Industry Updates

USPS Reports Financials for FY2018 Q2

On May 11, 2018, the Postal Service hosted a media call to review the financial results from FY2018 Q2. They have also posted the associated press release and supporting documentation.

They reported total revenue of $17.5 billion for the second quarter of 2018 (January 1, 2018 – March 31, 2018), an increase of $235 million, or 1.4 percent, compared to the same quarter last year. Reported a net loss of $1.3 billion, with slight revenue increases offset by cost increases, particularly in transportation and salaries and benefits.

Shipping and Packages revenue grew by $445 million, or 9.5 percent, while First-Class and Marketing Mail revenue fell by a combined $181 million.

To date this year, USPS has lost $1.9 billion.

  • First Class: For the three months ended March 31, 2018, First-Class Mail revenue decreased $166 million, or 2.5%, and volume declined 521 million pieces, or 3.4%, compared to the same period last year. For the six months ended March 31, 2018, First-Class Mail revenue decreased $475 million, or 3.5%, and volume declined nearly 1.2 billion pieces, or 3.7%, compared to the same period last year.
  • Marketing Mail: For the three months ended March 31, 2018, Marketing Mail revenue decreased $15 million, or 0.4%, and volume declined by 179 million pieces, or 1.0%, compared to the same period last year. For the six months ended March 31, 2018, Marketing Mail revenue decreased $263 million, or 3.0%, and volume declined by 1.5 billion pieces, or 3.6%, compared to the same period last year.

After the presentation by PMG Brennan and VP Luke Grossman, USPS fielded questions from media where they reiterated their hope that immediate legislative and regulatory relief will be in the offing irrespective of the ongoing efforts of the President’s Task Force.


USPS Board of Governors: Two move past Committee (waiting for floor vote)

The Senate Homeland Security and Government Affairs Committee approved, by voice vote, the nominations of David C. Williams and Robert M. “Mike” Duncan to be Postal Service Governors.

The third nominated governor, Calvin R. Tucker, withdrew his nomination.

At this time, no floor vote has been scheduled.

If the two nominees were approved by the senate, the USPS could consider seeking their approval to file rate changes and promotions with the Postal Regulatory Commission, PRC.

Additional Background:

The term of the last Governor expired on December 8, 2016. By law, the USPS must notify the PRC of any changes to rates, fees or basic classification rules. Such filings require the prior approval of the Postal Service’s Board of Governors. The Board normally consists of up to nine governors appointed by the President of the United States with the advice and consent of the Senate. Currently, the Board of Governors now consists of only the Postmaster General and Deputy Postmaster General.  With no politically appointed members they do not have the authority to approve rate changes or basic classification changes; this include promotions.

On October 26, 2017, the White House announced nominations for three individuals to be postal governors. The Senate has not confirmed the nominations.

  • David C. Williams of Illinois, for the remainder of a seven-year term expiring December 8, 2019. Williams was sworn in as the second independent Inspector General (IG) for the U.S. Postal Service on August 20, 2003.
  • Robert M. Duncan of Kentucky, for the remainder of a seven-year term expiring December 8, 2018, and an additional term expiring December 8, 2025. A 40-year political strategist and veteran of Republican politics, served as the 60th chairman of the Republican National Committee (RNC) from 2007-2009.
  • Calvin R. Tucker of Pennsylvania, for the remainder of a term expiring December 8, 2023. President and CEO, Eagles Capital Advisors, LLC, a financial, management & Economic Development Consultant firm.

USPS Continues Rollout of Enterprise Payment System: Centralized System to Pay and Manage Services

The Postal Service has been developing a new Enterprise Payment System (EPS) to replace the current product-centric payment with a centralized account processing system enabling customers to pay and manage their service online using a single account.

The Enterprise Payment System (EPS) allows customers to pay for Postal products and services through a single account, called the Enterprise Payment Account (EPA). EPS supports commercial, domestic and international products and services which includes First-Class Mail, USPS Marketing Mail, Periodicals, Electronic PO Boxes Online (EPOBOL) and Address Quality Products.
  • Trust Account: Allows you to directly deposit funds to your USPS payment account for transactions.
    • Trust Accounts can be funded through:
      • Check, cash, or money order deposited at designated retail units (https://postalpro.usps.com/EPS/RetailLocations). You are no longer restricted to deposit at the Zip Code where your permit/publication is held. Note: As an EPS customer, you must provide your 10-digit EPA number, not your permit/publication number, to make a deposit to your Trust Account.
      • Fedwire Transfer -a service provided by the Federal Reserve bank to electronically deposit funds into your account
      • ACH Credit – electronic method to deposit funds into your account directly from your banking institution.
  • ACH Debit: Allows USPS to withdraw payment transactions directly from your bank account.

The USPS has posted a Fact Sheet that walks the user through how to enroll, create an account, migrate CAPS Account, setup payment methods and link account. To keep up to date on the latest regarding EPS, visit the USPS Enterprise Payment System site on PostalPro.

USPS representatives are also reaching out to mailers to help them through the upgrade process. For CAPS users, the USPS expects to retire that system in about a year.

 


White House Issues Executive Order on Postal Service

President Trump has signed an Executive Order establishing a Task Force on the United States Postal Service which is assigned the responsibility of coming up with structural changes for the Postal Service.  It’s required to report back in 120 days.  Stakeholders are mentioned in paragraph 4. Neither postal agency is represented on the Task Force, but both the PMG and PRC Chair are to be consulted.

