By Steve Hutkins

The section on service standards comes first, and it is obviously a response to all the problems with poor service over the past seven months. It includes more stringent service performance reporting than currently shared with the Postal Regulatory Commission and the public, a tougher line on what happens when the Postal Service fails to meet the standards, and changes to the PRC’s advisory opinion process for reviewing a change in standards (including a report to Congress). The draft legislation concludes this section as follows:

“The United States Postal Service may not revise the service standards for market-dominant products in effect on the day before the date of enactment of this Act in a manner that lengthens delivery times before the date on which the report required by subsection (c) is submitted to Congress.”

The Committee’s meeting on Wednesday is clearly going to address the past problems with service performance and what to do about them moving forward. (There’s more about the delays here.) It’s also clear that the Committee is aware of the Postmaster General’s plans to change service standards, as was reported recently in a great scoop by the Washington Post, and the Committee wants to head the PMG off at the pass.

Aside from the few clues in the Post’s article, we haven’t heard anything about what these changes in service standards might be. Perhaps the Postmaster General will reveal more in Wednesday’s hearing. While we wait, let’s speculate.  Read More

By Steve Hutkins

The Postmaster General has told the mailers that another rate increase, based on the new authority, is “imminent.” The exact size of the increase has not yet been revealed, but the Postal Service’s calculations indicate it could be as large as 5.56 percent. Market Dominant revenues in 2020 were about $42 billion, so a full increase could mean $2.3 billion in additional costs for mailers.

In December, the Mailers filed appeals on the PRC’s order approving the new system in the DC Circuit. On January 27, 2021, they proceeded to file a request for a stay seeking to prevent the order from being implemented while the court heard the appeal. On February 8, the Commission filed its brief opposing the request for a stay, and the Postal Service filed its own opposition as well. On Tuesday of this week (February 16), the Mailers filed their reply. (For more background about the case, see this previous post and this one too.)

The issues in the case are numerous and complex, but the crux of the matter appears to be something like this:

The current rate system was established in 2006 under the Postal Accountability and Enhancement Act. The key passage (39 U.S.C. §3622) says, “The Postal Regulatory Commission shall, within 18 months after the date of enactment of this section, by regulation establish (and may from time to time thereafter by regulation revise) a modern system for regulating rates and classes for market-dominant products.”

Section 3622(d)(1) goes on to say, “The system for regulating rates and classes for market-dominant products shall — (A) include an annual limitation on the percentage changes in rates to be set by the Postal Regulatory Commission that will be equal to the change in the Consumer Price Index.”

Section (d)(3) then says that ten years after the enactment of PAEA, the Commission will review the system and determine if it’s fulfilling the objective enumerated in the statute. If it’s not, the Commission shall “make such modification or adopt such alternative system for regulating rates and classes for market-dominant products as necessary to achieve the objectives.”

In other words, PAEA directed the Commission to create a modern rate system and said that the system needed to include the CPI rate cap. PAEA also said the Commission should review the system after ten years and possibly change it or adopt a new one.

The Mailers argue that section (d)(1) means that any new system developed by the Commission must continue to include the price cap. The Commission and the Postal Service argue that section (d)(1) means that the price cap had to be a component of the initial rate system in 2007, but it did not need to be a part of the alternative system developed ten years later.

The statute is arguably ambiguous on this issue, and the opposing briefs develop various reasons why one interpretation is better than the other.

As it is, a lot of weight falls on remarks made to the Senate by Susan Collins, one of the architects of PAEA, on December 8, 2006, the day before PAEA would be passed by the Senate.  Read More

By Steve Hutkins

The Postal Regulatory Commission’s annual compliance review ordinarily focuses on postal rates, but this year, due to widespread reports of mail delays over the past several months, the Commission has been scrutinizing on-time service performance. Over the past few weeks, the Commission and its newly appointed Chairman have filed a number of information requests seeking data from the Postal Service about the scope and causes of these delays.

According to the service performance data provided by the Postal Service, the delays began at a modest level in March 2020 when the pandemic started, deepened noticeably in July when the Postal Service implemented cost-cutting operational changes, improved modestly in the fall, and then got much worse in December with the holiday mail crush.

As for the causes of the delays, the Postal Service has blamed COVID — the surge in packages, employee availability problems, more dependence on surface transportation because of a lack of available space on aircraft, and so on. It has also cited bad weather, the need to prioritize election mail and other factors. The Postmaster General has acknowledged that operational changes made in July caused delays, but the Postal Service says the system adjusted to these changes in a matter of weeks and they were not a factor in the delays that followed.

