Washington, D.C.- Early this month, the Postal Regulatory Commission (PRC) concluded its 11-month review of the regulation of rates and classes for Market Dominant products first established by the Postal Accountability and Enhancement Act (PAEA) in 2006. The main objective of the review was to determine if the system achieved the PAEA’s goals, all of which sought to produce a flexible, stable, predictable, and streamlined ratemaking system that ensures the Postal Service’s financial health, while maintaining high quality service and performance for customers.

While the findings suggest that the system showed significant success in achieving goals related to the ratemaking structure, it has not increased pricing efficiency. Further, the system failed to maintain the financial health of the Postal Service in any long-term or significant way. Lastly, the Commission states that the ratemaking system did not help maintain high quality service standards.

In response to these findings, the Commission has issues a Notice of Proposed Rulemaking to create a ratemaking system that complements and improves the current one. Specifics of the proposed new system include two percentage points of rate authority per class of mail per calendar year for each of the first five calendar years, as well as up to one percentage point of rate authority per class of mail per calendar year. This last point depends on the Postal Service meeting or exceeding operational efficiency and adhering to service standard criteria. Additionally, the Commission has suggested a required rate increase for any non-compensatory product of a minimum of two percentage points above the percentage increase for the class. Lastly, they plan to establish two bands for workshare discount passthroughs: 1) band range of plus or minus 25% for Periodicals; and 2) band range of plus or minus 15% for all other classes.

Days after the PRC announcement, the Postmaster General & CEO Megan J. Brennan issued a statement on behalf of the United States Postal Service (USPS) agreeing with the conclusion of the review that the current price cap needs to be changed, adding that it does not “enable [the USPS] to achieve [their] mission of providing prompt, reliable, and efficient universal postal services to the American people in a financially sustainable manner.” However, while the USPS agrees with the PRC’s conclusion that the price cap falls short, it does not agree with their conclusion to retain a price cap at all. The USPS wants a system that allows for the price flexibility and innovation that they believe to be critical in their ability to compete in the constantly changing marketplace, and according to them, a price cap is not the solution.

Brennan states that the Postal Service is in the process of analyzing the alternative price cap suggested by the Commission to determine the extent to which it advances their goals. The statement concludes by ensuring their customers that they will continue to work with the Commission.

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