June 19, 2024

Issue 24/08

The leading voice for nonprofits on postal issues for over 44 years.

Copyright 2024 Alliance of Nonprofit Mailers—All rights reserved.

A 501 (c)(4) nonprofit organization established by nonprofits for nonprofits.

The Alliance is working on comments on PRC rate rule-making

Your Alliance of Nonprofit Mailers is working diligently on vitally important comments we will file with the Postal Regulatory Commission on July 9. Our Board Members, General Counsel, Chief Economist, and Executive Director are working hard to help overturn the ill-advised rules promulgated by the PRC in late 2020. These administrative rules allow the monopoly United States Postal Service extensive discretion to raise rates on captive mailers well above the rate of inflation and more frequently than ever before.

USPS used the new PRC rules to do as any monopoly business would do if allowed – maximize the price increases. Six such increases have ensued, plus the latest planned for July. These rate hikes have pummeled the mailers who remain with USPS and provide most of its funding.

We previously shared data showing that Quad’s mailing customers are facing total compound rate increases ranging from 29% to 83% under the USPS monopoly pricing aided by friendly “regulation” by the PRC.

On the next page, we include Quad’s table again. We also show the PRC’s depiction of the six rate hikes that its administrative regulations enable and the full use of the authority by the monopolist USPS. It is easy to see that the administrative add-ons have massively inflated USPS price increases well above the general rate of inflation measured by the Consumer Price Index.

Rate Cases Under the Modified Ratemaking System – Source: PRC

In its April 5 Order initiating and accelerating the reconsideration of the rate regulations, the PRC gave several reasons:

In recent dockets, commenters have raised a substantial number of concerns related to the effects of the modifications to the ratemaking system adopted in Order No. 5763, including: the magnitude of recent and future price increases, the frequency of rate adjustment proceedings, the Postal Service’s service performance, whether the objectives of 39 U.S.C. § 3622(b) are being achieved, the effects that recent rate adjustments have had on mailers, the Postal Service’s overall finances and financial stability, the Postal Service’s ability to collect adequate data, the Postal Service’s business reputation, and Market Dominant mail volumes declines.

The Alliance is an outspoken commenter on behalf of all nonprofit mailers.

The PRC invited public comments as follows:

Interested persons are invited to provide written comments to facilitate the Commission’s review of the ratemaking system. Commenters are encouraged to comment as generally or specifically as they deem appropriate. Below, the Commission identifies specific topics on which it would particularly appreciate comment. However, commenters are not limited to addressing these identified topics—the Commission will consider all comments that fall within the scope of this proceeding.

• Is the ratemaking system achieving the statutory objectives, while taking into account the statutory factors? Why or why not?

• If the ratemaking system is not achieving the statutory objectives, while taking into account the statutory factors, should modifications be made or an alternative system be adopted to achieve the statutory objectives?

1. Why or why not?
2. If so, what modifications to the ratemaking system should be made or what alternative system should be adopted?

We enumerated the statutory objectives and factors in our previous Alliance Report, so we will not repeat them here.

PRC releases very troubling report on USPS FY 2023 finances

Very much supporting the need for changes to USPS regulation, the PRC released on June 17 its annual report on the mail agency’s financial performance.  The report is a “murder’s row” of performance failures, many of which we and others have frequently cited:

The in-depth analysis of the Postal Service’s financial performance concluded that the organization’s overall financial condition continues to worsen. In FY 2023, the Postal Service recorded a net operating loss of $2.3 billion — an increase of $1.8 billion over the previous year. When non-operating expenses are included, the overall net loss increases to $6.5 billion.

The primary highlights from the report were:

• The Postal Service had a net loss of $6.5 billion.
• Total Factor Productivity, a measure of Postal Service efficiency, saw the largest decrease (4 percent) since it was first calculated in 1965.
• Total mail volume decreased by 8.7 percent, including a 2.0 percent decrease in the volume of Competitive products.
• Revenue from Competitive products increased by $0.2 billion.
• Despite rate increases, Market Dominant revenue decreased by $0.4 billion.
• Total operating expenses were $2.1 billion higher than the previous year.
• The Postal Service recorded total assets of $45.3 billion and total liabilities of $68.4 billion at the end of FY 2023.

Source: PRC press release

PRC also expresses concerns about deteriorating service performance by the USPS

Also announced on June 17 and also expressing deep concerns, the PRC is continuing its inquiry into the massive USPS network changes underway across the country. Supposed to increase both service and productivity performance, the changes are making both worse. The regulator summarized its efforts:

Today, the Postal Regulatory Commission requested information about continued large-scale network changes by the Postal Service despite its announced “pause” in implementing parts of the Delivering for America (DFA) plan. In addition, the Commission asked the Postal Service about the scope and nature of the pilot test described by the Postal Service regarding early DFA efforts in its May 16th response to the Commission’s Show Cause order. The Commission also requested information about the ’recently announced projection of $65 billion in ten-year losses under DFA. The questions are part of the Commission’s public inquiry into the DFA.

Commission Chairman Michael Kubayanda noted, “Emerging circumstances and information have reinforced the urgency and importance of understanding the impacts and regulatory implications of DFA before the Postal Service makes further changes that impact service.” National service performance in 2024 has been at historic lows, while locations such as Atlanta continue to suffer service problems, even after some improvement in recent weeks.

On May 20, the Postmaster General issued a letter to the Chairman of the Senate Homeland Security and Governmental Affairs Committee, Senator Gary Peters, stating that the Postal Service would move forward with network changes in dozens of locations around the country, despite separately announcing a “pause” in some facility consolidations. The Postal Service is required by law to request an Advisory Opinion on changes that will impact service on a nationwide or substantially nationwide basis, and the Commission continues to urge the Postal Service to request an Advisory Opinion on certain DFA initiatives.

Notably, the regulator appeared to observe that the Postmaster General pulled a fast one on his Senate oversight by first sending a letter indicating a “pause” in the massive network changes and then another that “clarified” that most of the effort is moving forward. In between letters, many members of Congress declared victory in stopping the relentless march of USPS changes until everyone could learn whether it was working or not. That made it difficult for the members to walk back their declarations upon further review of PMG letters.

Also notable was the regulator’s reiteration that the law requires USPS to request a non-binding advisory opinion from the regulator whenever the mail agency makes major changes like those currently underway. The regulator continued to urge the USPS to follow the law as it slow-walks compliance.

At the National Postal Forum, PMG DeJoy wished for an even less regulated USPS

In his June 3 speech to the attendees at the National Postal Forum, PMG DeJoy spoke of the virtues of the cost-of-service regulation in effect from 1970 to 2006 and blamed the problems faced by USPS on the CPI price cap in effect from 2007-2020.

Even though most real businesses, for-profit and nonprofit, must live within pricing limits imposed by market competition, often close to the inflation rate, DeJoy wishes for a Postal Service free to set its monopoly pricing as it wishes. That would make covering costs more of a calculation effort than successful leadership and management.

The speech and his relentless condemnation of living with inflation presage his intention to bully the regulator into giving the monopoly provider even more deregulated freedom to set prices and service parameters.

DeJoy tries to bolster his wish with statements that USPS no longer has a monopoly. If that has any truth, then he must request that Congress remove the statutory monopoly requirements in postal law.