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The R2006-1 Rate Case PRC Recommendation “Cost-Based Rates”

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Presentation on theme: "The R2006-1 Rate Case PRC Recommendation “Cost-Based Rates”"— Presentation transcript:

1 The R2006-1 Rate Case PRC Recommendation “Cost-Based Rates”

2 Cost-Based Rates Efficient Component Pricing (ECP) Shape-Based Rates Rate Structures Reflective of Cost Causation

3 ECP Worksharing Discount = Cost Avoided –Sends proper price signal –Results in more efficient processing and transportation practices Many existing rates deviate significantly from ECP rates –Thus, large variation in rate increase

4 ECP Per-Piece Standard Mail DBMC Discount –Current: 2.2 cents –Recommended:3.3 cents New Standard Mail Flat Presort Discounts –MADC to ADC:5.3 cents –3D to 5D:5.7 cents

5 Shape-Based Rates PRC: Same “ECP” principle should be applied to other mail characteristics, including shape –Promotes efficiency –“Fundamentally fair”

6 Shape-Based Rates Standard Regular (USPS Proposal) ShapeRevenueCost“Profit” Letter$0.209$0.086$0.123 Flat$0.342$0.274$0.068 Difference$0.133$0.188($0.055) USPS Proposal Did Not Fully Reflect Cost Differences

7 Periodicals Cost Drivers Entry Point Containerization Bundling Piece Characteristics All of these are reflected to some extent in Periodicals rates today, but not in a way that tracks how USPS costs are incurred.

8 PRC Recommendation “Grid” rate structure reflecting USPS cost incurrence –Editorial Pound Dropship Discounts –Container Charge –Bundle Charges –Machinable/Nonmachinable Rates –Rate for DBMC Entry Deviates from ECP to moderate impact Reduced emphasis on weight

9 PRC Recommendation Per-Container Charge –Entry Point –Container Type –Container Presort Per-Bundle Charge –Container Presort –Bundle Presort Edit Dropship Discount –Retains unzoned editorial pound rate for Zones 1-8 Nonmachinable Rates –For Non-CR Flats


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