Postal Pieces: Rates to Rollback on April 10, 2016
The USPS has filed the notice it is required to file by the Postal Regulatory Commission (PRC) decision in the exigency case to announce that postal rates will "rollback" on April 10, 2016.

Previous to this official filing, the USPS had released detailed rate information to all mailers about the "rollback rates" that will go into effect when the USPS has recovered all of the revenue the PRC found it was entitled to recoup "due to" the Great Recession and to collect with the 4.3% exigency increase that has been added to all Market Dominant postal rates.

The Postal Service announced, absent Congressional or Court Action to make the existing exigent surcharge for Market Dominant Products and Services part of the rate base or to otherwise extend it, that the Postal Service would provide notice of the rollback date to the PRC at least 45 days before the exigent surcharge revenue target is reached. The USPS posted on its RIBBS website charts that show all of the rollback rates.

The Postal Service PRC filing, announcement, and posting of the rollback rates, is all required by existing order of the PRC. The Postal Service would still like to see some legislation passed before the "rollback" date to permit it to keep the exigency surcharge in place. In a USPS Release accompanying the announcement, Postmaster General Megan Brennan said, "Removing the surcharge and reducing our prices is an irrational outcome considering the Postal Service's precarious financial condition."

The USPS, the President's budget, and some mailers and associations have supported a continuation of the exigent surcharge as part of a potential postal reform package that would help stabilize Postal Service finances. Such a proposal was in the President's budget and is in the Ipost bill introduced by Senator Carper. The USPS has also continued its exigency appeal challenging the last round of proceedings before the PRC. But in this contentious Congressional environment and election year, and in light of the extensive court proceedings and rulings that have already taken place, the likelihood of Congressional or court action to continue the exigent surcharge seems remote.

A chart of the rates for Enhanced Carrier Route Flats sent as High Density (TMC) Mail or Saturation Mail Flats, reprinted with permission of PostCom, the Association of Postal Commerce, accompanies this article. These are the rate categories used most frequently by free paper publishers that use the mail for all or part of their circulation.

The rate category referred to as EDDM ECR Flats - Saturation refers to Saturation Mail pieces sent with the simplified address format, and as commercial mail where the mailer has a mailing permit. (These are not the rates for EDDM Retail where a business owner can enter smaller quantities of unaddressed saturation mail at a local postal office without a permit). SMC is a member of PostCom and thanks that organization for the permission to share this information and this helpful chart with our members.

So what is ahead for postal rates? With CPI continuing to be exceptionally low, it is not anticipated that there will be a rate change until January 2017. Under the current law governing the USPS, the Postal Accountability and Enhancement Act, postal rate increases have been limited to adjustments within the CPI rate cap, except for extraordinary or exigent circumstances. In 2017, after the exigent 10 year anniversary of the law, the PRC is charged with conducting a "Rate Review" to determine how the rate setting process has worked.

Although most mailers applaud the Rate Cap as a PAEA protection that has stabilized postal prices for monopoly products and encouraged the USPS to cut costs and right size its network, the USPS and postal labor have made it clear that they want to bust the cap. Brennan said, "Our current pricing regime is unworkable and should be replaced with a system that provides greater pricing flexibility and better reflects the economic challenges facing the Postal Service."

Mailers and other USPS stakeholders believe the problems the USPS faces are not due to the rate cap but unworkable and unfair government imposed mandates relating to health care costs and prefunding, overpayment of retirement costs, and other burdens that could be fixed with postal reforms that do not unfairly and unreasonably burden mailers, and put the USPS and the federal government at risk of losing more of the postal rate paying customers that fund the USPS.

Some mailers and associations, including SMC, have advanced an idea to be included as part of an overall postal reform package of a rate proposal that would give the Postal Service some additional revenue (beyond what is permitted by CPI) to help the USPS with its financial challenges. The willingness of mailers and industry to accept a higher than CPI rate is conditioned, however, on other Congressional action that would postpone the 10 year rate review one year to 2018, and would give mailers the certainty of two years of rate stability.

This rate proposal would be part of a comprehensive postal reform package that would give the USPS the restructuring changes it needs to amortize health care obligations over a longer period of time, would allow the USPS and its employees to take advantage of Medicare participation (currently USPS employees pay for Medicare but do not participate in the plan), would give the Postal Service a right to refunds for overpayments to its retirement plans, and would make other changes that would improve the long-term health and stability of the USPS.

As of the writing of this column, this proposal is still in the discussion stage. But it is an effort by mailers that opposed exigency, to try and meet the Postal Service part way on its financial challenges, but to also give the industry and the Postal Service some breathing room to adjust to changes that might be in an overall reform law, and to complete studies that would be required by the law, before the PRC begins its rate review process. But as of this writing, the prospects of comprehensive postal reform in the short-term, or long-term, during an election year remain uncertain.


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