PRC 10-YEAR RATE MAKING REVIEW RECORDING

LSC Communications summary of facts and possible impacts due to the PRC 10-Year Rate Making Final Rule No. 5763 was recorded on January 24^th, 2021.

• LSC Communications summary of facts and possible impacts due to the PRC 10-Year Rate Making Final Rule No. 5763 was recorded on January 24th, 2021.
• Any later actions of USPS Board of Governors or the DC Circuit Court responses to request of Stay, and later judgements cannot be precisely forecasted as of January 24^th, 2021.
• There are multiple factors that can impact the likelihood and range of a possible second rate increase in 2021.
• Those factors may occur after the date of this recording and may not be included in this video
• We do know that the regulation requires 90-day notice be provided to the industry of any new rate changes.  Upon any official announcement of such rate change the LSC Postal Blog will be updated with that information. 
• Please contact your Sales Rep or the LSC Postal Operations team with any follow up questions postaloperations@lsccom.com?

Frequently Asked Questions (FAQ)

Q - Does this possible new increase impact First Class mail and Business Reply Mail?

A - Yes - Both the density and retirement authorities are available to all classes of mail to address the effects of decreases in density of mail and to provide revenue for remittance towards the statutorily mandated amortization payments.  

The only exclusion would be products that the USPS does not have the ability to set the rates, in Market Dominant there is one category that meets that description - Inbound Letter Post

Q – When will we know for sure if there will be a second rate increase in 2021?

A – The earliest will be when the Board of Governors meet in April. 

Q - If the USPS does not use the available authority in 2021 and they choose to bank it, can they use all of that in 2022 on top of the 2022 rate increase?

A - No - they may use up to 2% of banked authority each year, and any unused expires 5 years from date of banking.

Q – What does it mean to bank part or all of the rates?

A – If the USPS chooses to not use part of the rate authorities provided to them they are allowed to save that amount for future use (bank it) –with the restriction of limits on amount that can be used each future year and how long it lasts (with the above restrictions on use)

Q - If the courts side with industry after the USPS has already initiated a second rate increase will they refund any of the revenue from the additional factors?

A – No - there is no mechanism to refund - but if the courts side with Industry any percentage they had added in based on the new authority would be removed from the rates.  

Q - Is there anything changing in CoMAIL, or our operations that could help mitigate this? 

A –There is additional capital being invested to add lines to our equipment for better optimization allowing more pieces to migrate to HD.

Q – Are there solutions that LSC is offering to help offset potential rate increases?

A – Please work with your LSC rep to review your titles for possible upgrades in Co Services offerings. 

Q – Can we get postage estimates of what our postage rates may be at a title level this summer?

A – If it is confirmed that there will be a second increase this year, and when the BOG announces the amount then your LSC rep will be able to work with list services to supply those estimates.  We will have 90 days’ notice before any rate increase can be initiated.

Q – Can you in layman’s terms explain the density factor?

A – The USPS uses the volume of mail pieces and delivery points of one year and compares it to same period last year, with declining mail and increasing delivery points the unit cost of each piece increases, so the PRC says this is a factor the USPS cannot control so they are entitled to extra rate authority based on the declining density of mail. 

Q – Why is the retirement factor 1.062% 

A – It was calculated as the percentage by which total revenue would need to increase, assuming same increase across competitive products as well, to provide sufficient revenue for the Postal Service to meet its required retirement obligation payments

Q – Does the USPS have to do any differently based on the final rule?

A – The PRC has placed additional reporting requirements on the USPS intended to help in the tracking of costs and monitoring go the USPS efforts to reduce costs.

Additional summary information can be found in the PRC press release on the Final Rule.

The full PRC Order No. 5763 – Order Adopting Final Rules for the System of Regulating Rates and Classes for Market Dominant Products.

The PRC Notice of Calculations of Future Rate Authorities.