Postal Regulatory Commission Chairman Ruth Goldway this week wrote to Postmaster General Pat Donahoe raising concerns about numerous post office closings around the country. Goldway noted that the PMG had assured the Commission earlier this year that the USPS would not close a “significant” number of offices without getting an advisory opinion from the PRC.

In her letter Goldway suggests that the USPS is already engaged in a nationwide program of office closings, and may therefore be breaking the law:

… numerous articles have appeared in the press identifying facilities in a number of states that have been closed, or that have been evaluated for potential closing, or shortly will be evaluated for potential closing. The Commission has received an increased number of post office closing appeals, hundreds of inquiries from citizens, and has had communications with concerned members of Congress. Thus, it appears that the Postal Service may already be engaged in a nationwide change in service without prior notification to the Commission as title 39 requires.

Goldway goes on to suggest that the USPS promptly file a request for an advisory opinion.

Chairman’s letter to PMG_1862.pdf application/pdf Object.

The DC Circuit Court of Appeals issued its decision in USPS v. Postal Regulatory Commission today, sending the case back to the PRC for further deliberations. The USPS had requested an above CPI rate increase of 5.6%, claiming the rate hike was needed to offset decreased volume caused by the recession. The PRC denied the request, finding that while the recession was indeed an “extraordinary” event, the rate increase was based more on “long-term structural problems not caused by the recent recession”.

The Appeals Court found that the PRC erred in requiring too exact a link between the rate increase and the revenue lost by the USPS due to the specific “extraordinary” circumstance. It held that since Congress had not required that any exigent increase be solely due to the specific cause cited by The USPS, it was up to the PRC to spell out “how closely the amount of the adjustments must match the amount of the revenue lost as a result of the exigent circumstances.
Because the Commission did not…, we remand for it to do so now”.

Here’s the full decision:

USPS v. PRC Opinion on Merits

Testimony of Postal Regulatory Commission Chairman Ruth Goldway, submitted to the Senate Subcommittee on Federal Financial Management, Government Information, Federal Services, and International Security 

Chairman Carper and Ranking Member Brown, thank you for the opportunity to submit my comments as Chairman of the Postal Regulatory Commission for inclusion in today’s hearing record. I regret being unable to testify in person.

We all know that in four months, the United States Postal Service will conclude its fiscal year and it will not have sufficient cash or borrowing authority to pay all of its bills.

Commission analysis has found that the Postal Service’s financial crisis derives from 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. All other things being equal, the Postal Service would have achieved a small net profit over that time, except for the prefunding requirement – rather than losses exceeding $20 billion. The Commission’s objective analysis shows that the Postal Service has essentially overpaid as much as $55 billion into the Civil Service Retirement System, and those funds could be used to help address the current crisis.

I reiterate the Commission’s continuing support for the fundamental approach outlined in your bill to address the financial crisis and long‐standing issues related to Postal Service funding of its employee pensions, as well as its future retiree health benefit fund. The Commission wishes to be of assistance to the Committee so that legislative reform in this area proceeds quickly and successfully.

Your bill also provides for regulatory oversight of non‐postal products and services that may be proposed to the Commission under new flexibilities to be provided to the Postal Service. The Commission believes this will promote postal growth and innovation while protecting the public interest, as is currently the case with postal products and services.

The Commission supports modernization of the Advisory Opinion process. Your proposal requiring the Postal Service to respond specifically to the issues and recommendations in the Advisory Opinion is an important improvement, which would be further strengthened by requiring its response prior to implementation of the proposed changes.

The Commission has not yet agreed upon whether a fixed time frame for the Advisory Opinion process would be beneficial. It is not clear whether 90 days would be sufficient in all cases for the facts to be fully set forth or for adequate public input. We hope an accommodation can be found.

The Postal Service has said that it plans to request an Advisory Opinion within months related to the closing of a large number of post offices nationwide. It is apparent, however, from the volume of news reports and customer inquiries received by the Commission from around the country that the
Postal Service is already taking substantial action to close post offices or evaluate them for closure. The Postal Service has not provided details of this activity to the Commission.

I am concerned that the Postal Service should not be undertaking nationwide service changes without first requesting an Advisory Opinion. Their suggested timing of such a request may obfuscate the purpose and intent of Congress in requiring such Advisory Opinions.

The Commission has provided comments to the Postal Service’s Federal Register filing regarding changes to the closings process, as well as in an Advisory Opinion on Station and Branch Closings. I am concerned the public’s rights to notification and participation in the closing process are now ignored. The Postal Service is a government monopoly with obligations to all its citizens, not only a delivery service for business mailers ‐‐ as important as that may be to our nation’s economy.

Effective regulatory oversight is especially vital when the entire mail system faces major changes. The Commission ensures transparency, accountability and adequate service levels and supports positive changes needed to keep the Postal Service vital and relevant.

In closing, I was heartened by Senator Carper’s recent editorial promoting the “triple happiness” of wiser energy policies that protect our environment, reduce costs, and create jobs. In my view, moving to electric vehicles could result in environmental and financial dividends if the Postal Service’s financial difficulties can be resolved.

According to PostCom Executive Vice President Jessica Lowrance, “There have been rumors within the industry that it should expect or budget for a 23 percent increase for Standard Mail flats during the next annual USPS price change early in 2012. This type of rumor can have disastrous consequences for mail volume as businesses begin media choices for 2012 across the nation. To a novice postal user or out-of-the-loop type of mailer, this type of news may force their hand in leaving mail altogether or test other media at a more accelerated pace.”

