On Tuesday, December 24, the Postal Regulatory Commission (“PRC”) conditionally approved the US Postal Service’s request for an exigent rate increase. This means that on January 26, 2014, postage rates will increase an average of 6.0%.
According to current laws, the US Postal Service (“USPS”) may increase postage prices at the rate of inflation as determined by the Consumer Price Index (“CPI”). If there are “exceptional or extraordinary” circumstances, the USPS may request and additional, or exigent, rate increase. The USPS filed such a request in 2010, citing the impact great recession of 2009 on mail volumes. The PRC rejected the request. The USPS filed an appeal in court, which directed the request back to the PRC. There was no action by either party at that time.
On September 26, 2013, the USPS re-filed the 2010 exigent rate request, while also filing for the CPI increase.
In this latest decision, the PRC found that the Postal Service experienced financial harm as a result of the recession and is legally entitled to implement price increases in excess of the CPI cap. In an unexpected move, the PRC denied the Postal Service’s request to make the increases permanent. It found allowing the increases to remain in effect indefinitely would be inconsistent with fundamental postal policies underlying the price cap.
In brief, the PRC determined that the USPS didn’t adequately break out losses due to electronic diversion from the losses due to the recession. The PRC analysis determined that the recession caused the loss of 25.3 billion pieces with a value of $2.8 billion. The exigent rate increase will stay in effect until the USPS recovers the $2.8 billion, with the additional requirement of reporting quarterly on revenues generated by the rate increase.
This decision will be greeted with dismay by most mailers. After the November PRC ruling that the USPS couldn’t implement Full Service IMb requirements concurrently with the proposed increased rates, it looked like the PRC would also deny the exigent rate increase. Major mailers and mailing associations will probably use the decision to put more pressure on Congress for postal reform legislation.
Sen. Tom Carper (D-Del.) is the chairman of the Senate Homeland Security Committee, which has authority over the USPS. He recently stated that he expects postal legislation to be approved in January by his committee – with bipartisan support. However, the bill is very different than the proposed House legislation. Also, there’s significant opposition by members of both parties who don’t want to see cuts in service to their constituents.
It will be an interesting 2014.