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A Little “Inside Baseball” as the PRC Launches Its Rate and Regulatory Review

Kurt Ruppel

It’s another month before pitchers and catchers arrive for the start of Major League Baseball’s Spring Training camps. While it may be a little early to start talking baseball, things are already heating up around several issues related to the U.S. Postal Service, so let’s talk a little “inside baseball” about what’s going on in postal affairs.

PRC Rate and Regulatory Review

When the Postal Accountability and Enhancement Act (PAEA) was passed in 2006, it required that the Postal Regulatory Commission (PRC) review the ratemaking system for market dominant products* 10 years later to determine if it is achieving the eight objectives that were established by Congress.

The nine objectives that the ratemaking system was created to achieve are:

  1. Maximize incentives to reduce costs and increase efficiency;
  2. Create predictability and stability in rates;
  3. Maintain high quality service standards;
  4. Allow the Postal Service pricing flexibility;
  5. Assure adequate revenues to maintain financial stability;
  6. Reduce administrative burden and increase transparency in the ratemaking process;
  7. Enhance mail security and deter terrorism;
  8. Establish and maintain a just and reasonable schedule for rates and classifications;
  9. Allocate USPS institutional costs appropriately between market dominant and competitive products.

If the PRC determines the ratemaking system is not meeting its objectives, it can propose modifications to the current system or recommend an alternative system to better meet the objectives.

In addition to reviewing the eight objectives, the PRC will also consider the annual limitation on the percentage changes in rates, the class level application of the annual limitation, the schedule for rate changes, the amount of notice given before rate changes, and expedited rate changes based on exigent circumstances.

Since December 2016 marked the 10-year anniversary of PAEA becoming law, the PRC has begun laying out its review framework, including preliminary definitions of each objective and potential measurements of the results. It has asked stakeholders to review the proposed framework and provide comments by March 20 on whether the definitions and measurements are reasonable, and if not, to propose an alternative framework. Stakeholders are also asked to comment on whether the current system is meeting the objectives, and if not, what modifications to the current system or alternative system should be adopted to achieve the objectives.

Most mailing industry associations are beginning to assess the PRC framework and will be developing comments for the Commission. The item of highest concern for mailers is the continuation of the CPI-based rate cap that has helped keep USPS costs in check and maintained affordable and predictable postal rates over the past 10 years. IWCO Direct will be working with our associations to ensure this important safeguard remains in place.

Postal Reform Legislation

Although we were unable to achieve a postal reform bill before the end of the last Congress, we are hopeful the new Congress can pick up from where the previous legislature left off and move quickly toward passage. The bills under discussion at the end of last year would address many of the common concerns that postal stakeholders share: restructuring USPS healthcare obligations (integration of USPS retirees into Medicare, more logical amortization of obligations), use of USPS demographics to determine pension and retiree healthcare obligations, and revised rules for the investment of pension and retiree healthcare funds. These measures will go a long way toward stabilizing Postal Service finances (see objective #5 above) and have a positive impact on the outcome of the PRC Rate and Regulatory Review.

As an Ohio native, baseball fan and postal geek, I see a lot of reasons for hope as we move toward Spring Training. SpeakingDIRECT will keep you informed as these two important issues develop throughout the year. And we’ll definitely let you know when Cleveland wins the 2017 World Series!

*Market dominant products are those over which the Postal Service has a monopoly, including First-Class Mail, Periodicals, and USPS Marketing Mail (formerly Standard Mail).

link https://www.iwco.com/blog/2017/01/10/postal-regulatory-commission-rate-review/
Kurt Ruppel

Author

Kurt Ruppel

Director Postal Policy and Marketing Communications and graduate of Utah State University. Bringing the “all of us know more than any of us” business philosophy to IWCO Direct for more than 30 years (oy!). Two-time IWCO Direct President’s Award winner, bicycling enthusiast and Ohio State Buckeye Football fan.

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