January 20, 2016

As we approach the December 2016 start of the review of USPS pricing regulation by the PRC, more and more of our attention will be on the task at hand. It is important to recall that the focus will be on the following 23 equally-weighted objectives and factors.

`Sec. 3622. Modern rate regulation

`(a) AUTHORITY GENERALLY- The Postal Regulatory Commission shall, within 18 months after the date of enactment of this section, by regulation establish (and may from time to time thereafter by regulation revise) a modern system for regulating rates and classes for market-dominant products.

(b) OBJECTIVES- Such system shall be designed to achieve the following objectives, each of which shall be applied in conjunction with the others:

`(1) To maximize incentives to reduce costs and increase efficiency.

`(2) To create predictability and stability in rates.

`(3) To maintain high quality service standards established under section 3691.

`(4) To allow the Postal Service pricing flexibility.

`(5) To assure adequate revenues, including retained earnings, to maintain financial stability.

`(6) To reduce the administrative burden and increase the transparency of the ratemaking process.

`(7) To enhance mail security and deter terrorism.

`(8) To establish and maintain a just and reasonable schedule for rates and classifications, however the objective under this paragraph shall not be construed to prohibit the Postal Service from making changes of unequal magnitude within, between, or among classes of mail.

`(9) To allocate the total institutional costs of the Postal Service appropriately between market-dominant and competitive products.

`(c) FACTORS- In establishing or revising such system, the Postal Regulatory Commission shall take into account–

`(1) the value of the mail service actually provided each class or type of mail service to both the sender and the recipient, including but not limited to the collection, mode of transportation, and priority of delivery;

`(2) the requirement that each class of mail or type of mail service bear the direct and indirect postal costs attributable to each class or type of mail service through reliably identified causal relationships plus that portion of all other costs of the Postal Service reasonably assignable to such class or type;

`(3) the effect of rate increases upon the general public, business mail users, and enterprises in the private sector of the economy engaged in the delivery of mail matter other than letters;

`(4) the available alternative means of sending and receiving letters and other mail matter at reasonable costs;

`(5) the degree of preparation of mail for delivery into the postal system performed by the mailer and its effect upon reducing costs to the Postal Service;

`(6) simplicity of structure for the entire schedule and simple, identifiable relationships between the rates or fees charged the various classes of mail for postal services;

`(7) the importance of pricing flexibility to encourage increased mail volume and operational efficiency;

`(8) the relative value to the people of the kinds of mail matter entered into the postal system and the desirability and justification for special classifications and services of mail;

`(9) the importance of providing classifications with extremely high degrees of reliability and speed of delivery and of providing those that do not require high degrees of reliability and speed of delivery;

`(10) the desirability of special classifications for both postal users and the Postal Service in accordance with the policies of this title, including agreements between the Postal Service and postal users, when available on public and reasonable terms to similarly situated mailers, that–

`(A) either–

`(i) improve the net financial position of the Postal Service through reducing Postal Service costs or increasing the overall contribution to the institutional costs of the Postal Service; or

`(ii) enhance the performance of mail preparation, processing, transportation, or other functions; and

`(B) do not cause unreasonable harm to the marketplace.

`(11) the educational, cultural, scientific, and informational value to the recipient of mail matter;

`(12) the need for the Postal Service to increase its efficiency and reduce its costs, including infrastructure costs, to help maintain high quality, affordable postal services;

(13) the value to the Postal Service and postal users of promoting intelligent mail and of secure, sender-identified mail; and

`(14) the policies of this title as well as such other factors as the Commission determines appropriate.

The regulatory review to be led by the PRC starting in December 2016 will be complex and multi-faceted. The law describes it as follows.

`(3) REVIEW- Ten years after the date of enactment of the Postal Accountability and Enhancement Act and as appropriate thereafter, the Commission shall review the system for regulating rates and classes for market-dominant products established under this section to determine if the system is achieving the objectives in subsection (b), taking into account the factors in subsection (c). If the Commission determines, after notice and opportunity for public comment, that the system is not achieving the objectives in subsection (b), taking into account the factors in subsection (c), the Commission may, by regulation, make such modification or adopt such alternative system for regulating rates and classes for market-dominant products as necessary to achieve the objectives.

The PRC will need to balance many objective and factors, some of which pull in opposite directions, as it reviews pricing regulations. And it is clear that the regulator and its review, while playing a critically important role, is not expected to solve all of the issues faced by the USPS.

© 2016 Alliance of Nonprofit Mailers