Thank you for the opportunity to provide testimony on the operation of the new Postal 

Regulatory Commission and our strategy for the future. 

The PRC is an independent agency that has exercised regulatory oversight over the Postal 

Service since its creation by the Postal Reorganization Act of 1970. Primarily, that oversight has 

consisted of conducting public, on-the-record hearings concerning proposed rate, mail 

classification, major service changes, and recommending decisions for action by the postal 

Governors. 

The Postal legislation enacted on December 20, 2006, strengthens the authority of the 

renamed Postal Regulatory Commission and changes the form of regulatory oversight in many 

respects. The Postal Service is granted more autonomy in setting rates, particularly for its 

competitive products. However, the Service’s ability to increase rates for market-dominant 

products is limited ordinarily by changes in the Consumer Price Index (CPI). The law now 

requires the Commission to complete its review of new rates for compliance with the CPI cap 

within 45 days. Moreover, the PAEA streamlines the Postal Service’s ability to introduce new 

postal products. 

To counterbalance the Postal Service’s enhanced autonomy in setting rates and 

introducing new services, the PAEA assigns continuing oversight responsibilities to the 

Commission. The law appropriately equips the PRC with authority to use new enforcement 

mechanisms. Oversight will consist mainly of information gathering, annual determinations of 

Postal Service compliance, consideration of complaints, and periodic reports on Commission 

operations. Enforcement tools include subpoena power, authority to direct the Postal Service to 

adjust rates and to take other remedial actions, and levying fines in cases of deliberate 

noncompliance with applicable postal laws. 

 

The Commission is now fully engaged in implementing the strengthened regulatory 

functions assigned by the PAEA. This effort involves completing pending business under 

previous law, as well as developing an organization adapted to the Commission’s new 

responsibilities. 

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As you know, the Commission rendered its recommended decision on the Postal 

Service’s omnibus rate request on February 26, 2007. We audited the Postal Service’s projected 

revenue needs and made appropriate adjustments to their initial estimates based upon subsequent 

Postal Service refinements of these estimates. We also recommended improvements in the 

design of rates for many postal products at the Postal Service’s request, such as aligning rates 

more closely with shape, which affects processing costs. The Commission’s decision relied on 

well-established ratemaking principles, including a definitive reaffirmation of the principle that 

worksharing discounts should be limited to the amount of cost savings accruing to the Postal 

Service – the approach ratified by the PAEA.

On March 19, 2007, the Governors of the Postal Service endorsed the Commission’s rate 

recommendations, with three limited exceptions: rates for the Priority Mail flat rate box; for 

additional ounces of non-standard First-Class letters; and for Standard Rate Flats mail. On 

March 29, 2007, the Commission issued an Order establishing procedures for further 

consideration of these issues and inviting comments from interested parties before the end of this 

month. Because the Commission’s deliberations on these topics are ongoing, I hope you will 

understand that it is inappropriate for me to address them specifically at this time. 

Other pending business includes two mail classification proceedings, one of which 

concerns a Negotiated Service Agreement or NSA. To date, the Commission has completed 

proceedings on six proposed NSAs and approved each of them, with the exception of one that 

was withdrawn at the request of the Postal Service and the co-proponent. The Commission also 

issued an Advisory Opinion on December 19, 2006, on the Postal Service’s plans for 

reconfiguring its mail processing and transportation networks. 

One of the most critical requirements the PAEA assigns to the Postal Regulatory 

Commission is the establishment of a modern system for regulating rates and classes of marketdominant postal products. In order to move expeditiously toward the new ratemaking system, 

the Commission published an Advance Notice of Proposed Rulemaking on January 30, 2007, 

soliciting comments on how the Commission can best fulfill its responsibilities and achieves the 

objectives of the PAEA. The initial round of comments was due on April 6, 2007, and reply 

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comments will be due on May 7, 2007. To date, the Commission has received comments from

32 parties. In addition, the Commission and the Postal Service co-sponsored a summit on 

meeting customer needs in a changing regulatory environment, with over 200 attendees on 

March 13, 2007. 

