The newly unveiled PRC rate-setting system keeps the inflation price cap, but gives the Postal Service ample room to build on top of it with mailers paying all along the way.
Here’s how it goes: The current system is an annual rate hike capped at inflation, which for January 2018 will be 1.9%. That’s where we were today.
Now add in 2% on top of that. In the new system announced December 1, the PRC is giving the USPS 2% above the inflation cap each year for the next five years.
Now add in another 1% on top of that. The new system gives the USPS the opportunity for another 1% if it meets certain service standards.
And finally, add in the PRC’s efforts to standardize worksharing discounts and fix “underwater” product. That could be another 2% on top of the other rates.
Add it up, and some mailers could see 7% annual rate hikes for the foreseeable future.
Underlying this new ratesetting system is the PRC’s conviction that the USPS needs more money. Earlier this year the PRC found the USPS’ financial condition worsening. (Click for earlier story).