The Postal Rate Commission (PRC) has issued its recommended decision on R2006-1, the rate case filed last May.
The Commission has supported the establishment of the "Forever Stamp," a non-denominated retail stamp. The PRC said the Postal Service's rate designs need improvement, but it supported the $77.6 billion revenue requirement, full funding of the requested contingency, and rates at or below the USPS request.
The PRC recommended only a 2-cent rise in the retail First Class Mail (FCM) rate for letters and postcards. The PRC accepted the shape-based rate design format for FCM and Standard (STD) and the rate structure changes urged by Time and others for Periodicals. The rates for Express, Priority, and Parcel Post were largely recommended as filed.
The rate increase for STD is in excess of 9%, essentially in the range of the requested rates.
From the PRC’s summary of its recommended decision:
- The Commission finds the Postal Service will need to increase rates in order to break even next year. The Commission also concludes that the rate designs for many postal products can and should be improved.
- The rates recommended in this decision fully fund every expense the Postal Service identified, including $768 million for contingencies. However, the Commission identified calculation errors in USPS documentation, and conceptual errors in its proposed rates, that allowed the Commission to recommend smaller increases than requested – on average 7.6% vs. the requested 8.1%.
- The Commission recommended a 2¢ increase in the retail rate for First-Class one-ounce letters, and lowered the second-ounce rate to 17 cents. On average, First-Class Mail rates increase 6.9%. The PRC also recommended the “Forever Stamp” and the separate shape-based rate schedules. The Commission rejected the USPS rate design proposal to “de-link” single-piece from work-sharing rates, saying “it would expand discounts beyond avoided costs, and unfairly shift the burden of this rate increase on to single-piece mailers. The Commission believes that mailers who work-share should be rewarded, and recommends discounts that fully reflect the costs avoided by work-sharing.”
- The Commission supported separate shape-based rate schedules for Standard Mail, with rates that vary from those suggested by the Postal Service; smaller increases are recommended for the more efficient (lower cost) pieces, while some less efficient pieces face larger increases. On average, Standard Mail rates increase 9.3%.
- For Periodicals, the PRC noted that costs have risen disproportionately in recent years, in part because current rates send such poor signals regarding efficient mail piece design. For example, the PRC said, Periodicals is the only class where no rate penalty is applied to non-machinable pieces. So, the Commission recommended a new design, drawn from proposals by the Postal Service and Time Warner Inc., that recognize only a limited portion of the costs in order to moderate the impact on mailers. Nonetheless, the Commission expects that these rates will foster more efficient, less costly Periodicals mail. On average, Periodicals rates will increase 11.8%.
- The Commission did not recommend new rate designs for the Postal Service’s competitive products, so rates for Express, Priority and Parcel Post include adjustments to better reflect costs, but otherwise are largely as suggested by the Postal Service.
Download Selected_Recommended_RatesR2006.pdf .
