The Postal Regulatory Commission (PRC) said March 24 that the US Postal Service (USPS) overestimated its potential savings and underestimated potential lost revenues in its proposal to move to five-day-per-week home delivery. The commission’s five members issued varying opinions on the plan to cut Saturday delivery, which Congress is expected to debate this session.
The USPS had estimated that it would see net savings of $3.1 billion annually by cutting delivery on Saturdays, but the PRC found the organization would only save $1.7 billion. The Postal Service also estimated net revenue losses due to volume declines of $200 million, while the PRC placed that number at $587 million.
The oversight body also found that the full savings would not be achieved until three years after the service change, and that the planned service cut would cause about 25% of First Class and Priority mail to be delayed by two days. It also determined that residents in rural and non-contiguous areas of the country would be adversely affected by the move to five-day delivery.
PRC Chairman Ruth Goldway told Direct Marketing News (DMN) that the USPS did not accurately determine how costs previously spent on Saturdays would accumulate throughout the rest of the week. She also disputed the USPS’ research in determining net revenue losses and asking consumers whether they would prefer eliminated Saturday delivery or a 10% rate hike as “not a very reliable methodology.”
Postmaster General Patrick Donahoe said in a statement that the PRC’s report “is advisory only and therefore is not a final determination of on the merits of our proposal.”
“We remain convinced of our findings,” he said. The Postal Service declined comment other than the e-mailed statement.
Goldway said in her individual opinion that Congress should change the Postal Accountability and Enhancement Act of 2006 if it allows the USPS to eliminate Saturday delivery because the proposal “does not conform to the nation’s postal policy.”
“While it may be acceptable for a private company to charge whatever the market will bear, the Postal Service is a government monopoly operating in the public interest under national policies. It should not reduce service unless it adjusts prices accordingly,” she said.
Former Postmaster General John Potter unveiled the USPS’ 10-year plan to return to financial stability last March. The initiative also included an “exigent” rate increase for the 2011 fiscal year that would have exceeded the USPS’ inflation-based price cap. The PRC denied that request last September.
Commissioner Dan Blair said the USPS “must have the flexibility to reduce costs and align its products and service with customer demand” and noted that technology is drastically changing communication methods.
“The use of technology is changing the way we send and receive communications. The Postal Service’s most profitable product, First Class Mail, has been steadily declining since 2000 due to changes in communications and electronic diversion,” he said. “Even the federal government is eschewing the mail in favor of the Internet, or direct deposit or use of debit cards in lieu of checks. That is today’s reality.”
“I think all of the commissioners saw the merits in each other’s arguments,” Goldway told DMN. “So I think we didn’t really want to take a position that was absolute, even those of us who leaned one way or the other.”
The USPS has said it could run out of money before the end of its 2011 fiscal year, which closes September 30, unless Congress allows it to make major changes. The USPS ran a net loss of $8.5 billion in its 2010 fiscal year.
Goldway has asked Congress to fix the USPS’ retiree health benefit payment system before turning its attention to a reduction in home delivery. The USPS’ inspector general said last year that the current system of funding the USPS’ Civil Service Retirement System has resulted in it overpaying $75 billion from 1972 to 2009.
