Court Decision May Lead to Hike in Postal Rates

Mailers may be facing an unexpected, emergency increase in most postal rates later this year because of an appeals court decision that was issued today. (May 25 update: A knowledgeable person states that the ruling will not result in a rate increase, just some new guidelines from the PRC. Stay tuned.)

The U.S. District Court of Appeals for the District of Columbia sided mostly with the U.S. Postal Service in its appeal of a Postal Regulatory Commission decision last year denying "exigent" rate increases of more than 5%. The court sent the case back to the PRC for reconsideration.

The PRC erred, the court said, in requiring that "the proposed rate adjustments be tailored to offset the specific effects of the claimed exigency," which in this case was the economic recession that helped cause the Postal Service's financial crisis. Rates for most classes of mail -- including First Class, Standard, and Periodicals -- can increase no faster than the rate of inflation except in the case of "exceptional or extraordinary circumstances."

"A financial crisis can often result from multiple contributing factors, of which only one may be 'extraordinary or exceptional,' but that would still justify an exigent rate increase,” the court said.

The decision seems to present at least three challenges for the PRC:

1) The court said the PRC should "exercise its discretion" in interpreting an ambiguous law and determine "how closely the amount of the [rate] adjustments must match the amount of the revenue lost as a result of the exigent circumstances." But the ruling offers no guide as to how much discretion the PRC must exercise, other than saying the PRC was too strict with the Postal Service in its Sept. 30 ruling. In other words: "Exercise discretion, but not too much discretion."

2) The PRC must decide how much of a rate increase is justified by the recession even though the Postal Service presented sketchy data on the amount of money it lost because of the economy -- and how much was from such other causes as the increasing use of e-mail.

3) In the 10 months since the Postal Service asked for exigent rate increases, an inflation-based set of rate hikes was proposed and implemented.  The PRC must apparently decide whether to recalculate -- or to have USPS recalculate -- the requested exigency-based rates in light of those non-exigent increases.