SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background

II. Basis of Proposed Rules

III. Proposed Rules

I. Background

On April 5, 2024, the Commission issued an advance notice of proposed rulemaking seeking comments on the Commission's review of the system for regulating rates and classes for Market Dominant products (ratemaking system).^[1] In Order No. 8891, the Commission determined that the system for regulating rates and classes for Market Dominant products was not achieving the objectives appearing in 39 U.S.C. 3622(b), taking into account the factors in 39 U.S.C. 3622(c) and has determined to undertake a phased approach to considering modifications necessary to achieve the statutory objectives.^[2]

II. Basis of Proposed Rules

Pursuant to 39 U.S.C. 503 and 3622, the Commission considers proposed revisions to its rules pertaining to two aspects of the ratemaking system at this time.

First, in response to Order No. 7032, many commenters express their concerns about the frequency of the Market Dominant rate adjustments that the Postal Service has implemented since the issuance of Order No. 5763. Since the issuance of Order No. 5763, the Postal Service established a schedule of implementing rate adjustments twice each year, with a few exceptions. Commenters generally assert that the Postal Service's current schedule of twice-per-year Market Dominant rate adjustments frustrates the achievement of the statutory objectives to “create predictability and stability in rates” and to “reduce the administrative burden and increase the transparency of the ratemaking process” as provided by Objectives 2 and 6 respectively. See39 U.S.C. 3622(b)(2) and (6). To address the observed weaknesses relating to achieving these statutory objectives, the Commission proposes to restrict the Postal Service from adjusting rates of general applicability for Market Dominant products more than once per fiscal year from October 1, 2025, through October 1, 2030, unless such rate adjustment filings only include rate decreases or are de minimis rate increases. See id. At this time, the Commission finds it prudent to include a 5-year sunset period on the proposed rule ( i.e., the proposed rule will be effective from October 1, 2025, through October 1, 2030). This would promote stability for mailers in the next 5 years while also recognizing the uncertainties of the environment over which the ratemaking system regulates and in which the Postal Service operates. The Commission is interested in receiving comments from stakeholders on the proposed sunset period and the proposed effective dates of October 1, 2025, through October 1, 2030. Depending on public comment, the Commission may decide to consider potential adjustments to the proposed sunset period and the proposed effective dates of October 1, 2025, through October 1, 2030.

Second, in response to Order No. 7032, several commenters express concerns that the Postal Service's approach to setting workshare discounts under the Modified Ratemaking System undermines efficiency and frustrates the achievement of multiple statutory objectives. As noted several times in Docket No. RM2017-3, workshare discounts are considered most efficient when discounts are set as closely as practicable to the avoided costs of the particular workshare activity ( i.e., 100 percent passthroughs). See e.g., Order No. 5763 at 8. In Order No. 5763, the Commission codified § 3030.282, labeling it as a “do no harm” principle, intended to prohibit the Postal Service from making workshare discounts more inefficient. Order No. 5763 at 214. However, since its adoption of these rules, a regulatory gap in § 3030.282 inadvertently permits the Postal Service to reduce workshare discounts with excessive passthroughs down to the 85 percent passthrough floor found in § 3030.284(e), frustrating the “do no harm principle.” To correct this regulatory gap that directly affects the achievement of Objective 1 (maximizing incentives to reduce costs and increase efficiency), the Commission proposes an amendment to ensure that workshare discounts remain as close to avoided costs as possible. See39 U.S.C. 3622(b)(1).

Each proposal is necessary to address areas that frustrate the ability of the ratemaking system to achieve the statutory objectives found in 39 U.S.C. 3622.

III. Proposed Rules

The Commission proposes revisions to the system for regulating rates and classes for Market Dominant products (ratemaking system). These proposals aim to enhance predictability, reduce administrative burden, and maximize efficiency and cost reduction, ensuring a ratemaking system that better fulfills the statutory objectives.

For the reasons stated in the preamble, the Commission proposes to amend 39 CFR part 3030 as follows:

1. The authority citation for part 3030 continues to read as follows:

Authority: 39 U.S.C. 503; 3622.

2. Add § 3030.103 to read as follows:

3. In § 3030.282, add paragraph (d) to read as follows: