rulings, it has issued a comprehensive order, which will be followed by a 90-day comments period followed by a one-month period for reply comments. In addition to the order, the PRC also issued this press release.
The ACMA will further analyze what this all means to catalog mailers and provide further details soon.