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Pricing update

USPS responds to regulatory proposal

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USPS says a proposed modified system to regulate rates and classes for some postal products and services doesn’t give the organization the flexibility it needs.

USPS has responded to a proposal to establish a modified system to regulate rates and classes for some postal products and services.

Under a 2006 law, the Postal Regulatory Commission (PRC) must review the system used to regulate rates and classes for market-dominant products, including First-Class Mail and Marketing Mail. The goal is to determine if the system is meeting its objectives, which include enabling the Postal Service to be financially stable.

In December, as part of this review, the PRC determined that the current pricing system — which caps market-dominant price increases by inflation — isn’t working in part because it doesn’t allow USPS to be financially stable. The PRC proposed a new pricing system that gives the Postal Service some additional pricing authority, while maintaining a price cap.

In comments filed with the PRC this week, the Postal Service said the proposed alternative doesn’t give the organization the flexibility it needs to deal with changing market conditions and the competitive business landscape.

“We continue to believe that a price cap system is unnecessary because there are alternatives in the marketplace to every product that we offer, and therefore market conditions and business realities will inform and constrain our ability to raise prices. Instead of modifying the price cap, the commission should exercise after-the-fact regulatory monitoring to ensure that the prices we charge are just and reasonable,” USPS said in a statement.

“If the commission insists on maintaining a price cap, then we have also suggested changes to its proposal which are needed to enable the Postal Service to have a more realistic opportunity to be financially stable.”

In addition to a better pricing system, USPS leaders say the organization’s long-term financial stability requires legislative reform and management’s continued actions to control costs, optimize the postal network and enhance postal products and services.

All interested parties, including the Postal Service, will have an opportunity to file further comments March 30. The PRC will then consider those comments and issue a final decision regarding the new regulatory system.

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