POSTAL REGULATORY COMMISSION

PRC Releases Report Assessing Postal Service Compliance with Rates and Service: Service performance continued to lag in FY 2025

Washington, DC – Today, the Postal Regulatory Commission (Commission) released its Fiscal Year 2025 Annual Compliance Determination (ACD), a comprehensive evaluation of whether the Postal Service complied with price caps for Market Dominant products, cost attribution requirements, and service performance standards. By law, the Commission must issue its Determination within 90 days of receiving the Postal Service’s Annual Compliance Report (ACR).

A summary of the Commission’s overall findings is captured in the ACD’s Executive Summary. The ACD outlines the Commission’s detailed findings, recommendations for improvement, and directives requiring the Postal Service to take specific corrective actions where necessary, regarding:

• Market Dominant Rate and Fee Compliance. In Chapter II, the Commission determines that all FY 2025 rates complied with applicable rate authority provisions and that all workshare discounts were compliant when introduced based on the most recent avoided cost data. The Postal Service is required to bring any current discounts that are out of compliance with relevant regulations based on the new FY 2025 avoided costs into compliance in the next Market Dominant rate adjustment.
• Market Dominant Non-Compensatory Classes and Products. In Chapter III, the Commission finds that the Postal Service incurred $711.6 million in losses from non-compensatory classes and products in FY 2025. Periodicals was the only non-compensatory class, and both products within that class were non-compensatory, while Alaska Bypass Service (Package Services class) and USPS Marketing Mail Flats (USPS Marketing Mail class) were also non-compensatory. The Commission directs the Postal Service to adjust prices for these products, consistent with existing regulations in upcoming FY 2026 Market Dominant rate proceedings.
• Competitive Products. In Chapter IV, the Commission finds that total revenues for Competitive products were not subsidized by Market Dominant products during FY 2025, thereby satisfying 39 U.S.C. § 3633(a)(1). The Commission also finds that collectively, Competitive products satisfied the appropriate share requirement of 39 U.S.C. § 3633(a)(3). However, revenues for 18 Competitive products did not cover attributable costs and, therefore, did not comply with 39 U.S.C. § 3633(a)(2). Revenues for 5 Competitive domestic contracts included in Non-Published Rates (NPR) products, and 6 Competitive international sub-products or components, did not cover their attributable costs, even though the product covered its attributable costs.
• Nonpostal Products and Services. In Chapter V, the Commission finds that Market Dominant and Competitive legacy nonpostal products complied with the applicable requirements of 39 U.S.C. chapter 37 and that Competitive legacy nonpostal products satisfied the cost coverage requirement of 39 U.S.C. § 3633(a)(2) in FY 2025. As it relates to the Postal Service’s interagency agreements (IAAs), the Commission finds that the Postal Service’s IAAs provided a net contribution to the Postal Service in compliance with 39 U.S.C. § 3704 during FY 2025.
• Service Performance. In Chapter VI, the Commission finds that 20 out of 27 Market Dominant products/categories failed to meet their FY 2025 service performance targets and directs the Postal Service to take corrective action to achieve compliance in FY 2026. This occurred despite the Postal Service lowering its targets for 19 products/categories in FY 2025. The remaining seven products met their targets. Commission analysis also confirms that changes to the service performance measurement system, particularly the Sunday/Holiday exclusion, produce a meaningful but uneven increase in reported service performance scores, as much as 2.1 percentage points for some products' annual on-time performance. The Commission directs the Postal Service to improve service performance results to achieve the applicable on-time percent target level for all non-compliant products in FY 2026. The Commission has developed specific directives that are designed to provide increased transparency for the public about the government-owned postal operator's ongoing efforts to restore service performance for those products in FY 2026. These directives include continued Postal Service reporting of specific information developed from its internal metrics within 90 days of the issuance of this ACD and as part of the Postal Service’s FY 2026 ACR.
• Flats. In Chapter VII, the Commission finds that overall cost coverage for flats products improved in FY 2025, with 5 out of 8 flats products covering their costs and unit revenue rising across all 8 flat categories. However, unit costs for non-compensatory flats increased significantly, and service performance continued to decline for most categories. Persistent operational challenges, such as bundle breakage rates, in addition to increased purchased transportation costs and delivery costs contributed to these results. The Commission provides several recommendations for the Postal Service to collect, improve, and analyze data on specific flats initiatives.

Later this spring, the Commission will release a separate, expanded report on the Postal Service’s Financial Results and 10-K Statement for 2025. In addition, the Commission will also issue a supplemental report on the Postal Service’s FY 2025 Annual Performance Report and FY 2026 Performance Plan.