Senator Collins: Mailers should not pay for USPS problems

It is not “reasonable” for mailers to pay above-inflation rate increases to recover shortfalls from “avoidable or structural problems” at the US Postal Service, according to the author of the most recent postal reform legislation in the United States. Senator Susan Collins, ranking member of the Senate’s Senate Homeland Security and Governmental Affairs Committee, was commenting today on the Postal Service exigent rate case.

The Republican Senator from Maine said that the spirit of her law, the Postal Accountability and Enhancement Act (PAEA) of 2006, is that the US Postal Service cannot effect an above-inflation price increase just to make up for a financial shortfall.

She said US regulators should take a “strict” view on ensuring that any above-inflation postal rate rises match exceptional costs the USPS has suffered because of the economic downturn.

The exigent rate case involves last September’s refusal by the Postal Regulatory Commission (PRC) to allow USPS to raise its rates by 5.4% to counter the impact of the recent global recession.

Under the PAEA law, USPS is allowed to make an above-inflation increase in postal rates only when there is a justified “exigent” reason for doing so. Last September’s verdict from the PRC suggested that the global recession was not the only cause of the financial woes at USPS, and therefore the Postal Service should not be able to raise prices to cover more than the impact of the global recession.

After the USPS appealed the PRC ruling, an order issued by the Appeals court earlier this summer asked the PRC to go back and define for USPS how direct an “exigent” event needs to be to a correlating rise in USPS costs for it to be allowed to break its inflation-based price cap for market-dominant services.

But today, Senator Collins, the author of PAEA, insisted that the original intent of the Act was not to allow USPS to cover its financial shortfalls with increased prices – but instead, to address financial problems by improving its business model and service efficiencies.

“Safety valve”

Writing to the PRC today, Senator Susan Collins said the intent of the law had been to allow a “narrow safety valve” only, which would allow above-inflation postal rate increases only during a “truly rare, isolated, quantifiable and distinctive” incident affecting Postal Service costs.

She said a key clause in the PAEA cited by the Appeals Court order was “intended to help ensure that the Postal Service could not use this narrow exception to the inflation-based rate cap as a means to merely increase revenue or make up for a financial shortfall.”

Senator Collins added that another line in the Act requiring “reasonable and equitable and necessary” rate increases was also there to ensure an exigent rate rise was “closely and quantifiably related” to the exigent circumstances.

“Allowing the Postal Service to use above-inflation rate increases to cover losses that are due, in significant part, to avoidable or structural problems would violate the separate requirement that the increases be ‘reasonable and equitable’,” said the Senator from Maine.

New Bill

Senator Collins introduced a new bill into the Senate back in February, which proposed various fixes to the multi-billion dollar overpayments made by the USPS into its various pension funds, along with measures to improve USPS procurement practices and draw up a consolidation plan to reduce the size of its network.

The Senator is now talking with her Democrat counterpart, Senator Thomas Carper of Delaware, on a possible joint bill to address the financial problems at the Postal Service, which recorded an $8.5bn loss last year and is set to record an $8.3bn loss at the end of this financial year in September.