PRC proposes giving USPS greater freedom to raise stamp prices

Washington Postal Scene by Bill McAllister

The Postal Regulatory Commission has taken another step toward giving the United States Postal Service greater freedom to raise stamp prices.

In a Dec. 5 “revised notice of proposed rulemaking,” the commission moved closer to Postmaster General Megan Brennan’s wish for annual increases greater than the rate of inflation.

The PRC proposal calls for comments by Feb. 3, 2020.

While the new proposal does not give Brennan all the price-setting power she wants, it does reflect the commission’s concerns that the USPS needs some escape from a 2006 price cap that has limited annual stamp price increases to the rate of inflation.

That’s not enough to help the Postal Service escape from the red ink that has engulfed the agency since it was obligated to prepay the soaring health care costs of its retirees by the same 2006 law that created the price cap.

The new PRC notice proposes to alter the price cap to allow the USPS “to achieve long-term financial stability and increase operational efficiency while maintaining high-quality service standards.”

“At first blush the new proposal looks much like the first proposal [from 2017]” said Stephen Kearney, executive director of the Alliance of Nonprofit Mailers.

“The theme is allowing USPS to raise rates much higher than inflation,” he added in a bulletin to his members.

Michael Plunkett, president of the Association for Postal Commerce, predicted that this new proposal, like the first one, “would have a profoundly negative impact on mailers and customers allowing the Postal Service to increase prices well above the rate of inflation with no incentives for improvements in service and no assurances that the Postal Service will improve efficiency and control costs.”

Plunkett also predicted that any new rule that comes out of the latest proposal will be challenged “by one party or another” in the courts before it can take effect.

The PRC’s first proposal, in 2017, called for allowing the Postal Service to raise stamp prices by 2 percent above the rate of inflation.

The new proposal would allow the USPS to exceed the rate of inflation by 2 percent for five years. It also “includes a mechanism that targets two underlying drivers of the Postal Service’s net losses that are largely outside of its direct control.”

These two areas are “declining mail density” and the “statutorily mandated” payments the USPS must make for retiree health care.

The comments of Kearney and Plunkett suggest that mailing companies will likely oppose the new regulations, and comments from postal unions concerning the PRC proposal suggest they will be more supportive.

One of the key questions likely to be raised by any PRC action is whether it can act to change the price cap without specific legislation from Congress authorizing such a change.

Lawmakers have failed to head years of pleas from the USPS for changes in the 2006 Postal Accountability and Enhancement Act. That law was approved by Congress with promises that it would assure the USPS could face the future undaunted by threats from the internet.

But, as the PRC’s latest proposal makes clear, the law did not work.

It did not halt the erosion of first-class mail volume, and the law’s requirement that the USPS pay future employees’ health care costs has resulted in large annual losses for the agency.

The revised notice of proposed rulemaking noted that the Postal Service’s losses between fiscal year 2006 and fiscal year 2016 totaled $59.1 billion. It said the PRC’s plan could put the USPS on the road to financial health.

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