These pricing mechanisms could help minimize mail volume losses due to competitive forces and help keep rates lower for most mail classes over the long run. The Postal Service and the Commission also disagreed on the resulting rate increases among the competitive mail categories. Resolving this situation may require that Congress clarify the ratemaking criteria set forth in the 1970 Act. The Current Postal Ratemaking Process

Postal ratemaking is a complex process that usually takes 10 months—the statutory deadline established by Congress in 1976. This period does not include the time the Postal Service spends preparing a rate case, nor the time it takes for an appeal when the Board of Governors and the Commission do not agree. These recommendations include accelerated review procedures for marketing new products and services and multi-year cost recovery for new service introductions. In addition, the Postal Service has filed a proposal with the Commission to establish a market-based classification schedule that, among other things, restructures First-Class and bulk regular third-class mail. The proposals that we and others have offered—to improve the effectiveness of the postal ratemaking process, ensure financial accountability, and give the Postal Service more flexibility to price and compete in the marketplace—provide the Postal Service, the Postal Rate Commission, and the Subcommittee with a variety of ideas to consider in reforming the ratemaking process.
Why GAO Did This Study

GAO examined the U.S. Postal Service's proposals for modifying the postal ratemaking process, focusing on: (1) how the current ratemaking process could be improved; and (2) the effects of the 1970 Postal Reorganization Act on postal rates.

What GAO Found

GAO found that: (1) the Postal Service has petitioned the Postal Rate Commission to give it more flexibility in pricing postal products and establish a market-based mail classification schedule; (2) new Postal Service pricing mechanisms could minimize mail volume losses and keep rates lower for most mail classes; (3) Congress may have to clarify the 1970 ratemaking criteria because the Postal Service and Commission disagree on the extent that market forces impact postal rates; (4) postal ratemaking usually takes 10 months to complete and it does not include the time the Postal Service spends preparing rate cases and appeals; (5) proposed postal ratemaking reforms include developing accelerated procedures for market testing new products, establishing rate bands for competitive products, and allowing volume-based rates for high volume shippers; and (6) the Postal Service needs to be able to control labor costs and resolve workforce issues to remain competitive in the postal marketplace.