USPS’s Potter “disappointed” by PRC ruling

US postmaster general John E Potter has spoke of his frustration after USPS was refused permission to increase the price of a first-class US stamp. The US Postal Regulatory Commission (PRC) rejected the proposals, as USPS continues to seek ways to grow its income as it struggles with growing debts and huge operating costs.

Potter said he was “disappointed” to learn of the decision, but was “encouraged by [the PRC’s] acknowledgment and understanding of the larger financial risk [USPS] face through the mandated prefunding of Retiree Health Benefits”.

The postmaster general also pointed out a number of requirements USPS needs in order to become financially stable, including changes to: the pensions obligation; retail offerings; and the ability to close loss-making post offices.

The proposal – which would have seen the cost of a letter rise to 46 cents from January 2011 – was discarded by the regulator in Washington last week. Under the proposal, the price of mailing a letter would have increased 5.6%, far greater than the 0.6% level of inflation.

Potter, in an open letter, said that USPS is “a viable business”. He said that in order to maintain that status, “USPS requires the elimination of several legislatively-imposed constraints that hamper [its] ability to operate efficiently and profitably.”

“Specifically: enable us to alter frequency of delivery consistent with use of the mail; allow us to close unprofitable post offices; restructure our obligation under a 2006 law to prefund retiree health benefits, an obligation not applicable to any other private or government entity; permit us to create and offer products and services beyond mail; assure that arbitrators consider the financial health of the Postal Service when agreement cannot be reached with our labour unions; and resolve over-funding of our pension systems. Legislation has been introduced in Congress to address these issues.”

Consumer bodies and mail organisations praised PRC’s decision last week. Lawrence Kimmel, CEO at the US Direct Mail Association, said: “[The] decision is a great victory for businesses and consumers. The US Mail will remain a viable and affordable communications channel.” Meanwhile, Tony Conway, Affordable Mail Alliance spokesperson and executive director of the Alliance of Nonprofit Mailers, said the ruling “has helped countless businesses stay competitive and saved tens of thousands of jobs”.

In regards to the future, Potter said the Postal service will need to “take a much closer look at the ruling from the PRC in order to make an informed decision about what options we have and what may be the best course of action for our customers, our employees, our stakeholders and the American public”.

He added: “The Postal Service ends the current fiscal year with approximately $2bn cash and available credit, meeting all our end-of-year financial obligations, including a $5.5bn payment to the Retiree Health Benefit Fund as required by law.

“As we have stated repeatedly throughout the year, the Postal Service sought a deferral of this $5.5bn payment to minimise the risk of defaulting on our financial obligations in Fiscal Year 2011. Unfortunately, no legislative action has been taken at this time.

“The financial risk remains. We will carefully manage every dollar we spend in the upcoming fiscal year. Our current forecast shows that we will not have sufficient cash to make the $5.5bn payment due on 30 September 2011, and any major disruption, whether in volume loss or unforeseen circumstances, could cause us to default on financial obligations earlier in FY11.

“In the midst of financial and regulatory challenges, the Postal Service achieved record productivity gains in 2010 and a reduction of over 100,000 career employees and cost savings of over $10bn during the last three years.

“As always, service to our customers remains our number one priority. No financial challenge or uncertainty will change that. We will continue to work with Congress and our stakeholders to implement necessary changes to ensure a viable Postal Service for decades to come.”

What are your views on Potter’s letter? Do you agree with the PRC ruling? Please comment below…