PRC: USPS Should Make Better Use Of Pricing Flexibility In the Law

PRC Issues Annual Compliance Determination – Finds Some Rates Do Not Comply

Washington, DC – The Postal Regulatory Commission today issued its Annual Compliance Determination (ACD) assessing the financial and service performance of the Postal Service in fiscal year (FY) 2010.

The Postal Service’s financial situation continued to deteriorate in 2010, despite major reductions in costs. “Postal management and employees have done a commendable job in effectively adjusting to sudden volume declines due to the recent recession, but the Postal Service is at risk of insolvency and projects in its Integrated Financial Plan for FY 2011 that it could end the year with a negative cash balance of $2.7 billion,” said Commission Chairman Ruth Y. Goldway.

Volume and Revenue Declines. First-Class Mail volume and revenue continue to decline, falling by 5.5 billion pieces and more than $1.8 billion, respectively.

Structural Obstacles. The Postal Service’s liquidity crisis is related to an overly ambitious requirement for the Postal Service to prefund its future retiree health benefit premiums. Over the past four years, the Postal Service has paid $21.9 billion to prefund these benefits, while the Postal Service’s cumulative losses were just $20 billion. The Postal Service is mandated to make another $5.5 billion payment this year.

Pricing Imbalances. Part of the Postal Service’s financial problem lies in pricing imbalances. The Commission identifies 10 market dominant products and services with revenue that did not cover attributable costs in FY2010, including flats, periodicals, and non-profit mail, totaling $1.7 billion in losses.

For the first time ever, the Commission finds rates not in compliance with the statute, and directs the Postal Service to take action to end the intra-class cross subsidy for Standard Mail Flats as soon as practicable. “The Postal Service has repeatedly failed to use its pricing flexibility, allowing the subsidy to increase over time,” according to Chairman Goldway.

Service Measurement. The Commission reviewed the Postal Service’s service measurement systems based on the Intelligent Mail barcode (IMb) and found persistent data errors, insufficient customer IMb usage, and a lack of product specific documentation. “The Postal Service must address these problems to assure customers of the continuing value of the mail,” said Chairman Goldway.

This is the fourth annual ACD issued since the enactment of the PAEA. It reviews the prior fiscal year’s activities and measures the Postal Service’s progress in meeting its statutory obligations including financial independence and fair and efficient service to the Nation.

PRC Compliance Determination Report

7 thoughts on “PRC: USPS Should Make Better Use Of Pricing Flexibility In the Law

  1. BC, you are right, it’s the “Workshare” discounts that make no sense. USPS is spending $mills for automation equipment to put the flats in walk sequence order AND giving the big mailers a big discount to put those same flats in walk sequence. The mailer no longer needs to put them in order for us so why do they still get a discount. And why should a direct drop shipment get a discount when they are bypassing the Flat Sorters & then the carrier has to manually sort them. Same with letters, why give a discount to drop at the delivery post office for us to manually sort & case, when it would be more efficient to DSP them with the other letters. If they are not 1st class, we send them to the plant to be DPS’d with next day’s mail, so why the discount to the mailer when we have to handle it twice. I think some discounts make sense, i.e. book rate, but USPS should take a hard look at what we want Big Mailers to do for us and what we can do for ourselves. Times they are a changing.

    Pat, Everything I know about the PostalOne! system says that we are eliminating the “honor” system that was in place (and it was rampant) . Every dock clerk should have been trained to recognize the “release” form that says the mailing fees have been paid and how many containers (trays, tubs, pallets) are in that mailing. I think USPS has finally figured out that the honor system was only good for Big Mailers.

  2. Better yet, stop giving workshare discounts. Everyone pays full rate according to classification. No more 1.3 cent mail pieces. There is sufficient capacity in the postal processing network that we don’t NEED big print houses to sort for us. In the process we could get rid of the upper mgmt types that are currently in charge of understating how efficient we are when they set the workshare discounts higher than they should be.

  3. make flats and letter start as first class and then option up for priority or express.
    Same for parcels simplify:
    ground- is parcel post,
    Air- is priority and
    Next day air is Express.
    No media mail No book rate its time to pay what it costs to move it.

  4. Quit giving subsidies to large mailers at the expense of the general public and make the PO break even again. Simple.

  5. Pat……I agree with you. I have frequently wondered if the Postal Service is really even getting paid for some of these “mailings” but you can never really get a straight, knowledgable answer. Because I don’t really think they know…..they “assume”…..

  6. JD, do you realize that the post office bends over backward to accommodate these bulk mailers? On top of discounts they often bring mail to the receiving offices lacking the proper paperwork , which shows postage has been paid so that delivery can be affected. These forms 8125 are complex and difficult to read and many dock clerks merely sign them so the trucker can leave. Once I told a forklift driver not to move 10 pallets of mail, as they had not been checked only to have the supervisor tell me it was O.K. to do so as the post office no longer checked the paperwork for such drop shipments. The term he used has strangely stuck with me and that was we now operated under “the honor system!” Kinder,gentler and broke!!

  7. It has been my thoughts for a long time. Volume at my post office is not down that much. Revenue is down because of the mail mix. We have hardly any first class but are swamped with bulk mailings. Let the bulk mailers use smarter mailing lists pay their fair share and eliminate some mostly unwanted junk mail. Last Saturday I delivered to seven houses before one piece of first class mail do not always watch but that is fairly common.

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