2.6 General principle of cost orientation of prices

Prices of postal services that integrate the universal service provision must comply with the principle of cost-orientation of prices, so as to encourage an efficient provision of the universal service [point b) of paragraph 1 of article 3].

Without prejudice to the application of specific provisions provided for in articles 8, 9 and 10, already analysed in preceding chapters, in a first analysis this Authority considers that the general principle of cost orientation of prices is not complied with where the following conditions occur:

a) Where the margin¹ is positive in 2016 and increases in 2017;

b) where the margin is negative in 2016 and deteriorates (is even more negative) in 2017.

Furthermore, where an increase of the positive margin or a deterioration of the negative margin is estimated, this Authority considers that the principle of cost orientation of prices is complied where one of the following situations occurs:

a) The price proposal represents an increase of average annual prices for a service the margin of which deteriorates;

b) The price proposal represents a reduction of average annual prices for a service the margin of which increases;

c) The margin of the service is close to zero, a margin in the range of [-5%; 5%] being deemed to be a “close to zero margin”;

d) The margin estimated for 2017 is very close to the margin for 2016, the margin being deemed to be “close” where the margin variation, in percentage points (p.p.), lies in the range of [-1 p.p.; 1 p.p.];

e) The service concerned has an irrelevant weight in the amount of total revenues of the universal postal service (weight not exceeding 0.5%).

In light of the above, and taking into account estimates and forecasts presented by CTT for 2016 and 2017 ², within the scope of the price proposal under analysis, no situations of failure to comply with the principle of cost orientation of prices were identified (Table 5).

Although two services are identified where it is estimated that the negative margins deteriorate in percentage terms (national priority mail and subsidised national editorial mail), for both services average annual price increases are proposed. In the specific case of national priority mail, it is also estimated that the variation in the margin of this service lies in the range of [-1 p.p.; 1 p.p.]. As such, for these services, it is considered that the principle of cost orientation of prices is complied with. No services are identified for which an increase, in percentage terms, of the positive margin is estimated.

“+” means a price increase. “-” means a price decrease. “0” means price maintenance.
(d) Source: CTT's letter of 20.03.2017.
(e) Includes the International Economic Mail service - Special Regime (deliveries to Guinea-Bissau and São Tomé and Príncipe).