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US Postal Service needs independent oversight, commissioners warn

Thursday, October 3rd, 2013

The annual price cap for the US Postal Service and the current regulatory approvals system for postage rates in the United States has been “effective”, US lawmakers were told yesterday.

As the US Senate held a hearing to confirm two continuing Postal Regulatory Commissioners, Nanci Langley and Tony Hammond, they were told that the world’s biggest government monopoly needs independent regulatory oversight to ensure it operates efficiently.

The comments came as Langley and Hammond were asked their views on the comprehensive postal reform legislation being developed by the Senate Homeland Security and Governmental Affairs Committee with the goal of rescuing USPS from its current financial crisis.

One of the key proposals within the Senate bill is for USPS to have its prices set and reviewed by its Board of Governors, with the regulator merely feeding its thoughts into the process, instead of being able to reject price proposals.

The annual price cap would remain in place under the Senate proposals, but it would be for the USPS Governors, on a unanimous vote, to decide when the Postal Service should be able to breach its price cap to reflect “extraordinary or exceptional circumstances” in the postal market, rather than the regulators.

Regulatory protection

Yesterday Commissioner Langley agreed it was appropriate to debate the rate-making system as postal reforms are developed, since USPS has not been able to retain its revenues under the present system.

However, she warned that many of the monopoly mail services provided by USPS have a “captive audience” who may not have easy access to alternatives, and that in such a situation a price cap was “proven public policy” to provide those customers with protection.

This issue appears particularly topical at the moment with USPS currently seeking above-inflation price increases to generate $2bn-a-year in extra revenue, with major customers looking at the Commission review process as an opportunity to challenge the proposal.

US postal commissioner Nanci Langley told Senators that the regulators have reviewed price-setting proposals quickly and efficiently

“The rate cap as it exists now has been effective,” Langley said yesterday, adding that where revenues have been lost by USPS have generally been because of healthcare and workers’ compensation arrangements, not postage rates.

“The rate-making system has worked before the Commission,” she added, stating that by reviewing price proposals within 30-day periods, the delays in the regulatory system are also being kept to a minimum. “I think the Commission is turning around rate cases in a very expeditious time-line.”

Hammond, who is a Republican while his colleague Langley is a Democrat, told the Senate that the Commission would be able to adapt to any new system that Congress adopted for the postal industry.

But the Commissioner starting his fourth term in the role also warned of the need for independent oversight.

“If you’re going to make changes and increase flexibility for the Postal Service once again, you do need an independent oversight of that if it’s going to be effective,” he said.

“Since they are the world’s biggest government monopoly, you have to have some oversight, some controls over them. You have to force efficiencies upon them, otherwise – I don’t know what government monopoly would become more efficient if they were not required to be.”

The Postal Service is currently pushing Congress to give its Board of Governors authority to make structural changes in the business and launch new products without control from the Postal Regulatory Commission, as well as taking stronger price-setting controls from the regulators.

Testifying to the same Senate committee last month, US Postmaster General Patrick Donahoe insisted that the Postal Service now has sufficient competition outside the mail channel to motivate efficiency and protect customers from excessive prices.

“Extensive price and product controls are therefore not necessary to protect customers, as has been recognised in other countries that have streamlined their regulation of the post in recent years, including countries that, like the United States, continue to have a government post whose provision of universal service is supported by a monopoly.”

Gaps on the Board

“Carper hopes to have this legislation enacted by the end of the year and will evaluate pending nominations to the Board of Governors at that time”

As a potential replacement for the oversight currently provided by the independent Postal Regulatory Commission, the Board of Governors at USPS is at least designed to include members representing the public interest.

Governors are supposed be selected from candidates with experience in law, accounting, public service or corporate management to provide expertise within the Postal Service leadership.

However, there are currently four vacancies on the board designed to have nine members plus the Postmaster General and his Deputy, and from December there will be five vacancies.

From December, Governor Dennis Toner concludes the one-year extension to his term, which expired in December 2012. Chairman Mickey Barnett’s term also expires this December, although he will be able to serve a one-year extension under the rules. Two other Governors – Louis J Giuliano and Ellen C Williams – have terms that expire in December 2014.

At present, there are no appointees awaiting confirmation by Congress as USPS Governors to fill the gaps on the Board. Under the rules, the Board of Governors must have at least six members – including the Postmaster General and his deputy – to achieve a quorum to act. From December, it will be at this minimum quorum level.

It is difficult to recruit qualified people to serve as USPS Governors, particularly with the business in such a state and the part-time role offering senior candidates only a $30,000 salary plus $300-a-day expenses.

It also takes time to confirm candidates as Governors, particularly with Congress time being taken up by other pressing priorities – not least major postal reforms.

Postal Service spokesperson David Partenheimer referred Post&Parcel to the Senate Oversight Committee, stating that the seats on the Board cannot be filled until the Committee confirms the President’s nominations.

“We would like to see all the vacant Board seats filled as quickly as possible,” he said.

Senate Oversight Committee spokesperson Emily Spain noted just how busy the Committee was at the moment, between the current federal government shutdown and various hearings, including on postal reform.

She said postal reforms had to be dealt with by the Committee before it could turn its attention to other matters.

“Chairman Carper is working closely with Ranking Member Coburn and other Senate colleagues on bipartisan postal reform legislation that would also provide a number of much needed reforms to the Postal Service, including improvements to the Postal Service’s the Board of Governors,” she said. “Chairman Carper hopes to have this legislation enacted by the end of the year and will evaluate what action is needed regarding pending nominations to the Board of Governors at that time.”

Source: James Cartledge, Post&Parcel

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