PRC’s ruling to change pricing for mailers

The Postal Regulatory Commission’s final ruling on rate-making for the US Postal Service came last week, marking the end of a 10-month effort in working to implement the 2006 Postal Accountability and Enhancement Act (PAEA).

This decision came eight months ahead of the timeline set by the PAEA.

The rules create a new system to set postal rates for market-dominant products that is tied to the Consumer Price Index. While rate increases can take place more frequently, an annual CPI cap aims to reduce the impact on mailers of unexpected or drastic rate changes. This dynamic pricing will also make it possible for the USPS to incentivize off-peak mailings and create custom rates for large mailers.

“Having the new ratemaking system in place sooner, rather than later, allows us to focus on the tasks ahead and hopefully avoid an old cost-of-service rate case,” said PRC chairman Dan G. Blair in a statement.

Jerry Cerasale, the Direct Marketing Association’s SVP of government affairs, has expressed his support for new rules and hopes that the old rate case process would not resurface.

Cary Baer, consultant and past chairman of Postcom, said that while it’s still possible the USPS may need to file another non-capped increase, the odds are in favor of a CPI increase.

“The biggest benefit to come out of the PRC’s ratemaking regulations is the balance it demonstrated between the rights and responsibilities of all three parties: the USPS Board of Governors, mailers and the PRC itself,” Baer said.

Baer said the next hurdle for the USPS enacting the PAEA would be agreeing to delivery service standards.

The mailing industry is still reacting to the May 14 postal rate increase, which followed the 1970 “old law” regulations.

Early last week, American Catalog Mailer Association executive director Hamilton Davison testified before a House Subcommittee on the last rate increase’s impact on catalog prospecting and mailing volumes – both of which, he claims, have decreased since catologs were hit with rate increases of up to 40%.

Davison told DMNews that catalogers are some of the most reliable contributors to the mailstream that the USPS has and, by improving its service and thus encouraging more volume, the USPS could generate revenue without a need for further large rate increases.

In fact, the PRC’s new rules seem to encourage extra volume from all mailers, not just catalogers, by outlining a number of worksharing discounts and further defining the rules around granting and implementation of negotiated service agreements (NSAs).

NSAs are special arrangements between the USPS and mailers. Proponents say they encourage greater volume by rewarding postal customers with discounts and premium services. NSAs must be made “available on public and reasonable terms to similarly situated mailers,” according to the ruling.

Industry feedback on the new regulations has been positive thus far.

Pitney Bowes Inc. issued a statement of support for the new rules. President/CEO Murray Martin said, “The commission found the regulatory sweet spot, and that will bring lasting benefits to anyone who wants to send or receive mail.”

The DMA will hold a briefing on November 14 to discuss the regulations in detail. The PRC is invited to participate in the event.

Blair is joined on the PRC, a independent federal agency, by commissioners Ruth Goldway, Tony Hammond, Dawn Tisdale (who will soon leave his post) and Mark Acton.

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