Testimony of 

The Honorable Dan G. Blair, Chairman 

On behalf of the 

Postal Regulatory Commission 

Before the 

U.S. House of Representatives 

Committee on Oversight 

And Government Reform 

Subcommittee on Federal Workforce, 

Postal Service, and the District of Columbia 

April 17, 2007
Chairman Davis, Ranking Member Marchant, and members of the Subcommittee 

on Federal Workforce, Postal Service, and the District of Columbia, thank you for the 

opportunity to provide testimony on the operation of the new Postal Regulatory

Commission (PRC) and our strategy for the future. 

I wish to particularly thank Chairman Davis, full Committee Chairman Waxman, 

full Committee Ranking Member Davis, and Congressman McHugh for their longtime 

support of the Commission and the confidence they have shown in the Commission as 

demonstrated by the Postal Accountability and Enhancement Act (PAEA). 

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, 

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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. 

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. 

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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 

market-dominant 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 achieve the objectives of the PAEA. The initial round of 

comments was due on April 6, 2007, and reply 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. 

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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

• 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. 

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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 in-depth 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 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. 

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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. Thank you, Mr, Chairman, on behalf of the Commission, 

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. Your Subcommittee’s attention to these matters assists us greatly in 

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

I will be happy to answer any questions you may have. 

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