The various causes are difficult to isolate and quantify, particularly because they interact and compound each other. So the reports submitted to the Commission do not provide a simple explanation of what’s behind the poor service, but they can shed some light on the question and perhaps suggest paths toward a solution.

Service performance

In response to Chairman’s Information Request No. 6, the Postal Service provided two data sets on service performance. The first spreadsheet shows service performance for First-Class Mail, Marketing Mail, and Periodicals on a weekly basis for the period FY 2019, FY 2020, and the first quarter of FY 2021 (Oct. 2018 – Dec. 2020), disaggregated for each USPS geographic Area and the nation.

Normally the Postal Service provides quarterly and annual service performance reports for the fiscal year covered by the compliance review. In this case, however, the Commission has sought weekly performance scores, and the requests go beyond the fiscal year (Oct. 2019 – Sept. 2020) to encompass the first quarter of FY 2021 (Oct.-Dec., 2020).

Here’s a chart based on that data, showing the national scores for First Class Mail from February through December 2020 compared with the same months in 2019. Most of the following charts, by the way, are interactive and you can scroll over them for more stats. (If you’re having trouble loading the charts, you can see another version of the post here.)

As the chart shows, performance declined noticeably in July and August when the Postal Service implemented operational changes concerning transportation and overtime as part of its Workhour Reduction Plan to cut 64 million hours. Performance scores improved in September, then started going down again in November, precipitously so in December.

Here’s a chart showing the service performance of three main types of Market Dominant mail.

The ups and downs seen throughout the year are roughly the same for each type of mail, with First Class and Marketing Mail performing at similar levels and Periodicals performing at much lower levels.

A second spreadsheet, responding to ChIR No. 6, Question No. 20, shows weekly service performance for First-Class Mail disaggregated into presort and single piece, letters/cards and flats, and mail with an overnight (ON) 1-day service standard, a 2-day standard and a 3-5 day standard.

This 3-5-day mail, it should be noted, consists almost entirely of mail sent and delivered within the continental U.S., which has a 3-day standard. The fourth and fifth day are for mail to and from Alaska, Hawaii, Puerto Rico, and the Virgin Islands.

Here’s a chart, based on that second spreadsheet, showing the national scores for the main types of First Class Mail.

Each type of First Class went through the same ups and downs, with single-piece mail suffering more delays than presort and with 3-5 day single piece doing the worst, declining to 38 percent on time in December.  Read More

The CPWU Winter 2021 Newsletter has articles about why Postmaster General DeJoy should be dumped, the possible implications of the Senate going Democrat, and the contrast between DeJoy’s vision and what a public vision of the Postal Service looks like. Read the newsletter here.

On November 30, 2020, the Postal Regulatory Commission issued a 484-page order revising the rate system for Market Dominant products. Under the new system, the Postal Service will be able to raise rates beyond the Consumer Price Index, which it was prevented from doing (aside from the provision for an exigent increase) by the Postal Accountability and Enhancement Act of 2006. (See this previous post for more about the order.)

Last week, the Postal Service gave the PRC its calculations for the two new authorities crafted by the Commission. The Notice of Calculations of Future Rate Authorities indicates that the density-based rate authority will be 4.5 percent, and the retirement-based rate authority will be 1.06 percent, for a total of 5.56 percent.

Those potential increases are on top of the approximately 1.8 percent increase for First-Class Mail and 1.5 percent increase for other categories the Postal Service has already proposed for 2021. If the Postal Service were to exercise its full rate authority, the total increase would thus be over 7 percent. The new system also gives the Postal Service authority for an additional 2 percent increase for products that don’t cover their attributable costs.

The new rate authorities will take some time to go into effect in a price hike, almost certainly not before summer 2021. And it’s very possible that the Postal Service will not take full advantage of its new authority and instead bank some portion for future use.

The rate authority numbers presented last week are considerably greater than what the Commission had envisioned over the past couple of years as it was developing the formulas for future above-CPI increases. This table from the order shows what the density-based increases would have been in previous years based on the new formula. The average authority for this period would have been about 1.23 percent annually; the highest was the 2013 number, 2.69 percent.  Read More

By Steve Hutkins

Fairhope Courier, November 15, 1961: “Pulitzer Prize Winning Author Visits Spanish Fort Post Office: Harper Lee, author of the Pulitzer Prize winning novel, To Kill A Mocking Bird, chats with Har­mon Hanson (photo above) while admiring his newly opened post office at Span­ish Fort. Miss Lee is a frequent visitor to this area and was de­lighted with the addition of this facility. Residents too, are singing the praises of this office — Christmas mails will be handled with greater speed. Many have rented post office boxes, finding it is con­venient to receive mails from early morning until night.”

