January 30, 2018

But Will the CPI Cap Mean Anything?

You might remember that the Alliance objected, along with many others, when the USPS first proposed to included new Full Service Intelligent Barcode requirements to qualify for automation rates in 2014. The PRC agreed with the objectors that it was a stealth rate increase. It said all the possible higher rates paid would have to be accounted for against the CPI cap.

USPS backed off from the requirement in 2014, but fought the PRC ruling tooth and nail, both at the PRC and in the U.S. Court of Appeals. After much wrangling, the PRC held its ground and issued a very straightforward standard on January 22, 2016:

“The Commission applies a two-prong standard to determine when a mail preparation change will be considered a classification change that requires compliance with the price cap rule under 39 C.F.R. § 3010.23(d)(2). A mail preparation requirement change is a classification change with rate effects when the change either:

 Results in the deletion of a rate cell; and/or

 Results in the redefinition of a rate cell if the mail preparation change causes a significant change to a basic characteristic of a mailing.”

Last week, the Commission issued an order that sets up the process the USPS must use when it wants to propose a classification change. It must publish classification change proposals in a single place and state whether the price cap should apply or not.  And the PRC placed the burden of proof on the USPS:

“Procedures for mail preparation changes. The Postal Service shall provide published notice of all mail preparation changes in a single, publicly available source. The Postal Service shall file notice with the Commission of the single source it will use to provide published notice of all mail preparation changes. When providing notice of a mail preparation change, the Postal Service shall affirmatively state whether or not the change requires compliance with paragraph (d)(2) of this section. If the Postal Service’s determination regarding compliance with paragraph (d)(2) of this section is raised by the Commission or any other party, the Postal Service must demonstrate, by a preponderance of the evidence, that a mail preparation change does not require Docket No. RM2016-6 – 23 – Order No. 4393 compliance with paragraph (d)(2) of this section in any proceeding where compliance is at issue. In any challenge to the Postal Service’s determination concerning a mail preparation change, the challenging party shall provide all information to rebut the Postal Service’s determination that the change is not subject to the price cap.”

This is a very important example of the regulator recognizing an area in which customers needed protection from the monopoly provider. It was a potential way for the provider to, in effect, exceed the CPI rate cap through manipulation of mail classification rules and elimination of rate cells.

Unfortunately, this kind of excellent regulatory practice could be blown to smithereens if the December 1 Commission proposal to greatly exceed the price cap is implemented. The Alliance, of course, will be commenting in the PRC proceeding on March 1 and again with reply comments on March 30.