June 14, 2017
The USPS is pushing the legal envelope in two ways. First, it wants to override the CPI price cap that is written into law. And second, it is likely to propose rate increases for 2018, even if it has no Governors to approve the decision.
The Postal Service is now testing whether it can get its regulator to rewrite specific language in the law passed by Congress. The Postal Accountability and Enhancement Act (PAEA) of 2006. Section 3622, Modern Rate Regulation, has the following requirement:
`(d) REQUIREMENTS-
`(1) IN GENERAL- The system for regulating rates and classes for market-dominant products shall–`(A) include an annual limitation on the percentage changes in rates to be set by the Postal Regulatory Commission that will be equal to the change in the Consumer Price Index for All Urban Consumers unadjusted for seasonal variation over the most recent available 12-month period preceding the date the Postal Service files notice of its intention to increase rates;
USPS is arguing in the ten-year rate review at the Postal Regulatory Commission that the PRC should overrule Congress’ requirement that postal prices be limited to the CPI. Postal leaders, with no presidentially-appointed Governors, propose an open-ended process in which they determine how much they would like to raise prices and notify everyone in advance. After the prices take effect, the PRC could review whether it thinks they met all of the objectives and factors in the law. The PRC decision will be announced in the fall.
A second test of legal limits also could come this fall if USPS announces a rate increase for 2018, and still has no Governors. The law is clear that only the Presidentially-appointed Governors set postage rates, subject to concurrence by the PRC. The USPS Office of Inspector General highlighted this conundrum in its Semiannual Report to Congress:
Our most recent Semiannual Report to Congress (SARC), which is a record of our work over a six-month period, includes a paper we did that highlights the ramifications of having no presidentially appointed governors. Governance of the U.S. Postal Service noted that by law, only the presidentially appointed governors can conduct certain actions, including authorizing rate and fee changes for postal products, and requesting the Postal Regulatory Commission add, remove, or reclassify product, among other things.
The fall of 2017 will be very interesting and eventful. The PRC will issue its decision and possibly propose a rule-making to replace or alter the CPI cap. And, if the absence of postal Governors continues, USPS is likely to try to increase rates without them. Stay tuned.