USPS Seeks Special January Rate Increases

The U.S. Postal Service is seeking permission to implement “exigent” rate increases in January averaging more than 4% on most classes of mail.

In a filing with the Postal Regulatory Commission this week, USPS asked for the ability to implement the special rate increases, along with the usual inflation-based price increases, to make up for the volume it lost during the recent recession. The PRC rejected a similar 2010 attempt to impose exigent increases of about 5.6%, but is reconsidering that ruling at the direction of a federal court

“The Postal Service suffered financial harm directly associated with extraordinary and exceptional volume losses that the [inflation-based] price cap mechanism is incapable of addressing,” the USPS brief in the case says. “The Postal Service respectfully requests that the Commission recognize $2.34 billion as a plausible lower-bound estimate of the Postal Service’s financial harm ‘due to’ recession-related volume losses in FY2008 and FY2009, and approve exigent increases (for January 2012 implementation) on that basis.”

To yield $2.3 billion annually, the rate increases on the market-dominant classes of mail -- such as First Class, Standard, and Periodicals -- would have to average at least 4.2%. USPS did not specify exactly how rates would change, only that it wants increases that would bring in an additional $2.3 billion in revenue.

But mailers groups don’t think the court order means the Postal Service should get another crack at rate increases that exceed the rate of inflation.

“The court left in place the Commission’s findings that the Postal Service had submitted no evidence indicating that its request was causally related to the recession, and that the Postal Service’s financial problems were caused in large part by longstanding structural issues, not the recession,” says a joint filing by four industry groups.

The Postal Service brief notes that USPS is in even worse shape now that when it filed the original request for exigent increases last year:

“The contribution lost as a result of the massive volume declines, including volumes lost because of the recession, has not returned, and, based on volume projections, is unlikely to return. The injection of additional revenue from this increase is also critically important to ensuring the continuation of mail service. The Postal Service lost $15.1 billion over the FY2008-FY2010 period, will lose approximately $9 billion this year, and will soon exhaust its statutory borrowing authority. The Postal Service currently expects to run out of money to pay its employees and suppliers sometime next year, thereby risking a shutdown in mail service. The additional revenue from this increase would help to delay that date, and is therefore clearly ‘necessary’ to ‘enable the Postal Service…to maintain and continue the development of postal services of the kind and quality adapted to the needs of the United States.’”

Related articles:

• Court Decision May Lead to Hike in Postal Rates: Why a federal appeals court sent the original case back to the PRC. 
• Could the Deficit-Reduction Deal Limit Postal Pay Raises and Rate Increases?: Congress has toyed with changing how the inflation rate is calculated, which could lower the price cap on most postage rates.