Alliance Alert–PRC Issues New Proposal in Ten-Year Rate Review

December 5, 2019

The Postal Regulatory Commission this morning announced a new proposal and rulemaking process in its 10-year rate review that started December 6, 2016.  A copy of the press release is attached.  Comments on the proposal are due on February 3 2020, with reply comments due on March 4 2020.  The Alliance will, as always, be an active participant and strong advocate for the rights and needs of nonprofit mailers who make up 10 percent of the USPS customer base.

We will provide further analysis to you, but at first blush the new proposal looks much like the first.  The theme is allowing USPS to raise rates much higher than inflation.

The PRC order is posted here.

The primary revisions to the Commission’s proposal include:

  • The Commission modifies the proposed supplemental rate authority mechanism to address drivers of the Postal Service’s inability to achieve net income during the PAEA era. Instead of a singular, fixed amount of supplemental rate authority, the revised supplemental authority proposal includes a mechanism that targets two underlying drivers of the Postal Service’s net losses that are largely outside of its direct control: declining mail density and statutorily mandated amortization payments for particular retirement costs.
  • The Commission adjusts the performance-based authority to retain the 1 percentage point of rate authority benchmark but modifies how the specific performance-based requirements for operational efficiency and service will be measured.
  • The Commission makes revisions to the rules for non-compensatory products and classes, proposing that the use of an additional 2 percentage points of rate authority for non-compensatory classes be optional and removing the requirement that determinations be made in the Annual Compliance Determination proceeding.
  • The Commission proposes revised rules for worksharing discounts that dispense with the 3-year grace period. The modifications separately address workshare discounts set below avoided costs and workshare discounts set above avoided costs and add new requirements that the Postal Service provide information and analysis specific to certain workshare costs set excessively above or below avoided cost.
  • The Commission proposes new reporting requirements for costs and cost-reduction initiatives in response to commenter concerns and in light of the revised proposals for additional rate authority. These reporting requirements address changes in unit costs, specific cost-reduction initiatives, and Decision Analysis Reports (DARs).
  • The Commission proposes additional procedural rules related to planning rate adjustments of general applicability.