August 7, 2025
Dear Alliance Members:
Today, we filed reply comments in the current phase of the Postal Regulatory Commission’s rate review. This phase covers only two proposals by the PRC: (1) to limit USPS rate increases to once a year, and (2) to incentivize greater pricing efficiency by forcing the Postal Service to set workshare discount passthroughs as close to avoided marginal costs as possible and preventing it from “gaming the system” while being technically compliant with the current rules.
Although we have urged the PRC to get on to a more comprehensive review, we support these proposed changes. Not surprisingly, the Postal Service opposes them and wants to continue the fiction of relying on the part-time USPS Governors to exercise “business judgment” about all things related to rate increases. The Governors’ apparent rubber-stamping of everything proposed by management has contributed to the disastrous results of the past several years.
Our reply comments are posted here: https://prc.arkcase.com/portal/filings/137434.
Here is our conclusion, but we also recommend reading the full comments.
- Conclusion
The initial comments reveal strong mailer-side support for the Commission’s first two proposals, indecision from the Public Representative, and steadfast opposition from the Postal Service. Indecision cannot be countenanced: the Commission was correct to accelerate its review of the current system and should enact reforms as soon as reasonably possible.
Nor should the Commission credit the Postal Service’s continued chafing against any regulatory oversight. The administrative record overwhelmingly shows what has happened to the Postal Service’s performance under a ratemaking system that defers to its judgment without sufficient regulatory guardrails. The Postal Service wants to keep digging a deeper hole, but Congress has empowered the Commission to take the agency’s shovel away. Revisions to the current ratemaking regulations that restrain the Postal Service’s ability to price-gouge its captive customers are needed urgently. While the two proposals under consideration are insufficient by themselves, they are necessary and they are a good start.
The next phase of the rulemaking should cover the important issues of the mail density add-on to the Consumer Price Index rate cap and the application of the objectives and factors in postal law to all rate increase proposals. The PRC created rules that they believe limit them to checking the price cap math each time the USPS files a rate increase. When the regulator established its system, it believed that it sufficiently covered the legal objectives and factors.
As a reminder, we provide the following excerpt from the USPS governing law, Title 39:
(b) Objectives.—Such system shall be designed to achieve the following objectives, each of which shall be applied in conjunction with the others:
(1) To maximize incentives to reduce costs and increase efficiency.
(2) To create predictability and stability in rates.
(3) To maintain high quality service standards established under section 3691.
(4) To allow the Postal Service pricing flexibility.
(5) To assure adequate revenues, including retained earnings, to maintain financial stability.
(6) To reduce the administrative burden and increase the transparency of the ratemaking process.
(7) To enhance mail security and deter terrorism.
(8) To establish and maintain a just and reasonable schedule for rates and classifications, however the objective under this paragraph shall not be construed to prohibit the Postal Service from making changes of unequal magnitude within, between, or among classes of mail.
(9) To allocate the total institutional costs of the Postal Service appropriately between market-dominant and competitive products.
(c) Factors.—In establishing or revising such system, the Postal Regulatory Commission shall take into account—
(1) the value of the mail service actually provided each class or type of mail service to both the sender and the recipient, including but not limited to the collection, mode of transportation, and priority of delivery;
(2) the requirement that each class of mail or type of mail service bear the direct and indirect postal costs attributable to each class or type of mail service through reliably identified causal relationships plus that portion of all other costs of the Postal Service reasonably assignable to such class or type;
(3) the effect of rate increases upon the general public, business mail users, and enterprises in the private sector of the economy engaged in the delivery of mail matter other than letters;
(4) the available alternative means of sending and receiving letters and other mail matter at reasonable costs;
(5) the degree of preparation of mail for delivery into the postal system performed by the mailer and its effect upon reducing costs to the Postal Service;
(6) simplicity of structure for the entire schedule and simple, identifiable relationships between the rates or fees charged the various classes of mail for postal services;
(7) the importance of pricing flexibility to encourage increased mail volume and operational efficiency;
(8) the relative value to the people of the kinds of mail matter entered into the postal system and the desirability and justification for special classifications and services of mail;
(9) the importance of providing classifications with extremely high degrees of reliability and speed of delivery and of providing those that do not require high degrees of reliability and speed of delivery;
(10) the desirability of special classifications for both postal users and the Postal Service in accordance with the policies of this title, including agreements between the Postal Service and postal users, when available on public and reasonable terms to similarly situated mailers, that—
(A) either—
(i) improve the net financial position of the Postal Service through reducing Postal Service costs or increasing the overall contribution to the institutional costs of the Postal Service; or
(ii) enhance the performance of mail preparation, processing, transportation, or other functions; and
(B) do not cause unreasonable harm to the marketplace.
(11) the educational, cultural, scientific, and informational value to the recipient of mail matter;
(12) the need for the Postal Service to increase its efficiency and reduce its costs, including infrastructure costs, to help maintain high quality, affordable postal services;
(13) the value to the Postal Service and postal users of promoting intelligent mail and of secure, sender-identified mail; and
(14) the policies of this title as well as such other factors as the Commission determines appropriate.
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