The gist of the appeal is that the Postal Service has not gone through the normal discontinuance procedure required by 39 C.F.R. 241.3, which includes a feasibility study, questionnaires to postal customers, a public meeting, an opportunity to submit comments, access to the administrative record, and the right to appeal to the PRC.

As it has in the past with similar appeals, the Postal Service will soon file a motion to dismiss the appeal, arguing that that the Spanish Fort post office is a contractor-operated unit, not a USPS-operated facility, so the post office is not actually a “Post Office” and the closing is not covered by the regulations that govern discontinuances.

The Commission has dismissed several similar appeals on contract offices over the past decade, and most likely it will follow its own precedents and do so again. The Commission’s position is a slight variation of the Postal Service’s rationale. The Commission says that the discontinuance rules may apply to a contract unit but only if it is the “sole source” of postal services in the community.

That’s clearly the case in Spanish Fort. It’s a city of over 9,000 people, it was incorporated in 1993, it has its own government — and it has only the one post office.

The Commission will probably find a way to dismiss the appeal anyway, perhaps by expanding the geographic range of “community” to include nearby communities that do have post offices, as well as noting that one can always do postal business online.  Read More

By Steve Hutkins

The Postal Regulatory Commission has spent the past four years working on a revision of the rate system for Market Dominant products. Yesterday the Commission issued its final rule on the changes. The order is here. The PRC’s press release is here. The media kit contains a useful FAQ.

The review of the rate system involved the Commission, the Postal Service, and an extensive list of stakeholders and commenters.  And even though this contentious process has been going on since December 2016, it’s not over yet, not by a long shot. Given that many of the mailers have fought the changes that were finally approved, it’s widely expected that some stakeholders will appeal the PRC’s order to the D.C. Circuit.

The Alliance of Nonprofit Mailers has already promised as much. In an article on its website back in February 2020, the ANM wrote that the proposed changes would not achieve the objectives stated in the 2006 Postal Accountability and Enhancement Act and would thus “violate the law.” If the regulator were to approve these proposals in a final rule, wrote the ANM, “many expect multiple stakeholders to appeal it at the U.S. Court of Appeals.  The court could take some time to reach a decision, meaning that mailers could face a year or two of surcharges in 2021 and 2022, before the appeals are resolved.”

We will probably soon hear similar comments from other mailers and industry insiders. Just yesterday, minutes after the order was posted on the PRC website, DeadTreeEdition, a highly respected blog that covers the print business and postal issues, posted a tweet about the new order saying, “If you’re involved in mailing or #printmedia, stay tuned. Big developments are afoot in #USPS pricing. See you in court.”

The new rate system gives the Postal Service significant above-inflation pricing authority over Market Dominant products. Or, as the mailers put it, the new system “busts the price cap.”

At one stage of the proceedings, the Commission considered a simple CPI-plus formula that would have allowed the Postal Service to increase prices by 2 percent on top of the regular CPI increase. In the end, the Commission adopted a different approach. Under the new system, rate increases will be tied to two factors.

The first factor ties the above-CPI authority to changes in mail density, i.e., the number of pieces per delivery point. This aspect of the rate system would address increases in the cost-per-mailpiece that are driven by measured declines in year-over-year density. The second factor ties the above-CPI authority to Congressionally-required amortization payments for retirement health benefit and pension costs. This second factor could become irrelevant if Congress were to pass legislation that modified how the Postal Service deals with these costs.  Read More

We’re tracking all the reports the Postal Service has been submitting on service performance, the processing of ballots, and other data being shared in the various lawsuits. The Postal Service’s weekly on-time service performance reports submitted in Jones v USPS can be found here. The daily reports being submitted in Richardson, Vote Forward, and NAACP are here. There have also been reports made public by requests via FOIA and the PRC. All the performance reports are here.

November 7, 2020

The Postal Service has submitted its weekly service performance reports in Jones. You can find them here.

The First Class score for the nation as a whole was 81.57 percent, up slightly from the week before, when it was 80.85 percent. Since the week of July 11, when scores dropped due to operational changes, First Class has averaged 84.77 percent. That’s compared to the 92 percent for First Class in FY 2019 and FY 2020 before operational changes went into effect. Here’s a chart showing First Class service performance since the first of the year.

The scores on Election Mail have been significantly better. It will be a couple of weeks before we see the report for the week of the election itself, but here’s a table with the scores through the week of Oct. 24. Note that these are processing scores, not on-time delivery scores, and the numbers only includes scores for mailpieces that have been properly identified by the mailer as election mail, outbound ballots, or inbound ballots and if it adhered to Service Performance Measurement business rules.