In a document filed December 30 with the Postal Regulatory Commission, the Postal Service provided the calculations for its additional (over-CPI) rate authorities under the PRC’s November 2020 final rule.
According to the Postal Service’s calculations, its added rate authority under the “density” provision is 1.026%, and its “retirement” rate authority is 1.036%. The “non-compensatory” rate authority is a fixed 2% applicable to “underwater” classes and categories.
In its cover letter transmitting the calculations, the Postal Service took note of the potential need for revisions:
“Pertinent to the issue of our density rate authority, on December 12, 2022, the United States Postal Service submitted Proposal Seven in Docket No. RM20232. Through this petition we are seeking changes to analytical principles related to a one-time adjustment in the FY 2022 Annual Compliance Report to exclude from institutional costs the $57 billion negative expense caused by the Postal Service Reform Act’s elimination of all past due retiree health benefit payments. Should the Commission determine that this adjustment is appropriate and approve Proposal Seven, density rate authority calculations would change substantially. Therefore, the United States Postal Service is also including an additional set of density rate authority calculations for this scenario.”
If the PRC endorses the Postal Service’s preferred accounting for the $57 billion, it would result in positive (1.026%) “density” rate authority (worth an estimated $400 million in additional revenue). Conversely, should the PRC rule against the USPS, it’s “density” rate authority would be zero.
As noted in the December 19 issue of Mailers Hub News, the current trend in the CPI suggests that rate authority could be approximately 2.1% when, as expected, the USPS files its next price change in early April. In turn, addition of 1.026% under “density” and 1.036% for “retirement” would bring the total rate increase that would be implemented in July 2023 to 4.162%, or more, and 6.162% (or more) for “underwater” products. Three more months of CPI figures remain to be included, so the calculated CPI figure is likely to change – up or down – as a result.
Of course, the USPS noted in its letter that it cannot be assumed that its calculated authorities will be used:
“The Postal Service intends to use these additional rate authorities, although precise decisions about how, and in what amounts, will be made by the Governors after the Commission formally determines how much of each rate authority is available.” Observers would likely decline any bet that the governors will do other than seek every available penny.