- Letter from the President, Ron Royall
- Class Schedules
- Jaw Dropping Geo Framing
- The Internet of Things
- Unique Identifiers
- The Postal Regulatory Commission is Threatening Your Livelihood
- The Postal Regulatory Commission’s Next Steps
- Informed Delivery
- Super Charged Informed Delivery – Interactive Campaigns
- The Postal Reform Act of 2018
- The Run for Rama – MD Anderson’s Spring for Life 5K
As you have already heard, the Postal Regulatory Commission (PRC) has issued a proposed change to the rate setting process that would authorize a series of over -Consumer Price Index (CPI) increases that could sharply increase postal rates over the next five years. (For details see our blog; The PRC is Threatening Your Livelihood)
March 1, 2018 marked the deadline to receive comments about the proposed changes, and the PRC got plenty. The comments received had a consistent theme from industry associations, individual mailing companies and direct mail organizations.
The American Mail Alliance represents associations and individual signers that have come together for the sole and limited purpose of showing unanimity in asking the PRC to reconsider its proposed solution. The AMA is by far, the largest ad hoc group submitting comments. They criticized the prefunding burden and noted that the PRC was placing too much focus on the financial health of the USPS as impacted by the Postal Accountability and Enhancement Act (PAEA), stating that most stakeholders in the industry, predictability, rate stability, and transparency have been achieved. In turn, the group argued that the commission over zealously sought ways to pay the accumulated debts caused by the unnecessary prefunding requirement.
Another rally against the proposed plan came from three groups commenting jointly; (the National Postal Policy Council, Major Mailers Association, and the National Association of Presort Mailers). They not only argued against the higher prices but questioned whether the PRC has the authority to advance changes to the CPI-based rate setting system.
Other powerhouse organizations that “chimed in” questioning the PRC’s authority to move forward included the Alliance of Nonprofit Mailers, the American Catalog Mailers Association, the Association for Postal Commerce (PostComm), Idealliance, and the Association of Magazine Media.
So, what’s next? March 1st marked the first phase of comments; reply comments in which commenters critique each other, are due by the end of the month.
After that, the PRC faces the task of digesting the input it has received and developing responses to comments. They can produce a revised proposed rule (presumable acknowledging the industry’s concerns); or they can issue a final rule presenting the changes it plans to implement.
A second proposed rule would repeat the comment and, perhaps, reply comment periods, while a final rule would set a timeline on which it would be implemented.
The commission’s deliberations could reasonably take at least sixty days, meaning a revised proposal or a final rule shouldn’t be expected until late May or early June at the earliest, with implementation (under a final rule) sometime later this year. If a second proposed rule were issued, that would add another sixty to ninety days, at least.
Whether a presumed late-2018 rate filing by the USPS would be impacted is unknown at this time but, regardless, nothing will change about how USPS rates are set until the PRC’s rule making is concluded.
Of course, it’s widely anticipated that a law suit in federal court against the PRC’s final rule – no matter what it is – particularly given the opinion of some commenters that the commission lacks the legal authority to do what it’s proposing. If there is litigation, the final outcome is anybody’s guess! We will keep you posted as this important issue unfolds.
The Postal Accountability and Enhancement Act (PAEA) dictated that the Postal Regulatory Commission (PRC) conduct a study of the past decade to determine if the current system for regulating rates and classes for Market Dominant Postal Products was achieving its objectives.
Those results were published on December 1, 2017 and the PRC concluded that the current system achieved some of its goals, but overall the system has failed.
The PRC issued a Notice of Proposed Rulemaking that would give the USPS the authority to raise rates by at least 2% above the CPI for each market dominant rate class for five years. It also allows for an additional 1% increase if they hit service and productivity standards, and will be required to raise prices for “underwater products” (Periodicals and Nonprofit mailings for example) by a minimum of an additional 2% above the price change authority to move prices toward full-cost coverage over time. This could drive rate increases for standard letters (officially known as Marketing Mail Letters) up by 27% and flats by more than 40% over the next five-years.
These proposed changes to the current postage rate ceilings are inflated and threaten the vitality and efficiencies of the postal service and our industry as a whole.
The PRC is an independent agency that has exercised regulatory oversight over the Postal Service since its creation by the Postal Reorganization Act of 1970. It is composed of five Commissioners, each of whom is appointed by the President and subject to confirmation by the US Senate, for a term of six years. To ensure bipartisanship, not more than 3 of the Commissioners can belong to the same political party.
The PRC is tasked with ensuring transparency and accountability of the USPS and fostering a vital and efficient universal mail system. They act as an independent regulator for engaging postal stakeholders to promote a robust mail system through objective regulatory analyses and decisions. Normally, the PRC does not have the final say when it comes to postage rate increases. That is for the USPS Board of Governors. However, this is not a rate case. This is a 10-year review of the system which the PRC reigns supreme.
The argument that the USPS has accumulated losses of $59.1 billion include the $54.8 billion needed to prefund their already financially healthy retiree health plan; even though no other entity is required to do the same.
The current regulations force the USPS to reduce costs and raise efficiencies which is needed now more than ever as many economists expect inflation to increase.
Thursday, March 1, 2018 marks the end of a 90-day comment period. There is another 30-day (one month) period allowed for replies to comments before a ruling can be implemented.
We are very active with industry associations and sit on several industry boards. Together we are fighting to prevent this travesty from happening. The industry will continue to stand united and push the USPS to focus on rate increases specifically tied to cost efficiencies only. We will keep you abreast of the situation as it unfolds.
