On November 30th, 2020, the Postal Regulatory Commission (PRC) adopted final rule 5763 modifying the rate system for classes of Market Dominant products. Part of that rule provided a 5-year period of review for holistic assessment of the effects of the Commissions rule changes.
The PRC initiated the docket for that review under RM2024-4 in April of 2024.
Today June 9th, the PRC published the first of its filings concerning this review, using a phased approach. Additional phases to come at a later stage.
Each of these is subject to a 30-day comment period in which all interested parties (including the Postal Service) may comment.
Phase 1 Identifies why the changes are needed.
“Based on the foregoing, the Commission finds that it is appropriate to review the ratemaking system now. After notice and opportunity for public comment, the Commission has determined that the system is not achieving the objectives in subsection (b), taking into account the factors in subsection (c). Accordingly, the first phase of this review is completed.”
This filing notes the specific objectives that they find have continued weaknesses and where they have additional areas of concern.
Phase 2A addresses today’s proposal of two changes to the ratemaking system: (1) restricting the Postal Service from adjusting Market Dominant rates more than once per year for the next five years, and (2) restricting the Postal Service from setting workshare discounts farther away from their avoided costs.
“The Commission proposes to generally limit Market Dominant rate adjustments to no more than once per year, the proposed rule will be effective from October 1, 2025, through October 1, 2030.”
The relationship between workshare discounts and avoided costs is expressed as a percentage called a passthrough, which is calculated by dividing the discount by the avoided cost.
The current rules prohibit Postal Service from providing a discount greater than 100% of the Postal Avoided costs and limiting them from setting the discount below 85% (with a few exceptions) of their avoided costs.
Many in the industry believe this is too permissive and in need of strengthening.
The PRC has found, with support from multiple trade association comments, that at times USPS has lowered its discount from nearly 100% to the low band of 85%.
“Second, the Commission proposes to restrict the Postal Service from setting workshare discounts farther away from their avoided costs.”
This is a win for workshare and the valuable contribution the mailing industry makes to preparing more efficient mail.
GrayHair Software will provide updates to this docket as new filings of impact are introduced.
Questions? Concerns? If so, get in touch today with the postal experts at GrayHair Software via engage@grayhairsoftware.com.
