Good-Bye Rate Cap? Reading The PRC Tea Leaves

PRC Chairman Robert Taub at MAILCOM ’17.

Postal Regulatory Commission Chairman Robert Taub’s luncheon presentation at MAILCOM ’17 was probably the most anticipated session of the conference. The PRC is deciding whether or not to eliminate or modify the inflation-based price cap which limits postage rate hikes to the rate of inflation.

Mailers want to keep it. The Postal Service does not.

Chairman Taub gave an excellent presentation, careful not to tip his hand and reveal which way the issue will go. Perhaps the most revealing part of his comments was stating that the matter will be solved by the Fall.

Of note, Chairman Taub did spend time lamenting the poor state of postal finances. He cited the Post’s long-term deficiencies in assets vs. liabilities. He mentioned the tight state of capitial improvements, such as replacing the postal vehicle fleet.

What he didn’t say is just as revealing as what he did. He did not lament the struggling mailer paying higher postage bills. He did not talk of Auntie paying more to mail her greeting cards. He did not mention that higher rates drive mail out of the system.

In short, he sounded like he agreed with the core of the Postal Service argument that it needs more money. Does that mean eliminating the price cap? Perhaps not. One mailer at the luncheon said the PRC could very easily make the rate cap an “inflation plus system” — for example, inflation +1% or +2%.

That same mailer noted that inflation is picking up, so the puny 1% rate hikes of recent years could become 2, 3, or 4% very quickly with no change in the system. Add in a plus system, and mailers could see annual rate hikes pushing 5%. (Click for latest inflation report)

Were the PRC to adopt a plus system or eliminate the rate cap altogether, expect mailing groups to sue in court on the basis that the PRC does not have the authority to change the inflation rate cap established in the postal reform act of 2006.

Lastly, the PRC Chairman did note that prior to the reorganization in 1970 the Post Office did enjoy pricing freedom even though Congress ultimately had to pass postage hikes.

Chairman Taub’s MAILCOM presentation will be posted shortly.

Click for more pictures from MAILCOM ’17.