It will be Task Force will be composed of the following department and agency heads, or their designees:

  • The Director of the Office of Management and Budget
  • The Director of the Office of Personnel Management
  • Any other department and agency head the Chair may designate

The order instructs that the Task Team will conduct a thorough evaluation of the operations and finances of the USPS, including:

  • The expansion and pricing of the package delivery market and the USPS’s role in competitive markets
  • The decline in mail volume and its implications for USPS self-financing and the USPS monopoly over letter delivery and mailboxes
  • The definition of the “universal service obligation” in light of changes in technology, e-commerce, marketing practices, and customer needs
  • The USPS role in the U.S. economy and in rural areas, communities, and small towns
  • The state of the USPS business model, workforce, operations, costs, and pricing

Below is the full Exertive Order:

EXECUTIVE ORDER

– – – – – – –

TASK FORCE ON THE UNITED STATES POSTAL SYSTEM

By the authority vested in me as President by the Constitution and the laws of the United States of America, I hereby order the following:

Section 1. Policy. (a) The United States Postal Service (USPS) accounts for almost half of global mail volume and is regularly cited as the Federal agency with the highest public approval rating. However, a number of factors, including the steep decline in First-Class Mail volume, coupled with legal mandates that compel the USPS to incur substantial and inflexible costs, have resulted in a structural deficit where revenues are no longer sufficient to fund the pension liabilities and retiree health obligations owed to current employees. The USPS is on an unsustainable financial path and must be restructured to prevent a taxpayer-funded bailout. This finding is supported by the following considerations, among others:

(i) the USPS has incurred $65 billion of cumulative losses since the 2007-2009 recession;

(ii) the USPS has been unable to make payments required by law for its retiree health benefit obligations, which totaled more than $38 billion at the end of fiscal year 2017; and

(iii) the Government Accountability Office has had the USPS on its high-risk list since 2009 because of a serious financial situation that puts the USPS mission of providing prompt, reliable, and efficient universal mail services at risk. 2

(b) It shall be the policy of my Administration that the United States postal system operate under a sustainable business model to provide necessary mail services to citizens and businesses, and to compete fairly in commercial markets.

Sec. 2. Establishment. (a) There is hereby established a Task Force on the United States Postal Service (Task Force), to be chaired by the Secretary of the Treasury, as Secretary and as Chairman of the Federal Financing Bank, or his designee, to evaluate the operations and finances of the USPS. In addition to the Chair of the Task Force (Chair), the Task Force shall be composed of the following department and agency heads, or their designees:

(i) the Director of the Office of Management and Budget;

(ii) the Director of the Office of Personnel Management; and

(iii) any other department and agency head the Chair may designate.

(b) The Task Force shall consult with the Postmaster General and the Chairman of the Postal Regulatory Commission.

(c) The Task Force shall also engage:

(i) the Attorney General, on issues relating to government monopolies operating in the commercial marketplace;

(ii) the Secretary of Labor, on issues related to workers compensation programs; and

(iii) State, local, and tribal officials as determined by the Chair of the Task Force with input from the Task Force members.

(d) The Task Force shall meet as required by the Chair and, unless extended by the Chair, shall be dissolved once it 3

has accomplished the objectives set forth in sections 3 and 4, as determined by the Chair, and completed the report described in section 5 of this order.

Sec. 3. Evaluation. The Task Force shall conduct a thorough evaluation of the operations and finances of the USPS, including:

(i) the expansion and pricing of the package delivery market and the USPS’s role in competitive markets;

(ii) the decline in mail volume and its implications for USPS self-financing and the USPS monopoly over letter delivery and mailboxes;

(iii) the definition of the “universal service obligation” in light of changes in technology, e-commerce, marketing practices, and customer needs;

(iv) the USPS role in the U.S. economy and in rural areas, communities, and small towns; and

(v) the state of the USPS business model, workforce, operations, costs, and pricing.

Sec. 4. Recommendations for Reform. The Task Force shall develop recommendations for administrative and legislative reforms to the United States postal system.

(a) Such recommendations shall promote our Nation’s commerce and communication without shifting additional costs to taxpayers. The recommendations shall be developed in a manner that is consistent with the proposed plan to reorganize the executive branch as required by Executive Order 13781 of March 13, 2017.

(b) Such recommendations shall also consider the views of the USPS workforce; commercial, non-profit, and residential users of the USPS services; and competitors in the marketplace. 4

Sec. 5. Report. The Task Force, acting through the Chair and the Director of the Office of Management and Budget, shall submit a report to the President, in coordination with the Directors of the Domestic Policy and National Economic Councils, not later than 120 days after the date of this order. In its report, the Task Force shall summarize its findings and recommendations under sections 3 and 4 of this order.

Sec. 6. Administration. The Federal Financing Bank shall provide administrative support and funding for the Task Force.

Sec. 7. General Provisions. (a) Nothing in this order shall be construed to impair or otherwise affect:

(i) the authority granted by law to an executive department or agency, or the head thereof; or

(ii) the functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals.

(b) This order shall be implemented consistent with applicable law and subject to the availability of appropriations.

(c) This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.

THE WHITE HOUSE


USPS Board of Governors Hearings Scheduled

The Senate Committee on Homeland Security and Government Affairs has scheduled hearings Wednesday, April 18 to examine the nominations of David Williams, of Illinois, Robert M. Duncan, of Kentucky, and Calvin R. Tucker, of Pennsylvania, each to be a Governor of the United States Postal Service. Information about the hearing can be found here: https://www.senate.gov/committees/committee_hearings.htm.

Without a BOG, the USPS is not able to move promotions, rate changes or basic classification changes forward. This means we may see some promotions in 2018. If the candidates are confirmed, the promotions will still need to be brought before them and then approved by the PRC.

The term of the last Governor (out of nine) expired on December 8, 2016. By law, the USPS must notify the PRC of any changes to rates, fees or basic classification rules. Such filings require the prior approval of the Postal Service’s Board of Governors.  The Board of Governors now consists of only the Postmaster General and Deputy Postmaster General.  With no politically appointed members they do not have the authority to approve rate changes or basic classification changes.

Additional Background:
On October 26, 2017, the White House announced nominations for three individuals to be postal governors. The Senate has not confirmed the nominations.

  • Calvin R. Tucker of Pennsylvania, for the remainder of a term expiring December 8, 2023. President and CEO, Eagles Capital Advisors, LLC, a financial, management & Economic Development Consultant firm.
  • Robert M. Duncan of Kentucky, for the remainder of a seven-year term expiring December 8, 2018, and an additional term expiring December 8, 2025. A 40-year political strategist and veteran of Republican politics, served as the 60th chairman of the Republican National Committee (RNC) from 2007-2009.
  • David C. Williams of Illinois, for the remainder of a seven-year term expiring December 8, 2019. Williams was sworn in as the second independent Inspector General (IG) for the U.S. Postal Service on August 20, 2003.

