PRC's Proposed Rules On A New Rate Setting System Are Short On Details

On Aug. 15, the Postal Regulatory Commission issued a Notice of Proposed Rulemaking (NPRM) proposing rules to implement the rate setting provisions of the new postal reform law. The NPRM addresses only rules applicable to rate adjustments for market dominant products (First Class, Periodicals, Standard Mail (e.g. newspapers' TMC products)), regulation of rates for competitive products (products that compete with Fed Ex and UPS), and the classification of mail products.

The Commission stated that subsequent NPRMs will address issues such as complaint proceedings, reporting requirements and costing methodologies. An unfortunate consequence of this decision to hold off on specific rules covering these issues is that many important questions raised by NAA in comments to the Commission remain unanswered. For example, since the substantive requirements for a new complaint process are unknown, it is difficult to assess what procedural rights and remedies may be available to aggrieved parties under the new rate setting system.

In its proposal to implement the statutorily-required postage price cap system, the Commission adopted NAA's proposal to allow public comment on the Postal Service's proposed rate adjustments before implementation. In laying out the process for reviewing rate changes, the Commission said the Postal Service should be given an opportunity to exercise its pricing flexibility. The Commission stated, however, that if the Postal Service abuses this discretion and fails to comply with the statutory objective of “just and reasonable” rate, additional regulations in this area may be developed.

The NPRM affirms the statutory requirement that negotiated service agreements (NSAs) or “contract rates” must not cause unreasonable harm to the marketplace. NAA has been on the watch for an NSA that would favor newspapers' advertising mail competitors and lobbied Congress to insert this safeguard provision in the postal reform law. Unfortunately, the proposed rules are unclear as to how an aggrieved party can challenge an NSA on the grounds that it would cause unreasonable competitive harm. The Commission may intend for this to occur during the complaint process, but its failure to be clear on this precludes any assessment of the adequacy of the process. NAA will file comments before the September 24 deadline to address shortcomings in the NPRM, with a primary focus on the Commission's review of NSAs.

First Published:
September 03, 2007