R2000 Rate Case Makes Strange Bedfellows

The Postal Rate Commission is set to give its opinion on the R2000 rate case on or about Nov. 10.

The commission usually reserves about six weeks to deliberate and write its recommended decision. Therefore, it has set Sept. 28 and 29 as the final days for hearings.

The participants in the case have just submitted their supplemental and rebuttal testimony. However, I would like to make some comments on a joint motion filed by two unlikely bedfellows.

You may recall that the commission operates in a quasi-judicial manner, taking evidence, swearing in witnesses and making decisions on motions. It’s one of those motions that caught my interest. It’s a motion that asks for an extension of time to respond to “Notice of Inquiry No. 4 Concerning Mail Processing Variability Models.” The notice was issued Aug. 2 by the commission, with responses due back by Aug. 16. While the information that the commission is seeking seems arcane, it’s important to the way costs are assigned to the various mail classes. And costs serve as the basic underpinning to the pricing of postal services.

A joint motion was submitted by the commission, the Office of the Consumer Advocate and United Parcel Service asking for an extension till later in the month to respond to the commission’s inquiry.

They argued that they were busy analyzing other material submitted by the U.S. Postal Service and were unable to devote the necessary resources to respond to the commission’s Notice of Inquiry. I have no doubt that UPS’ and the OCA’s concerns are valid.

But I’ve got a bigger issue. The mission of the OCA is to represent the interests of the consumer before the commission.

What kind of a message does the OCA send by submitting a joint motion with UPS to the commission?

Let me explain my position.

UPS has always been a very active intervener in rate case proceedings before the PRC. It has argued that its objective is to ensure that there is no cross-subsidization between mail classes.

Specifically, it wants to ensure that First-Class rates are not being set too high. It’s good that the UPS wants to ensure accuracy and honesty in the rate-setting process. But the mailing community knows that UPS’ real objective is to raise parcel post rates as high as possible.

Nearly every action that UPS takes in a rate case has that as its intended action – that is, to provide a cover to UPS’ own pricing policy, which is to regularly raise rates for residential deliveries.

There is nothing improper with what UPS is doing in these proceedings. Indeed, every attorney I know practicing before the PRC is impressed with its effort and thoroughness. But it sure is nice to be able to influence your competitor’s pricing.

However, let’s back away for a minute and ask, How does a consumer use postal services?

First, of course, consumers receive all classes of mail. But when it comes to mailing, they are restricted to First-Class, Express Mail, Priority Mail and Parcel Post.

My guess is that after First-Class, Parcel Post is the next most important class of mail for consumers.

So what message does it send when the group that is chartered to protect the consumer files a joint motion with a corporation that tries to raise consumer rates for mailing parcels?

I’m not suggesting that anything unethical has taken place, but it sure looks strange. Not only that, a prominent rate case attorney told me it was the first time in his memory that the OCA had filed a joint motion at the commission with anybody.

It’s well accepted that UPS spends more to litigate postal rate cases than any other intervener. I guess you’d expect that from a USPS competitor with likely 2000 revenues of about $30 billion and operating profits of about $4 billion.

Therefore, my message to the OCA is that UPS, or another postal competitor, does not need any help with its filings, even if you should happen to agree with its position.

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