Commentary & Analysis
In the Mail: March 2018 - What You Need to Know About Postal Issues
An industry coalition of more than 50 mailing stakeholders expresses opposition to the ratemaking plan proposed by the Postal Regulatory Commission; the USPS rolls out an electronic payment system, reduces truck mileage, continues to lose money. Read on for this month’s postal system update.
Published: March 27, 2018
Opposition Mounts. An unprecedented coalition of mail industry participants—calling itself the American Mail Alliance (AMA)—is condemning the Postal Regulatory Commission (PRC) plan to let the U.S. Postal Service increase rates up to 3% above the CPI for five years.
The AMA comprises 50 leading associations, companies, nonprofits, magazines, newspapers, and other stakeholders that have joined together to advocate for a commonsense approach to setting new postal rates, promoting the long-term health and success of the Postal Service, and opposing the radical postal rate increases proposed by the PRC.
In comments filed before the commission, the AMA argued that the PRC’s decision gives too much weight to one of the factors the Postal Accountability and Enhancement Act (PAEA) of 2006 required of a ratemaking system—providing adequate revenue—to the detriment of other factors. “Notably, the first stated objective is to maximize incentives to reduce costs and increase efficiency,” the AMA stated, noting that the PRC itself had supported a CPI cap as an indispensable tool to provide incentives for Postal Service management to control costs.
The AMA further argued that the vast majority of the Postal Service’s funding shortfall is due to the requirement in the PAEA that it prefund retiree health benefits. The group said it is not the PRC’s job to correct a shortcoming that is due to legislation; rather, Congress should address that issue and the commission should focus on changing the ratemaking system only if there are issues that are due to that system.
AMA’s members stated that they “unanimously believe that the Commission rulemaking proposal will do lasting harm to the Postal Service. It will put many mail and supply chain stakeholders out of business, force them out of the mail, or push them to find—or create—alternative, cheaper, and more stable distribution methods.”
The group has organized a media campaign to promote its views, including developing press release and social media message templates members can use to promote the need to fight the PRC’s draconian proposal. Learn more at https://americanmailalliance.com/.
Disastrous Consequences. Last month, Idealliance provided the PRC with results of a member survey that provided clear and strong evidence of the disastrous consequences of implementing the commission’s proposal to allow above-CPI rate increases. Idealliance members determined that their clients expected to cut volume by 7.4%, or 2,410,767,486 pieces of mail, if the PRC proposal were implemented.
Idealliance mail, marketing, and print service providers said that 70% of their clients were extremely concerned about the PRC proposal, and 13% moderately concerned, and that their clients would consider the following actions if rate increases occurred as the PRC proposal would allow:
- 56% reduce volume by less frequent delivery
- 48% reduce volume by targeting
- 37% explore use of alternate delivery
- 7% get out of mail completely
Bill Violation Charged. Several AMA coalition members were also party to a second set of comments arguing, among other points, that the PRC’s proposal to allow rates 2% above inflation—with, potentially, an additional 1% increase if the USPS meets certain standards—won’t pass legal muster.
Groups submitting the comments included the Alliance of Nonprofit Mailers, American Catalog Mailers Association Inc., Association for Postal Commerce, Idealliance, and MPA, The Association of Magazine Media. They charged that the PAEA was clear that any ratemaking system must include an annual limitation equal to the CPI for increases in Market Dominant rates. Because the PRC proposal would break that CPI cap, it will not hold up to a court challenge, the groups argued.
“Index ratemaking encourages a regulated monopoly to operate efficiently by promising greater profits if the firm achieves above-average productivity gains, and lower profits (or losses) if the firm fails to do so. Showering the Postal Service with an extra $16 to $24 billion of revenue over the next five years, most of it unconditioned on any required showing of efficiency or productivity gains, would weaken, not maximize, incentives for efficiency and cost control,” the group said in comments filed March 1.
Cap-Free Ratemaking Sought. Commenting on the PRC’s proposed changes to the ratemaking system, the USPS argued against a price cap system, suggesting that because it relied strictly on consumer inflation it was not flexible enough to account for the unique environment in which the Postal Service operates. But recognizing that the PRC is not likely to completely eliminate this approach, the USPS suggested that it be given authority to raise rates 4% above the rate of inflation, rather than the 2% the PRC is proposing.
Electronic Payments. Organizations doing business with the Postal Service can now begin to use its new Electronic Payment System (EPS), designed to provide a single point for all payment-related activities. The EPS is now operational for functionalities involving commercial mail, Post Office Boxes, (P.O. Boxes), and address quality. The platform should make payments easier for mailers who pay the Postal Service through several different methods, use multiple detached mail units or business mail entry units (BMEU), or use multiple locations for P.O. Boxes.
With EPS, businesses establish a single account to pay for all products and services that would be recognized by all postal facilities. Commercial mailers set up an Electronic Payment Account (EPA) that can be used for electronic funds transfer (EFT), retail deposit, mobile deposit, and ACH Debit. In the near future, business mailers will also be able to scan checks and deposit them directly into an EPA.
Business customers will continue to receive receipts from the Postal Service, but they will be able to view payment information in a consolidated format on an EPS dashboard that shows account balances, postage statement reports, transactions history, and other information. For EPS set-up or support, contact Postalone@usps.gov or call 800-522-9085. For help with migration preparation, email email@example.com or your local BMEU.
Reducing Truck Mileage. The Postal Service has been using dynamic routing for package delivery for some time now, but more recently started using a dynamic approach to transportation routes for all mail, with some real savings. Using tools like eDoc, the new Dynamic Route Optimization (DRO) approach changes the timing of routes based on volume and other factors. To date, it has eliminated 2.1 million miles at seven sites, or a 13.5% reduction in mileage. The USPS seeks to eliminate 50 million miles a year from the plant to the post office using DRO. The system is being piloted at 11 sites, with a goal of implementation at all sites by the end of 2019.
Revenue Down. The Postal Service lost $613 million in the first four months of fiscal year (FY) 2018 (October 1, 2017–January 31, 2018), compared with revenue of $1.192 billion for the same period last year (SPLY). The good news: the agency did better than expected, as it planned for a loss of $913 million for the period. Year-to-date total mail volume was down 3.7% while shipping products’ volume was up 7%.