USPS seeks to raise $2.3bn through higher postal rates
The US Postal Service has asked regulators to allow it an above-inflation postal rate rise this January to recover $2.3bn extra revenues from higher postal rates. But, the request was made with the assertion that there is “no basis exists in the law” for the Postal Regulatory Commission to stop the Postal Service raising postal rates to recover that sum.
USPS said in the filing made this week to the Commission that it intended to effect the new “exigent” rate rise in January 2012.
The filing came as the USPS commented formally to regulators regarding a higher “exigent rate” request rejected by the Commission last September and subsequently appealed by USPS.
That request had been for a 5.6% rise in postal rates, with the Postal Service stating that the global recession and its impact on mail volumes should allow an above-inflation rate rise, busting the legal price cap on postal rates, which is linked to the annual rate of inflation.
The Commission and then, earlier this summer, the Appeals Court said the recession was not the only cause of mail volume declines, and that USPS could only be allowed a rate rise to cover the impact of the events it was citing as “exigent”.
This week, USPS came back stating that if the PRC had calculated the impact of the recession on its revenues as being $2.3bn a year, it should at least be allowed to recover that amount in higher postal rates.
It stated: “With the clear demonstration as to the impact on the Postal Service of total volume losses and recession-related volume losses set forth herein, no basis exists in the law to deny the Postal Service this request.”
“Critically necessary”
USPS, which said it remained “firmly convinced” that a sudden 20% loss of mail volume had caused it damage “well above” $2.34bn a year, and perhaps as much as $6.6 bn a year, said a major increase in postal rates was now “critically necessary” to continue quality postal services.
Financial results for June 2011 now put the Postal Service at a $5.6bn loss for the first three quarters of this financial year, heading towards an $8bn for the full year and the exhaustion of its line of government credit.
USPS argued that the regulators could not reject a request for an exigent rate rise because the USPS financial problems are due to multiple factors, or because the increase would not solve the entire crisis alone.
Four mailing industry groups said that they believed the law allows an exigent rate rise only when an exigent rate is the primary cause of a major loss of revenue at USPS.
The Alliance of Nonprofit Mailers, the Association for Postal Commerce (PostCom), the Direct Marketing Association and Magazine Publishers of America said the impact of the internet and long-term structural problems at USPS had also hit its revenues.
The groups said that the Postal Service could not raise rates when the “extraordinary or exceptional” circumstance was only one of several causes of USPS losses, and that if it could that would undermine the incentive for USPS to manage its business efficiently and plan for major changes in the mail market.
The view would appear to be shared by the author of the postal law on which the exigent rate case hinges, US Senator Susan Collins, who also commented on the case this week to say that her law was only meant for “truly rare” circumstances, not a recession.
