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The Postal Regulatory Commission (PRC) has concluded a nearly year-long review of the current process for setting prices for USPS market-dominant classes of mail.

In an announcement on December 1, 2017, the PRC reported that the existing system of ratemaking has failed to achieve the objectives set for it by the 2006 Postal Accountability & Enhancement Act (PAEA). According to the committee, it has not increased pricing efficiency, advanced the financial health of the USPS, allowed the setting of rates to cover costs for some classes, or fostered acceptable service standard quality.

As a result, the commission is initiating a rulemaking to propose and obtain comments on possible changes to the system. Specifically, the PRC is proposing this series of incremental price increases in addition to the usual rate increase that’s tied to changes in the Consumer Price Index (CPI):

  • 2 percentage points of supplemental rate authority per class of mail per calendar year for each of the first 5 full calendar years following the effective date of the rules, if/when approved.
  • Up to 1 percentage point of performance-based rate authority per class of mail per calendar year contingent on the Postal Service meeting or exceeding an operational efficiency-based standard and adhering to service standard quality criteria.
  • A required rate increase for any “non-compensatory” product of a minimum of 2 percentage points above the average percentage increase for the product’s class. This applies to “underwater” products that are not covering their attributable costs.
  • A requirement for all efficiency-based postage discounts to equal at least 75 percent of the Postal Service’s resulting savings, thus encouraging greater incentives for publishers to sort mail into carrier-route bundles.

As with other rate-making rulings, the PRC has issued a comprehensive order, which will be followed by a 90-day comments period, then followed by a one-month period for reply comments. Initial comments are due no later than March 1, 2018. Reply comments are due no later than March 30, 2018. To submit a comment, go to https://www.prc.gov/ and see the homepage link, “10 Year Rate System Review.”

Further Reading:

PRC Concludes Rate System Has Not Achieved Necessary Objectives and Issues Proposed Rulemaking to Address Shortcomings
Press Release, Postal Regulatory Commission
December 1, 2017

USPS Bail Out Could Hike Postal Rates 41% in the Next Five Years
By D. Eadward Tree
December 5, 2017

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