USPS pursues legal action over rate rise denial

The US Postal Service is to appeal last month’s decision by regulators to deny its request for a 5.6% increase in postal rates next year. The USPS said on Friday it would take the matter to the United States Court of Appeals, seeking a review of the Postal Regulatory Commission’s interpretation of the laws governing how USPS prices are set.

The loss-making Postal Service said a rate rise could help raise $2.3bn in “much-needed” revenue for the first nine months of 2011.

Postal rate rises are capped by the rate of inflation unless regulators find there are “extraordinary or exceptional” circumstances to go beyond this.

With US inflation running into the negative last year and remaining low this year, the USPS could not raise postal rates within the normal cap, but last month the Postal Regulatory Commission denied its request for special dispensation for a price increase.

The PRC ruled unanimously that the USPS had “failed to justify” its price increase by arguing the recession constituted “extraordinary or exceptional” circumstances under the law. Commissioners pointed out that the financial woes of the USPS were not down to the recession.

The Postal Service has now accused the PRC of misreading the legislation, claiming it has “applied an incorrect standard” on evaluating a request for an exigent price increase.

Postmaster general John E Potter said the USPS has a “fundamental disagreement” with the PRC on the issue of how prices can be set under extraordinary and exceptional circumstances.

He said: “This action is an investment in our future. We need to understand and define the rules under the current law should the Postal Service find itself in a similar situation in the future.”

As well as defining the laws, the USPS is to ask the Court of Appeals to force the PRC to review once again its request for a rise in the postal rates.

In a statement issued on Friday, the Postal Service said it would continue to look for alternatives to address the PRC’s ruling, but that filing for an exigent price rise was “the one tool” it had available to address the impact of the recession on its financial situation without new legislation from Congress.

Without benefit of funding from taxpayers despite its federally-owned status, the USPS insisted its long-term financial viability “will remain questionable” unless it can put its plan for recovery in place, and that a postal rate rise is a big part of that plan.

“A quick and timely resolution of the appeal is an important part of the Postal Service plan,” the USPS said.