Postcomm's decision on Royal Mail's Tariff 2010
22 December 2009
Postcomm has made two changes to the ‘price control’ which limits certain prices Royal Mail can charge its customers (Tariff 2010). Postcomm’s decision has effect for one year only. It will consult again for changes from 2011.
The decision recognises current economic circumstances and Royal Mail’s financial position.
The decision is in response to significant changes in the postal market since the price control was set in 2006. We have a statutory duty to protect the universal service. Royal Mail’s profit and cash flow are relevant to this. Royal Mail has reported a small profit in 2008-09 and for the first six months of 2009-10. However, it has a significant cash outflow to fund its investment and modernisation programme.
These measures will help Royal Mail generate more revenue to fund the universal service during this period. Actual prices will be determined by Royal Mail within the framework.
The changes to the price control affect the period from April 2010 to March 2011 and include:
- Limiting the impact of negative RPI on Royal Mail (as the formula used in Royal Mail’s price control is based on RPI)
- Make the formula for limiting individual product price rises (sub-caps1) more effective.
We received 8 responses to the licence modification consultation which opened on November 23, 2009.
The price control is a regulatory tool designed to protect the customer when there is not enough competition in the marketplace. Royal Mail’s price control ensures it cannot raise certain prices or let the quality of service of specified services fall, within limits. It also encourages Royal Mail to be more efficient, though at the same time is designed to ensure it can afford to deliver the universal service – a requirement of its licence.
All documents relating to the changes to Royal Mail’s licence for the period from 1 April 2010 to 31 March 2011 can be found on the links below.
For more information please contact Postcomm (email link), tel: 020 7593 2100.
1The sub-cap mechanism gives Royal Mail limited flexibility to increase some prices more than average as long as it increases other prices by less than the average change.
Related Documents:
- 22 December 2009 - licence modification decision
- Royal Mail's price control from April 2010 (Tariff 2010) - decision document (pdf, 177KB)
