PRC 10-Year Review at a Glance – FAQ Sheet

12/11/2017

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