 


PRC Directs USPS to Address Compliance Issues

On March 29, 2018, the Postal Regulatory Commission, PRC, issued their 2017 Annual Compliance Determination, ACD. The PRC as directed by statute, must prepare the ACD was prepared after a 90-day evaluation of the Postal Service’s Annual Compliance Report, ACR.

PRC Directs USPS to Address Compliance Issues in FY 2017 Annual Compliance Determination 
Report shows progress in some areas and continued challenges in others

Washington, DC – The Postal Regulatory Commission (Commission) today issued its Annual Compliance Determination (ACD), a mandated assessment of the U.S. Postal Service’s (Postal Service) compliance with pricing and service performance requirements in fiscal year 2017 (FY 2017). While the Commission acknowledges some areas of improvement, it identifies several compliance issues related to workshare discounts, noncompensatory Market Dominant products, Competitive products, service performance, and continued cost and service problems with flat-shaped mail (flats).

Workshare Discounts: The Commission identified 42 workshare discounts with compliance issues. Out of the 42, 20 of the discounts did not comply with section 3622(e). No action by the Commission was required for 7 of the 20 workshare discounts because price changes aligned the discounts with avoided costs or the Postal Service eliminated the discount. Thirteen workshare discounts remained out of compliance prompting the Commission to direct the Postal Service to either align workshare discounts with avoided costs in the next Market Dominant price adjustment or specify an applicable statutory exception. The Postal Service did address the Commission’s FY 2016 ACD directive to report on the cost and contribution impact of worksharing and progress in improving pricing efficiency. The Commission directs the Postal Service to continue reporting on Periodicals pricing issues in its FY 2018 Annual Compliance Report (ACR).

Noncompensatory Market Dominant Products: The Commission identified10 Market Dominant products that were Noncompensatory in FY 2017. For Periodicals In-County, Periodicals Outside County, and Standard Mail Flats, the Commission finds that additional transparency is necessary to hold the Postal Service accountable. For the Special Services product Money Orders, the Commission directs the Postal Service to investigate the accuracy of the costing methods. Regarding Inbound Letter Post, the Commission recommends that the Postal Service continue to pursue compensatory Universal Postal Union (UPU) terminal dues and pursue bilateral agreements with foreign postal operators that result in an improved financial position for the Postal Service. The Commission further directs the Postal Service to provide an update on its collection of accurate shape-based costing data. Additionally, the Commission found that the PHI NSA did not meet the criteria of section 3633(c)(10)(A) in contract year 2, prompting the Postal Service to suspend the agreement during contract year 3. If an amended contract is not in effect by June 30, 2018, the PHI NSA will remain suspended. For the remaining noncompensatory products, the Commission finds that the Postal Service is taking appropriate steps to improve cost coverage.

Competitive Products Revenues: Seven Competitive products identified by the Commission did not cover attributable costs and, were found to be out of compliance with section 3633(a)(2). The Competitive products that did not cover attributable costs include four domestic NSAs, International Money Transfer Service—Outbound (IMTS—Outbound), International Money Transfer Service—Inbound (IMTS—Inbound), and International Ancillary Services. The Commission directs the Postal Service to take corrective action, including reporting on an investigation of cost estimates, reporting on the status of contract negotiations, and seeking authority to terminate or re-negotiate agreements.

Service Performance: Despite improvements in service performance results in FY 2017 over FY 2016 for a majority of products, most products failed to meet their service performance targets in FY 2017. In particular, service performance targets were not met for all First-Class Mail products, both Periodicals products, USPS Marketing Mail High Density and Saturation Flats/Parcels, USPS Marketing Mail Flats, USPS Marketing Mail Every Door Direct Mail—Retail, Bound Printed Matter Flats, and Post Office Box Service. In response to a Commission directive in the FY 2016 ACD to provide specific information on First-Class Mail Single-Piece Letters/Postcards metrics as part of its FY 2017 ACR, the Postal Service provided data and narrative responses that improve visibility into service performance and the Postal Service’s remediation strategy. The Commission directs the Postal Service to continue reporting specific information on First-Class Mail Single-Piece Letters/Postcards metrics within 90 days of the issuance of this report and as part of its FY 2018 ACR.

Cost and Service Problems with Flat-Shaped Mail: The Commission continued to identify cost and service performance issues with flats, noting that the Postal Service does not have a comprehensive plan to measure, track, and report flats cost and service issues. As a result, the Commission finds that additional transparency is necessary in these areas to hold the Postal Service accountable. Further, the Commission initiated a strategic rulemaking to develop proposed reporting requirements related to flats operational cost and service issues. From this data, the Commission will develop potential data enhancements and consistent reporting requirements that will be used to develop metrics to measure, track, and report the cost and service performance issues associated with flats.

As directed by statute, the ACD was prepared after a 90-day evaluation of the Postal Service’s ACR and supplemental material, and evaluation of public comments. The full report, including an executive summary, is available on the Commission’s website, www.prc.gov, along with related documents under Docket No. ACR2017.


Senate: Postal Reform Legislation Introduced Today

This afternoon, a bipartisan group of Senators introduced reform legislation: The Postal Service Reform Act of 2018: Improving Postal Operations, Service, and Transparency to stabilize, preserve and improve the Postal Service – an essential part of our nation’s infrastructure and economy.

It is unknown if it will move forward, but it keep the conversation alive.

The bill has much in common with HR756 which was introduced in the House of Representatives last year. It includes the 2.15% exigent increase as well as a provision that PRC will take it into account for the10-Year Review Process.

It was accompanied by the following statement:

FOR RELEASE: March 22, 2018

CONTACT:

Meghan Pennington(Carper) 202-224-2441

Tom Brandt(Moran) 202-224-6521

Abigail McDonough(Heitkamp) 202-224-8898

Laura Epstein(McCaskill) 202-228-4595

Senators Carper, Moran, Heitkamp & McCaskill Introduce Bipartisan Bill to Stabilize & Improve Postal Service

WASHINGTON – Today, U.S. Senators Tom Carper (D-Del.), Jerry Moran (R-KS), Heidi Heitkamp (D-ND), and Claire McCaskill (D-MO) introduced The Postal Service Reform Act of 2018: Improving Postal Operations, Service, and Transparency to stabilize, preserve and improve the Postal Service – an essential part of our nation’s infrastructure and economy.

