on Jan 3rd, 2011
| 15 comments
It’s that time of year again. Those of us helping on the Office of Inspector General blog have come up with a list of the top 10 postal stories for 2010. Tell us about any stories we missed and add whatever comments you think appropriate. In particular, we would like to get your input on the top story, so take a minute and vote in the poll below. 10. OSHA Fines the Postal Service – At plants across the country, the Postal Service receives sizeable fines for electrical hazards. 9. e-Tipping Point – A flurry of activity in 2010 bolsters the notion that the Digital Revolution has trumped paper-based communications: Apple introduces its iPad tablet computer; all e-reader sales are up nearly 80 percent over last year; the Kindle becomes Amazon’s biggest seller and the company predicts e-books will surpass paper books within a year; Netflix announces that more customers watch streaming videos than DVDs. 8. Congress Takes Notice – Members from both houses of Congress – and both sides of the aisle – introduce legislation to fix the Postal Service’s overpayments to the federal government, which contributed significantly to the Postal Service’s massive net losses over the past few years. 7. America Wakes Up – Widespread mainstream media coverage on a number of postal issues, including 5-day delivery and the financial challenges plaguing the organization, spark a national interest in our postal system. 6. Reports Address Flawed Business Model – The Government Accountability Office confirms that the Postal Service’s business model is ”not viable.” The Postal Service issues its action plan to address declining mail volumes, changing communications habits and other systemic problems. 5. Stakeholders Debate 5-Day Delivery – The Postal Service’s plan to eliminate Saturday delivery generates heated debate, massive press coverage and congressional input. The Postal Regulatory Commission holds a series of public hearings on the topic. 4. PMG Potter Retires – After nearly 10 years as the postmaster general and 32 years with the Postal Service, Jack Potter called it a career and retired on Dec. 3. 3. Postal Service Suffers Largest Net Loss in History – The Postal Service ends FY 2010 with a net loss of $8.5 billion, the largest net loss in its history. Still, it manages to pay all of its bills and remain solvent at the start of FY 2011. 2. OIG Finds $75 Billion Overpayment – A report by the Office of Inspector General finds that the Postal Service has overpaid its Civil Service Retirement System obligations by a staggering $75 billion. Mailing industry unites in its support of a congressional fix. 1. PRC Denies Exigent Rate Request – The Postal Service invokes the exigency clause in the Postal Accountability and Enhancement Act and asks for a price increase above the inflation-based price cap. Mailers unite in their opposition to the request, which the Postal Regulatory Commission officially denies in September. The Postal Service appeals the decision to federal appeals court.
on Dec 20th, 2010
in Finances: Cost & Revenue
| 1 comment
The Postal Accountability and Enhancement Act (PAEA) requires the Postal Service to measure service performance and report to the Postal Regulatory Commission (PRC). The PAEA directs that external measurement systems be used for evaluating the Postal Service’s mail delivery performance unless alternate systems have been approved by the PRC. The PRC reviews this data to ensure that delivery performance does not deteriorate under the current rate setting process and to assess customer satisfaction. The Postal Service has approval to use a hybrid measurement system for bulk presorted First-Class™ and Standard Mail® relying on Intelligent Mail Barcode (IMb) scans to measure arrival at postal facilities (start the clock) and a network of external reporters who record delivery times. The PRC has expressed concern about the accuracy of start-the-clock recordings, noting that Postal Service’s start-the-clock event was based on the first read on mail processing equipment rather than on the documented arrival time. Given limited data availability, the PRC also expressed concern that the IMb service delivery performance measurement is not representative of all presort First-Class and Standard mail. They also recommended the Postal Service continue to work to correct service problems. The Postal Service implemented full-service IMb mailer certification procedures to ensure that mailings meet appropriate business rules. However, this certification process is not mandatory. Do you think that the mailer certification procedures will increase the availability and accuracy of start-the-clock data? Have you experienced problems with the certification procedures? Are there other steps the Postal Service can take to ensure the reliability of IMb-based service performance data? You are also invited to comment on this topic on our Audit Project Pages. The topic is hosted by the Office of Audit Cost, Revenue, and Rates team.
on Jul 7th, 2010
in Pricing & Rates
| 13 comments
The Postal Accountability and Enhancement Act of 2006 (PAEA) ushered in a new regulatory structure for the U.S. Postal Service. One key element was a price cap on market dominant products. (Most of the Postal Service's products are market dominant.) This means that price increases for market dominant products are capped by the rate of inflation as measured by the Consumer Price Index (CPI). PAEA, however, does allow the Postal Service to increase its prices beyond the CPI cap under “extraordinary and exceptional circumstances.” The Postal Service makes the exception by filing an ‘exigent’ rate case to the Postal Regulatory Commission (PRC). Before the Postal Service can increase prices, the PRC must agree with the ‘exigent’ request and find it to be reasonable, equitable, and necessary.
This week the Postal Service proposed an exigent rate increase, an average of 5.6 percent across all classes of mail, effective January 2011. The direct mail industry has challenged the increase, threatening legal action and warning that the Postal Service will suffer large drops in mail volume. Much of the industry’s objection has centered on whether the Postal Service’s current circumstances are really “extraordinary and exceptional.” The Postal Service has based its case on the significant decline in mail volume and revenue, caused by the economic recession. In addition, because inflation has been low, the Postal Service has a small margin under the cap to raise prices. Some might argue that a price cap based on consumer items such as food, apparel, and electronics might not be the best metric for the Postal Service, because its costs are based on fuel, salaries, and health benefits. What do you think of the exigent price increase? Is it important to the continued viability of the Postal Service or should other revenue and cost reduction opportunities be explored first? This topic is hosted by the OIG’s Risk Analysis Research Center (RARC).
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