The PAEA directs the Postal Service, in consultation with the PRC, to establish service 

standards for market-dominant products, and assigns regulatory oversight to the Commission. 

The Act also directs the Postal Service and the PRC to consult on developing a plan for meeting 

these standards, including any necessary changes to the Service’s processing, transportation, 

delivery, and retail networks. Consequently, we will revisit these infrastructure issues in the 

context of service standards to be established under the PAEA. Moreover, we appreciate the 

opportunity for Commission personnel to observe meetings of the Mailers Technical Advisory 

Committee (or MTAC) to become better informed on mailers’ views of their service needs. We

look forward to full consultation with the Postal Service, as envisioned by the Act, later this 

spring and summer. 

The Commission is also advancing toward performance of its auditing and reporting 

responsibilities under the PAEA. During the next two years, these responsibilities will require 

the following essential actions: 

• A comprehensive review and report examining universal postal service and the 

postal monopoly in all regions of the United States, including an assessment of 

likely future needs and recommended changes; 

• A review of all non-postal products offered by the Postal Service, followed by a 

determination whether each of them should continue, based on an assessment of 

public need for the service and the private sector’s ability to meet any such need;

• Annual notice-and-comment proceedings followed by Commission 

determinations on whether any rates, fees, and service standards failed to comply 

with applicable requirements during the preceding year; and

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• A report to the President and to the Congress on the first year of the Regulatory 

Commission’s operations.

In furtherance of these tasks, the Commission has already begun discussions with the 

Departments of Treasury and State, the Federal Trade Commission, U.S. Customs and Border 

Protection, the Postal Service’s Office of Inspector General, and the Government Accountability 

Office, regarding implementation of the new law. 

The Commission is also moving on other fronts to meet its new regulatory 

responsibilities. One critical effort is organizational – adapting the Postal Rate Commission into 

the regulatory body envisaged in the PAEA. 

With the enactment of the PAEA, the Commission will need to undergo changes in its

organizational structure, workforce size and skills mix, areas of functionality and expertise, and 

policies and procedures. The Act outlines specific requirements that necessitate a timely and 

thorough analysis of the Commission’s current state, and a strategic plan of action to bridge 

functional gaps and to meet statutory deadlines. The PRC is working with an outside expert in 

this regard. 

The first step in this process documented the current organizational baseline through indepth interviews with staff to gauge what competencies were required to perform their current 

duties. The Commission is analyzing and identifying skill gaps between the current baseline and 

the requirements the Act places on the PRC. 

Another key component of the Commission’s ongoing efforts is outreach: soliciting 

input from postal stakeholders, especially mail users, and consultation with other government 

agencies. Appearing before the Subcommittee today, and hearing your views and concerns, is an 

important part of this process. We are also progressing on schedule toward the appointment of 

the Commission’s first Inspector General. I would like to note that the Commission has recently 

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created an Office of Public Affairs and Governmental Relations to maintain contact with all 

postal stakeholders. 

The benchmarks established for the Commission by the PAEA pose some daunting 

challenges, especially in light of the Postal Service’s opportunity to file one last omnibus rate 

request under prior law. There is no question that an additional rate case would divert Postal 

Service and Commission resources that, in my view, would be better devoted to developing the 

new system of regulatory oversight. Nevertheless, the Commission is committed to timely 

performance of all its statutory obligations, and to doing so in a reasoned and balanced manner. 

CONCLUSION

In closing, I wish to acknowledge the dedication and commitment of my colleagues – 

Vice Chairman Dawn Tisdale, Commissioners Ruth Goldway, Tony Hammond, and Mark 

Acton. 

On behalf of the Commission, thank you for this opportunity to present a status report on 

our progress toward activating the strengthened oversight responsibilities assigned by the Postal 

Accountability and Enhancement Act. Congress’ attention to these matters assists us greatly in 

maintaining focus on issues vital to our Nation’s postal system. 

 

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