The financial condition of the Postal Service, which operates at the center of a $1.4 trillion industry and employs more than 7 million people, has been deteriorating for years. Despite the Postal Service setting a record on Dec. 18, 2017, when more than 37 million packages were delivered, the most packages delivered in a single day in their over 200-year history, the Postal Service saw a net loss for the first quarter totaling $540 million. In addition to reporting net losses for the 11thyear in a row and defaulting on their legally mandated multi-billion-dollar retiree health prefunding payments yet again, the Postal Service also, for the first time, missed payments they owe to the federal retirement system in 2017  ̶  for a combined total of $6.9 billion. For years now, the onerous prefunding schedule for future retiree healthcare obligations has put the Postal Service in a place where it must cut costs  ̶  often at the price of service  ̶  and ultimately prevents them from investing in the infrastructure they so desperately need. While the situation is one that is dire, it is also one that can be fixed through needed legislative reforms.

The Postal Service Reform Act of 2018 includes a comprehensive package of reforms that would put the Postal Service on firm financial footing, stabilize and improve service performance, allow for the development of new products and services, and enhance transparency.

“Nearly two and a half centuries after its founding, the Postal Service remains an important part of our everyday lives and plays a vital role in our economy,” said Senator Carper. “But it continues to lose money at a record pace. Our economy still depends on a healthy and robust Postal Service. It’s our duty in Congress to pave a fiscally sustainable path that will enable this American institution to thrive”

“The U.S. Postal Service has a significant history in Kansas – dating back to the Pony Express – and it continues to play a vital role in the American economy, especially in Kansas’ rural communities,”said Senator Moran. “Rural America depends on a reliable Postal Service. USPS’s deteriorating financial condition threatens its future and the well-being of the communities it serves. In order to provide certainty for rural America and protect taxpayers, Congress must act to put the Postal Service on a more sustainable path. This bipartisan legislation would provide some much needed stability, preserving and improving mail services across Kansas and the country.”

“There is no substitute for the Postal Service in rural America,”said Senator Heitkamp.“From receiving daily newspapers and prescriptions, to shipping products around the nation, families and businesses across the country rely on getting their mail on time in an accessible, affordable manner. Congress needs to act now to stabilize the Postal Service and give it the tools it needs to thrive – otherwise it will go insolvent, taking this critical service away from rural communities that need it. Across North Dakota, I’ve heard about problems with mail delivery and service and I’ve pushed for changes from the Postal Service through my Fix My Mail initiative. Now, our bipartisan, comprehensive bill would reform the Postal Service, put it on firmer financial footing, and help improve mail delivery and service in rural communities. Far too often, rural America gets the short end of the stick, and Congress needs to step up and pass our bill so the Postal Service can fully function and remain the great equalizer that enables Americans no matter where they live to get reliable, affordable mail delivery.”

“Post office access and efficient service are issues that families and businesses in rural Missouri care about, and we’ve got to do what it takes to ensure the service they’ve relied on for generations stays intact,”said Senator McCaskill.“This is an issue where we can and should continue to work together across the aisle and I’m committed to doing exactly that.”

Stakeholders in the industry also support the bill:

“It is vital that Congress act promptly to pass legislation that will ensure affordable, reliable mail service six days a week,” said Don Hall, CEO of Hallmark Cards, Inc. “I applaud the leadership of Senators Carper, Moran, Heitkamp and McCaskill in crafting legislation to achieve that goal and respond to the concerns of leaders in the House of Representatives.”

“The Association of Magazine Media commends Senators Carper, Moran, Heitkamp, and McCaskill for their leadership,” said Linda Thomas Brooks, president and CEO.“The introduction of this bill is an important first step toward securing the future of the American postal system and the many industries that rely on it to do business – including our own.”

“The very broad business mailing community represented by the Coalition for a 21st Century Postal Service endorses the Postal Reform Act of 2018 and appreciates the hard work by the bipartisan sponsors to get to this point. The extreme financial challenges overhanging the Postal Service have been evident and building for a number of years, with a day of real reckoning coming later this year. The industry and other stakeholders have sought help only Congress can give throughout this time to no avail. Now is the time for Congress to act before it must bail out the system with taxpayer dollars or radically shrink it.”

“The United Postmasters and Managers of America (UPMA) applauds the efforts of Senators Carper, Moran, Heitkamp and McCaskill in introducing bipartisan legislation to further the goal of providing financial relief to the U.S Postal Service, helping safeguard a universal postal system, and encouraging innovation,” said UPMA co-presidents Tony Leonardi and Sean Acord. “UPMA looks forward to continue working with these Senators and other members of Congress to sustain the U.S. Postal Service, a proven national treasure.”

“NNA supports the hard work these bill sponsors have done to ensure a reliable and affordable mail service,” saidSusan Rowell, publisher of the Lancaster (SC) News, and president of the National Newspaper Association. “Congress has lingered far too long over the needed corrections in postal policy, and as a result the continuation of this service is ever more seriously at risk. Our elected officials know the Postal Service must have a better set of laws for its operation, and they ignore this need at the peril of all of us who rely upon the mail. We strongly urge the Senate to take up this bill and give this proposal, which has bipartisan support, an opportunity to pass this year.”

For the last several sessions of Congress, Senator Carper, Senator Heitkamp, Senator Moran, and Senator McCaskill have held numerous briefings, roundtables, and meetings with members on both sides of the aisle and postal stakeholders to assess the hurdles facing the Postal Service, identify the tools the Postal Service needs to innovate and thrive in the 21st century, and find a way forward on postal reform.

Specifically, the bill:

Increases Sustainability

The Postal Service Reform Act eliminates the existing statutory payment schedule, cancels any outstanding payments, and amortizes payments over 40 years.  The bill would also create a new Postal Service Health Benefits Program (PSHBP) within FEHBP, implemented and administered by OPM, for all postal employees and annuitants and require all Medicare-eligible postal annuitants and employees enrolled in the PSHBP to also enroll in Medicare, including parts A, B and D. This is essential for protecting the American taxpayer from a future bailout and for protecting the employees’ benefits in retirement.

