January 10, 2018
In 2006, Congress changed the Postal Rate Commission to the Postal Regulatory Commission, in what was hailed as a much-needed broadening of authority for the regulator. The PRC proposal issued on December 1, however, seems to say that it has power over only one thing—rates. And it betrayed an inherent bias to get more money for the Postal Service from customers, above all else.
Aiding postal management and unions with more customer money has been a steady theme in speeches, talks, and interviews by the PRC Chairman, Robert Taub, for quite some time. He made no secret of his belief that fixing the Postal Service balance sheet, stabilizing USPS finances, and bringing it to profitability were his primary goals.
These are noble and important goals, but only if they are sought in a balanced, rational way that works for the long-term. And to throw up your hands, as helpless regarding several other parts of a balanced solution, leads to excessive non-solutions in the area you can control—rates.
The obsession with rates to solve all financial problems (and this came down to one exercise—to fix finances) fell almost necessarily out of the decision to ignore, discount, or declare inability to address the many other solutions that would constitute a balanced approach. These have been widely discussed and were reiterated by many customer comments in the first round of the review. They include:
Annual Compliance Reports (ACR) by the USPS, and responses by the PRC in Annual Compliance Determinations (ACD), have demonstrated the inability of the PRC to regulate the cost side of the equation. So, in the end, customers lose.
An example of the ineffectiveness of 10 years of Annual Compliance Determinations is this admission by USPS in the 2017 ACR, responding to a PRC directive to both increase flats prices above average and reduce their costs:
“However, the Postal Service is unable to provide an estimate of the financial impacts of these operational initiatives at this time. As the Postal Service explained in its responses to the Commission’s directive in Chapter 6 of its FY 2015 ACD, and in last year’s ACR, the information generated by the Postal Service’s existing data systems does not support reliable estimates of the impact of operational initiatives on flats costs.”
So, the Postal Service can’t show how their efforts are saving costs, but the PRC wants to give them above-inflation price increases anyway. Make the customers pay.
The PRC can regulate price increases. And that’s what it proposes in the December 1 filing. Adding as much as 3 to 5 percentage points to inflation in all future postage increases to bring the finances to profitability without any of the other much-needed improvements. That’s why perhaps it should go back to being called the Postal Rate Commission.