Full article (.pdf file) at PostCom: Postal News and Information from Around the World.

The USPS last week filed a request with the Postal Regulatory Commission for approval to test a guaranteed direct mail product, the “Mail Works Guarantee.” The program would offer companies that don’t already use direct mail a money back guarantee if their test marketing campaigns don’t produce results:

The United States Postal Service hereby gives notice that it intends to conduct a test of an experimental market-dominant product. The experimental product is the “Mail Works Guarantee.” The top advertisers in America represent $90 Billion in total expenditures for media advertising. The USPS share is currently 3.1% or about $3 Billion annually which represents a huge revenue potential for the Postal Service. Thus, this new product will be offered to a group of companies who spend a minimum of $250 Million annually on advertising as identified by Advertising Age magazine and for whom mail is not currently a large part of their advertising mix (postage is less than 0.36 percent of the company’s total spending on advertising). These companies will be offered a postage-back guarantee to test advertisements for their products through First-Class Mail and Standard Mail. The market test will begin on or shortly after May 16, 2011.

During the Mail Works Guarantee market test, 16 initial companies will be offered a postage-back guarantee to test the effectiveness of advertisements for their products using First-Class Mail and Standard Mail.

For each selected mailer, a set of unique metrics will be developed jointly with the Postal Service against which to evaluate the performance of a test Direct Mail campaign. For example, a retail company’s Direct Mail offer could be designed to increase store traffic, an e-commerce company’s offer could be designed to drive Web traffic, or a product goods company’s offer could be designed to promote increasing sales of a specific product. The threshold for determining success will be an agreed-upon percentage of increase in the uniquely established metric. Each participating mailer will be expected to mail a minimum of 500,000 pieces up to a maximum of 1 million pieces of First-Class Mail or Standard Mail. The Postal Service will provide assistance in developing the Direct Mail campaigns during the market test, as well as in the benchmarking and measuring the test metric.

If the Direct Mail campaign fails to meet the established metrics, as verified by a Postal Service representative, the Postal Service would only refund the postage paid during the market test, up to a total of $250,000, issued as a credit to the company’s Centralized Account Payment System account. Production and printing costs for the Direct Mail campaign would not be refundable.

Depending on the results of the test, the Postal Service may file a request with the Commission for approval to offer the Mail Works Guarantee to additional companies under the market test.

From Postcom: “Join PostCom President Gene Del Polito and Postal Regulatory Commission Chairman Ruth Goldway in a discussion of a number of wide-ranging topics including: the PRC’s recent five-day decision, the Annual Compliance Determination, the PRC’s complaint process, difficulties with service performance measurement, and more.”

Click here to download the mp3 file, or click the play button below to listen online. [audio:http://postcom.org/netcasts/04.11.11.goldway.mp3]

While post offices across the US will not be affected by a shutdown of the federal government (contrary to what you might have heard, the USPS is in much better financial shape than the rest of the government), the Postal Regulatory Commission will have to close if Congress causes a shutdown. The PRC has just posted the following on its web site:

April 07, 2011 – If the current continuing resolution expires at 12:01 a.m. on April 9, 2011 without passage of an FY 2011 appropriations bill or a further continuing resolution, the Postal Regulatory Commission will be required to shut down.

In that event, effective April 11, 2011, the Commission will be closed until such time as an FY 2011 appropriation or a continuing resolution for the Commission has been approved. With respect to proceedings pending before the Commission, the due date for all filings will be extended day-for-day for the duration of the shutdown. Thus, if the shutdown lasts a total of seven (7) calendar days, the due date for all filings otherwise due during the shutdown is extended by seven (7) days from the due date. For example, assuming an initial due date of April 13, 2011 and a 7-day shutdown which concludes April 18, 2011, the revised due date is April 20, 2011. During the shutdown, the Commission’s Docket section will not be operational. However, filings may be submitted. All filings submitted during the shutdown will be processed and posted to the Commission’s website when the Commission resumes normal operations.

via Postal Regulatory Commission: Breaking News.

From the National Association of Postmasters of the United States:

NAPUS President Bob Rapoza and Director of Government Relations Bob Levi are talking with key Members of Congress and postal regulators concerning the Postal Service’s plans to amend postal regulations to streamline the Post Office closing and consolidation process. NAPUS is concerned about the impact the proposed changes would have on service to small and rural communities.

via NAPUS.

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. Read the rest of this entry »

The Government Accountability Office (GAO) released a report on the USPS proposal to end Saturday delivery. While the report said that cutting a delivery would save money for the USPS, it, like the PRC, questioned the USPS’s assumptions about the effects the move would have on its finances.

Here is the GAO’s summary of its findings:

USPS’s proposal to move to 5-day delivery by ending Saturday delivery would likely result in substantial savings; however, the extent to which it would achieve these savings depends on how effectively this proposal is implemented. USPS’s $3.1 billion net cost-savings estimate is primarily based on eliminating city- and rural-carrier work hours and costs through attrition, involuntary separations, or other strategies. USPS also estimated that 5-day delivery would result in minimal mail volume decline. However, stakeholders have raised a variety of concerns about USPS’s estimates, including,

• First, USPS’s cost-savings estimate assumed that most of the Saturday workload transferred to weekdays would be absorbed through more efficient delivery operations. If certain city-carrier workload would not be absorbed, USPS estimated that up to $500 million in annual savings would not be realized.
• Second, USPS may have understated the size of the potential mail volume loss due to questions about the methodology USPS used to develop its estimates of how 5-day delivery may affect mail volumes.

Read the rest of this entry »