Improves and Stabilizes Postal Service and Operations

The price of postage is decreased pursuant to federal court orders last Congress, eliminating the positive revenue stream from the exigent rate case in 2014.  As the result of a compromise among the postal community, the bill restores the half of the temporary rate increase while freezing any further rate increases until a new rate system can be finalized by the Postal Regulatory Commission.

Prioritizes the Postal Customer with Service Improvements & Protections

The bill includes strong service reforms that put the postal customer first by improving mail service performance across the country—especially in rural America—while also requiring transparency and enforcement to ensure the Postal Service’s accountability.  Service performance would also be stabilized by preserving current service standards for at least 2-years.

Innovates and Modernizes Existing Postal Business Model and Increases Transparency

The bill also allows the Postal Service to introduce new non-postal products and services, ship beer, wine and distilled spirits, and partner with state and local governments in offering government services.

The Postal Service Reform Act also increases transparency of Postal Service delivery results and would require that all delivery and retail performance results are posted in a transparent and user-friendly way.


Quinn Expected to Bring Significant Impact to Northeast

Weather.com has announced that winter storm Quinn is expected have a significant impact. “Ahead of the storm, emergencies were declared in Pennsylvania and New Jersey. As Quinn arrived, more than 100,000 homes and businesses in New York, New Jersey and Pennsylvania were still without power from Winter Storm Riley.”

The Postal Service has also sent Service Alerts noting closed office locations.

As always, we let clients know if they are directly impacted.

 

 

 


More than 150 organizations have submitted PRC 10-Year Review Comments

More than 150 organizations have submitted PRC 10-Year Review Comments

More than 150 organizations have submitted comments to the Postal Regulatory Commission, PRC, regarding their 10 Year Review proposal. Most comments were unfavorable about the proposal. A variety of mail-dependent businesses and non-profits are challenging the PRC’s claim that it can enact the rate hikes without Congressional approval.

LSC Communications joined the effort, submitting comments directly to the PRC as well as signing on to the American Mail Alliance comments.

The American Mail Alliance is an unprecedented coalition of more than 50 leading associations, companies, nonprofits, magazines, newspapers and other stakeholders that have come together to advocate for a common sense approach to setting new postal rates, promoting the long-term health and success of the United States Postal Service (USPS), and opposing the radical postal rate increases proposed by the Postal Regulatory Commission (PRC), the independent regulatory agency tasked with USPS postage rate oversight.

For more information visit:

 


Acting Senior Vice President of Sales and Customer Relations – Dennis R. Nicoski

The Postmaster General and Chief Executive Officer, Megan J. Brennan, announced internally that Dennis R. Nicoski will be detailed to the position of Senior Vice President of Sales and Customer Relations, effective March 3.  Here is an excerpt of the announcement:

Dennis began his postal career in Minneapolis in 1984.  Since then he has developed functional expertise in marketing, sales, customer service, retail, and operations support that will serve him well in this challenging assignment.

Dennis currently serves as the Director of Field Sales Strategy and Contracts, where he oversees the development of customized mailing and shipping solutions for our largest mailers and shippers, and coordinates Postal Regulatory Commission approval of Negotiated Service Agreements.

Dennis replaces Cliff Rucker, who announced his retirement effective March 2, 2018.


PRC 10-Year Review: Comments Due March 1

Comments are due no later than March 1, 2018. Reply comments are due no later than March 30, 2018.

The Postal Regulatory Commission’s proposal would maintain a price-cap system, but with authority above CPI:

  • 2% Over CPI: Proposes a 2% rate authority over the CPI cap for five years
  • 1% Performance-Based Authority: Proposes an additional 1% performance-based rate authority. The PRC divided the 1% point of performance-based rate authority between an operational efficiency-based standard (0.75 percentage points), and service quality-related criteria (0.25 percentage points).
  • 2% Non-Compensatory: For products that do not cover costs, the PRC proposes price increases that are 2% higher than other elements of the class. That 30 days could extend longer. If it did move forward, there is an anticipated 45 – 90 day implementation period. This is a very fluid situation. It could be as early as June or push into 2019. Most expect the proposal will change and we won’t see implementation in 2018. Associations have shared templates to use as a starting point. If you would like a copy, contact Paula Stoskopf.

Visit the PRC website to create an account for comment submission.

Associations have shared templates to use as a starting point. If you would like a copy, contact Paula Stoskopf.

For more information visit:


Oliver Storms Through the Midwest

The Weather Channel posted that “Authorities warned drivers in the Plains and Midwest to drive slowly amid the snow and ice dumped by Winter Storm Oliver, as at least six people have died on ice-covered roads.”

At this time, we are not seeing major over the road delays, but rail has been impacted by both weather and capacity issues. As always, we let clients know if they are directly impacted.

 


Move Update Census Based Assessments – New Date, April 2018

After January 2018, USPS will be changing the method for measuring Move Update compliance to a Census based approach.  The Census Method utilizes Mail Processing scans to determine compliance.  Results from the census verification method are displayed on the Electronic Verification tab of the Mailer Scorecard.  As a reminder, mailers have been encouraged to review their Move Update compliance since May 2017 after the reports were tested, validated, and declared ready for use by an Industry Task Team.

On Jan 9, 2018 USPS filed a proposed Federal Register Notice (FRN) to introduce the new Green & Secure Alternative Move Update Method. The Green and Secure alternative method aims to reduce the handling cost of undeliverable-as-addressed (UAA) mail by minimizing volume of return-to-sender mail. For Mailers participating in Green & Secure Alternative Method, qualifying UAA mailpieces bearing an ACS Change Service Requested STID (First-Class Mail and USPS Marketing Mail) or a Secure Destruction STID (First-Class Mail only) will be displayed as warnings and not be included in the error threshold.

To allow the Industry additional time to respond to the proposed FRN and enroll in Green & Secure the USPS has delayed the Move Update Census assessments until April 2018.