The USPS said it will propose higher postal rates (for market dominant products) based on the August 2018 Consumer Price Index (CPI). The proposed filing will be submitted sometime in October and the rate hike will take effect on January 21, 2018.
The actual proposed changes are unknown at this time, and we are uncertain how much the USPS will draw on “Banked Pricing Authority” (see below right for more information).
However, based on statistics released by the Bureau of Labor, the Consumer Price Index Figures for August (including those used to construct the USPS pricing authority), reflect the calculated “cap” at 1.987%. Therefore, our advice to mailers is to estimate around a 2% increase for your 2018 postal budget. Of course specific prices can change plus or minus.
What is the USPS Banked Pricing Authority
An amount not used in a previous filing or developed through discounts tied to incentives & promotions. This can be added to what is available under the CPI cap to increase the net percentage applicable to each class of mail.
Since 2000, the 60% rule applies to NP rates. That means that the average NP revenue per piece should be 60% of the estimated average revenue per piece rate, class-wide. The USPS wants to revert to using a methodology that was used prior to the passage of postal reform legislation where regular and ECR (enhanced carrier route) rates are considered subclasses of mail. The Alliance of Nonprofit Mailers alerted members that by reverting to the prior methodology, prices could increase 3.3% to 6.9% over and above other increases that are proposed for implementation in January of 2018.
The PRC Public Representative recognized the potential “rate shock” facing nonprofit mailers, and urged the USPS to apply any corrective price adjustments (over the annual CPI cap increase) over more than two price-adjustment cycles.
There isn’t a time constraint applicable for the PRC to issue a decision on the matter, and the comment period on the USPS proposal ended on September 18th. Knowing the possibility of a legal challenge, the PRC may be more deliberate in issuing its ruling than usual. We’ll keep you posted as this issue unfolds.
*from The Bureau-October 2017 issue
The USPS & PRC (Postal Regulatory Commission) have started preparation for the end of the exigent surcharge that’s been in place since January 2014. The surcharge removal is projected to end in early April, but that date is only a forecast at this point, as it’s based solely on when the full amount authorized to be derived from the surcharge ($4.63 billion) will be collected.
For obvious reasons, the PRC is interested in ensuring that the correct date is set for the end of the surcharge and, accordingly, had directed the Postal Service to provide biweekly updates on the amount collected beginning in the postal quarter when the end of the surcharge was anticipated. Also, the agency must give 45 days’ notice of the end of the surcharge.
In its February 14 report, the USPS explained that it had collected an estimated $4.347 billion, including $827.1 million so far in FY 2016. For the 750 days that the surcharge had been in effect through February 14, the USPS averaged about $5.796 million per day in additional revenue. At that rate the total should take just over 799 days to collect, or until about April 3, 2016. As the PRC has noted, the USPS is entitled to collect only the amount the commission authorized, and there’s no process for refunding any excess collected from ratepayers, so the need to be as precise as possible in setting the end date is clear. In the meantime, the surcharge revenue continues to accumulate, mailers look forward to lower rates in April, and the Postal Service worries how it will replace the 4.3% of revenue.
See below for rate changes and comparisons:
If you have questions or need additional information, please don’t hesitate to contact us!
Today the U.S. Postal Service filed a request with the PRC (Postal Regulatory Commission) for a rate adjustment (1.966%) based on the CPI (Consumer Price Index). The request for increase applies to only “market-dominant products”, which includes Standard Mail, the primary postage used by marketers.
The USPS has requested that the increase take effect on April 26 and estimates that it will generate an additional $900 million on an annualized basis. The USPS estimates that an additional $400 million will be contributed to the fiscal year 2015, if the PRC agrees to meet the proposed implementation date.
The case also includes a separate pricing structure for Standard Mail run through the FSS (Flats Sequencing System). The request removes FSS pricing for carrier route, high density, or high density plus categories. Instead, a five-digit carrier route pallet rate will be created. An estimated 2.465% rate increase is predicted for Standard Flats.
Forever stamps will remain unchanged (49 cents), International letters will increase to $1.20 (a 5 cent increase), and postcard rates increase to 35 cents (a 1 cent rate hike).
We will keep you abreast of the outcome of this filing as it becomes available.
The price of a Forever stamp and other mail will rise by 3 cents on January 26, 2014. This represents the largest rate hike in 11 years. The increase will be in effect for two years, giving the USPS a temporary shot of extra revenue. “Allowing the rates to remain in effect indefinitely would result in over recovery of the financial impact of the Great Recession on the Postal Service,” wrote the commission.
The PRC (Postal Rate Commission) approved the exigent increase by a 2 to 1 vote, resulting in a 6% overall jump in postal rates. This is the first extra revenue for the USPS since the 2006 law limited rate increases to the rate of inflation.
In addition to First-Class mail, the higher rates will apply to magazines, newspapers, advertising mail and bills – which together account for most of the 158 billion pieces of mail delivered every year.
A review of the Exigent Rate Case from our partner, Thomas Glassman of Wilen Direct.
In general, the Postal Rate Commission granted the USPS request for additional revenue as a result of recession related losses. Even though the mailing industry argued that the losses were from diversion to other marketing methods. As a result, the rates contained in its exigent price filing would be allowed to take effect on January 26th. However, the PRC did not agree that the rate increase should be permanent and so directed that the rates should be implemented as a “surcharge”. The USPS was further directed to submit a plan for the eventual removal of that surcharge. I believe that you will see them in place for a long time.