Census based assessments will commence in April 2018, based on March data, for mailpieces determined to be over the established threshold for the calendar month.  Mailers are encouraged to review their results to ensure compliance with Move Update standards.


USPS Releases 2018 Q1 Financial Results

The United States Postal Service released its 2018 first quarter fiscal year (October 1 through December 31, 2017).

As expected, the data revealed continued downward trends in volume and revenue, however costs were not down.

For the quarter, the Postal Service reported a controllable income (i.e., revenues less costs it can control) of $353 million, down from $522 million at the end of PQ I/FY 2017. Total revenue for the quarter was $19.2 billion, essentially unchanged compared to the same quarter last year.

  • First-Class Mail: -$309 million (-4.4%), -646 million pcs. (-4.1%)
  • Standard Mail: -$248 million (-5.3%), -1.3 billion pcs. (-5.9%)
  • Shipping and Packages business increased $505 million, or 9.3 percent, during the quarter.

Once the “uncontrollable” costs are included, the true bottom line was a loss of $540 million, considerably worse than the $1.438 billion surplus posted a year ago.

 


Deadly Snowfalls, a Nasty Winter Continues

Storms that caused deadly pileups in the Midwest push east and there is more on the way. Winter Storm Liam is expected to spread a mess of snow, ice from the plains into the Midwest, Northeast through Wednesday night.

Delays are expected as road conditions continue to be problematic. As always, Fairrington will update clients directly impacted by the weather.

https://weather.com/storms/winter/news/2018-02-05-winter-storm-liam-snow-ice-forecast-rockies-plains-midwest-northeast


PRC Issues FY 2017 Annual Report to the President and Congress

The Postal Regulator Commission posted the following Press Release.

Washington, DC – Today the Postal Regulatory Commission (Commission) released its Annual Report to the President and Congress summarizing the activities undertaken by the Commission during Fiscal Year (FY) 2017. Each year, the Commission is required to address in its report information concerning the operations of the Commission, including the extent to which regulations are achieving the rate setting objectives of the Postal Accountability and Enhancement Act (PAEA). The Commission’s report must also include an estimate of the costs incurred by the Postal Service to provide certain services that the Postal Service would not otherwise have provided except for the requirements of the law.

In Chairman Robert Taub’s letter preceding the Report, he states that the Commission is dedicated to fulfilling its mission of ensuring transparency and accountability of the Postal Service and fostering a vital and efficient universal mail system. To that end, FY 2017 was an exceptionally productive year for the agency. In addition to the Commission carrying out its regulatory responsibilities of reviewing and approving postal rates and new product proposals, and formal complaint adjudication, the Commission began the important process of evaluating the system for regulating rates and classes for Market Dominant products 10 years from the enactment of the PAEA as dictated by law. Commission findings from its review and proposed rules were released in late Fall 2017.

The Commission also implemented its 5-year Strategic Plan for 2017 through 2022 designed to direct continual improvement in operational quality and efficiency.

The FY 2017 Annual Report is available on the Commission’s website, www.prc.gov.


Jakki Krage Strako named Acting USPS Chief Customer and Marketing Officer and Executive Vice President

The Postal Service has announced Jacqueline (Jakki) Krage Straka will be detailed to the position of Chief Customer and Marketing Officer and Executive Vice President, effective February 3. In her current role as Vice President, Area Operations, Great Lakes Area, Jakki oversees a workforce of more than 61,000 employees, and is responsible for all aspects of operations, marketing, and customer engagement across five states in the Great Lakes Area.


Free Webinar: Postal Pricing and Impact of PRC 10-Year Review

The U.S. Postal Regulatory Commission (PRC) in early December released a proposed rule that would grant the Postal Service significantly more latitude in increasing prices. The proposal has received negative feedback from the industry, which has until March 1 to submit formal comments.

Idealliance seeks to educate and engage its members and the industry on January 18th to:

  1. Outline the key components of the proposed PRC rule and how it was constructed and why.
  2. Answer the question: Can we gain any insights from the recently released USPS 2017 Annual Compliance Review (ACR)?
  3. Explain how the industry is reacting and coalescing.
  4. Discuss the proposed PRC rule and its possible impact on postal reform and Postal Service pricing strategy.
  5. Seek support for an Idealliance survey to collect feedback on the proposed PRC Rule and its impact on mail supply partners and their customers.

Join us on January 18th for a critical webinar about the future of postal pricing.

Thursday, January 18
4:00 p.m. – 5:00 p.m. Eastern Time

Register


Presenters

Steve Colella
Stephen Colella is Vice President Postal Affairs for The Calmark Group. The Calmark Group, located in Bedford Park, IL, is a large mail service provider mailing in excess of 600 million pieces annually. Starting his career in 1973, Colella held a variety of management positions in production, customer service, sales and postal affairs. Colella has been involved with MTAC for over 20 years and now represents Idealliance at MTAC. He presently serves as the industry lead for the Emerging Technology & Product innovation Focus Area and incoming Co-Chair of the Idealliance Postal Operations & Technologies Council. Colella has an MBA from DePaul University and was a recipient of the USPS Industry Excellence Award for Progressive Mailing Practices in the Advertising Mail and Print Industry.

Rose Flanagan
Rose Flanagan has over 39 years of experience in the mailing industry working in postal affairs, production, scheduling, client relations and logistics. As an active industry participant, Flanagan is completing her two-year term as Idealliance Postal Operations & Technologies Co-Chair in March 2018 and is the newly re-elected MTAC Industry Leader for Marketing Mail and incoming Chairman of PostCom.

Tom Glassman
Tom Glassman started in the industry over 25 years ago and now serves as Director of Data Services & Postal Affairs with Wilen Direct. He believes, “Over the years, I have passionately fostered working together with other print and mailing companies and believe that giving back to the industry will keep it thriving and moving forward in good and bad times. I have learned a great deal from industry professionals and try to allow time every day to return what others have shared with me.” Glassman leads various MTAC workgroups and serves as the MTAC Representative for Idealliance. He has been instrumental chairing the Idealliance Mail & Postal Education Working Group and launching the MailPro® Training Certification with over 1,000 professionals in the program.

Paula Stoskopf
As head of Postal Affairs for LSC Communications and Fairrington, Paula Stoskopf’s role is to ensure client and organizational readiness for new and changed regulations that impact the industry. Paula has over 18 years of expertise in product management and direct marketing solutions and focuses on helping organizations successfully communicate with their targeted audience. These have included domestic and international address quality, list enhancement, and postal savings tools for both the commercial and government contract markets. She has also served as an Offshore Development Relationship Manager both remotely and on-site to lead the successful migration of multiple projects to a global development center. She serves as the Secretary of the Board for the Association of Postal Commerce (PostCom), represents the Data and Marketing Association (DMA) on the Mailers’ Technical Advisory Committee (MTAC) and is the incoming Co-Chair for Idealliance Postal Operations and Technologies Council.

David Steinhardt
David Steinhardt leads Idealliance, a 3,000+ member not-for-profit international association for the Visual Communications and Media Industry. Steinhardt started his career in the industry at the Graphic Communications Association (GCA) more than 30-years ago. Idealliance concentrates on cross-industry integrated know-how and the global total supply chain, delivering best-in-class specifications, certifications, training, and research that drive education and innovation for the future of our industry. One of his core areas of work and expertise — with more than 20 years of experience — is facilitating and managing the Idealliance Mail & Postal Portfolio through its working groups across mail supply chain partners and the USPS. With his leadership, the USPS presented Idealliance in 2007 the USPS Best in Class — Business Achievement for Successful Partnership. He is a member of the Coalition for 21st Century Postal Service.


California Mandatory Evacuations – Transportation Delays Likely

Rail and truck delays will likely result from the rapidly changing situation in California.

Parts of Santa Barbara County recently affected by wildfires are now under evacuation orders because of the rain.

With fears that burn scar areas could see large mudslides during the first rain event since a series of wildfires devastated the landscape in the fall months.

According to NBC News, A powerful Pacific storm covering the entire length of California knocked out power for thousands and threatened dangerous mudslides in communities near mountains stripped of protective foliage by drought-fueled wildfires.

Almost 3 inches of rain fell on downtown Los Angeles through Friday evening, more than double in one day the total of 1.2 inches it had gotten since July 1 — a stretch of nine months.

As always, Fairrington will update clients directly impacted by the weather.

 


Winter Continues to Freeze up Transportation Networks

Winter continues to freeze up transportation networks. The subzero temperatures in the Midwest, record snowfalls in many locations to ice in the Carolinas continue. Even a named storm for the new year, Grayson.

We are seeing delays of 24 – 48 hours. As always, Fairrington will update clients directly impacted by the weather.


USPS Files FY 2017 Annual Compliance Report

On December 29, 2017, the USPS filed their FY 2017 Annual Compliance Report, ACR.

The Postal Service is required to an ACR within 90 days after the end of each fiscal year (FY). It includes a variety of data on costs, revenues, rates, and quality of service, in order to “demonstrate that all products during such year complied with all applicable requirements” of title 39.

Report Summary:

  • Report demonstrates that the Postal Service maintained stead progress on most metrics, despite an environment of falling mail volumes.
  • Market dominant and competitive products were broadly in compliance with the requirements of chapter 36 over the course of FY 2017.
  • The Postal Service reduced the number of workshare passthroughs above 100 percent by eleven, and, in many cases, those passthroughs that remained above 100 percent either fit into one of the statutory exceptions or will be corrected when with the January 2018 price change.
  • The report outlines service performance improvements and customer satisfaction survey results

First Class Summary:

  • With the exception of Inbound Letter Post, all First-Class Mail products covered their attributable costs in FY 2017, with most of them contributing significantly to institutional costs.
  • First-Class Mail volume had been slowing in recent years, it accelerated in FY 2017, with the class losing 4.1 percent, or 2.5 billion pieces.
  • Four of the nine First-Class Mail Presorted Letters and Cards workshare discounts exceeded 100 percent of avoided costs: AADC Letters (117.6 percent), Automation Mixed AADC Cards (142.9 percent), Automation AADC Cards (133.3 percent), and Automation 5-Digit Cards (118.2 percent).

Marketing Mail Summary:

  • All USPS Marketing Mail products, other than USPS Marketing Mail Parcels and USPS Marketing Mail Flats, covered their attributable costs in FY 2017. As a class, USPS Marketing Mail covered its attributable costs and contributed significantly to institutional costs.
  • Parcels: covered 62.8 percent of its attributable costs in FY 2017, down from 63.8 percent in FY 2016.
  • Mail Flats: Covered 73.9 percent of its attributable costs in FY 2017, down 5.8 percentage points from FY 2016. Per-piece revenue rose modestly over the previous year, increasing 2.4 percent, but this was offset by a 9.7 percent increase in per-piece cost. The increase in cost was due in part to the migration of Flats Sequencing System (FSS) pieces from Flats to Carrier Route Flats, as a result of the Docket No. R2017-1 price change.
  • Letters: The FY 2017 passthroughs for DNDC and DSCF dropship letters were 152.9 percent and 161.9 percent, respectively. In Docket Nos. R2017-1 and R2018-1, the Commission accepted the Postal Service’s justification of these passthroughs, contingent on the Postal Service’s adherence to a plan to reduce the passthroughs by 10 percentage points in each market dominant rate case. The Postal Service continues to justify these passthroughs; it plans to recommend to the Governors a reduction of at least 10 percentage points in the next market dominant rate case

Periodicals Summary:

  • Cost coverage for the Periodicals class overall decreased in FY 2017, from 73.96 percent to 69.33 percent. In-County Periodicals declined in cost coverage from 70.07 percent to 67.16 percent, and Outside County Periodicals declined in cost coverage from 73.73 percent to 68.81 percent.
  • Revenue per piece for Periodicals as a whole decreased from 27.0 cents in FY 2016 to 25.9 cents in FY 2017, or 4.07 percent. At the same time, cost per piece increased from 36.5 cents to 37.4 cents, or 2.5 percent. The combination of these factors led to the FY 2017 decline in cost coverage.

From Deep Freeze to Record Snowfall

Subzero temperatures in the Midwest to the record snowfalls in Pennsylvania, will most likely bring transportation delays. As always, Fairrington will update clients directly impacted by the weather.

 


PRC 10-Year Review at a Glance – FAQ Sheet

For a print version, download your copy 10-Year Review FAQ. We will also update this new Frequently Asked Questions are identified.

For a more in-depth understanding, check out More than the 10-Year Review when Planning for the Future – A Wobbly Three-Legged Stool
It dives into not only the PRC’s proposal, understand the USPS Board of Governors situation as well as legislative considerations.

What is the PRC 10-Year Review?

In 2006, the Postal Accountability and Enhancement Act (PAEA) was put in place to regulate rates and classes for market-dominant products. Part of the law required the Postal Regulatory Commission, PRC, review the past 10 years of the rate and classification system to determine if the system achieved the goals of PAEA which were to create a flexible, stable, predictable, and streamlined ratemaking system that ensures the Postal Service’s financial health and maintains high quality service standards and performance.

What were the PRC’s key finding?

The PRC determined that some of PAEA objectives are being met:

  • Predictable, stable rates
  • Less burdensome process
  • Improved transparency
  • Some are not
  • Adequate USPS revenues
  • Pricing efficiency
    • Non-compensatory products
    • Workshare passthroughs

Is this a final determination or rule?

No, this is a proposal

What do does the PRC propose for the CPI cap?

The Commission proposal would maintain a price-cap system. The Commission determined that it is necessary to maintain such a mechanism to create predictability and stability, and seeks to build upon, rather than replace the CPI price cap by providing discrete amounts of additional rate authority.

What are the proposed increases?

  • 2% Over CPI: Proposes a 2% rate authority over the CPI cap for five years
  • 1% Performance-Based Authority: Proposes an additional 1% performance-based rate authority. The PRC divided the 1% point of performance-based rate authority between an operational efficiency-based standard (0.75 percentage points), and service quality-related criteria (0.25 percentage points).
  • 2% Non-Compensatory: For products that do not cover costs, the PRC proposes price increases that are 2% higher than other elements of the class.

What factors will be used to determine how the pricing authority will be applied?

In the Commission’s review they determined that over the past 10 years, the Postal Service set most discounts substantially above or substantially below 100 percent. The proposal includes passthrough bands:

  • 75-125% for Periodicals
  • 85-115% for all others

The proposal includes a three-year phase-in to bring all existing discounts into compliance.

What does this mean catalogs?

If the proposal moves forward, the 2% over CPI would be applied. An additional 1% is the Postal Service met the performance-based objectives. Rate authority is not applied equally across all rate cells. Instead, the authority has historically been applied to optimize revenue, applying to higher-volume sortations, or used to improve cost coverage.

The proposal includes passthrough bands of 85-115%. Dropship for Marketing Mail flats has many rate cells that are below 85% passthroughs. This may be an opportunity for a reduced impact as rates are adjusted to meet the goals of the proposals. Also, for Carrier Route, many passthroughs are also low. Solutions like co-mail to drive carrier route and high density will help reduce the impact for some mailers.

What does this mean for Marketing Mail Letters?

If the proposal moves forward, the 2% over CPI would be applied. An additional 1% is the Postal Service met the performance-based objectives. Rate authority is not applied equally across all rate cells. Instead, the authority has historically been applied to optimize revenue, applying to higher-volume sortations, or used to improve cost coverage.

The proposal includes passthrough bands of 85-115%.

What does this mean for magazines?

If the proposal moves forward, the 2% over CPI would be applied. An additional 1% is the Postal Service met the performance-based objectives. Rate authority is not applied equally across all rate cells. Instead, the authority has historically been applied to optimize revenue, applying to higher-volume sortations, or used to improve cost coverage.

For Periodicals, where the entire class is non-compensatory, the PRC proposes that USPS must use all available rate authority including an additional 2 percent as applies to non-compensatory products within classes that cover their costs.

The passthrough band is 75-125% with a three-year phase-in to bring all existing discounts into compliance.

What is the timeline?

Winter 2006: On December 20, 2006, the Postal Accountability and Enhancement Act (PAEA) was signed into law and created a modern system of regulating rates and classes for Market Dominant products. The PAEA also mandated that the Commission review this system 10 years later to determine if it is achieving the objectives established by Congress. December 20, 2016 was the ten-year anniversary of the PAEA.

Winter 2016: On December 20, 2016, the Commission issued an Order begin the review. The Order described the approximate structure and timeframe within which the Commission will complete its review, as well as defined the opportunities for public comment within the review.

Spring 2017: Initial comment period closed. During the public comment period of the ongoing rate review, the PRC received more than 70 comments.

Winter 2017: December 1, 2017: Commission issued an Order including its findings and, if necessary, preparatory rule-making information for any changes to the system. This begins a 90-day comment period.

Spring 2018: Comments are due no later than March 1, 2018. Reply comments are due no later than March 30, 2018.

That 30 days could extend longer. If it did move forward, the there is an anticipated 45 – 90 day implementation period. This is a very fluid situation. It could be as early as June or push into 2019. Most expect the proposal will change and we won’t see implementation in 2018.

How are comments filed?

Visit the PRC website to create an account for comment submission.

Watch Fairrington’s Industry News for the Latest Updates

 


More than the 10-Year Review when Planning for the Future

A Wobbly Three-Legged Stool

On December 1, 2017, the Postal Regulatory Commission, PRC, announced their 10-Year Review proposal. But the conversation needs to go beyond their findings. There are several forces at work to take into consideration when planning.

This article takes a deeper dive into not only the PRC’s findings beyond our December 1 posting. It also provides a recap of the USPS Board of Governors situation as well as legislative considerations. While independent discussions, the movement in one area may impact the others or compound the effects. For example, if legislation was passed during the comment period, it is unknown if the PRC would change their findings or if we could have a situation that adds proposed increases by the PRC to a partial exigent postage increase through legislation.

For planning, the approved January 2018 rate increase is the certain item.

The rest, a bit of a wobbly stool… Download More than the 10-Year Review when Planning for the Future.