USPS seeks to delay above-inflation postal rate rise request

The US Postal Service has asked regulators for extra time before it has to decide whether to pursue its request for a major rate rise to counter the financial effects of the recent recession. The Postal Regulatory Commission had set a deadline of October 4 for USPS to come back with its response to clarifying the legal requirements for making an above-inflation or “exigent” rate increase for regulated market-dominant mail products.

A court had ordered the clarification from the PRC after looking into the PRC’s rejection in September 2010 of the USPS request for a 5.6% rate rise, which was above its inflation-linked price cap for non-competitive postal services.

But now the clarification has been made, USPS said yesterday that it was “not an appropriate time” to submit a fresh request for a major postal rate rise.

It now wants to delay its decision over the next step in the exigent case until December 15.

Postmaster General Patrick Donahoe told his major customers in August that he did not want to see postal rates rise above inflation this January, because of the affect such a move might have in pushing mailers into digital alternatives to the mail.

However, yesterday the Postal Service said such a move could come anyway through the various legislative proposals put forward by Congress and the White House.

Bills being debated in Congress include proposals to force a sudden increase in prices for any mail products that do not currently pay for themselves, such as the Standard Flats service.

The Obama Administration has proposed a one-off above-inflation rate rise “that would allow the Postal Service to increase rates consistent with its July 2010 exigent request without any participation by the Commission,” USPS noted. The President’s proposals, within a national deficit reduction plan, is expected to be taken to the next step by a Congressional “Super Committee” on November 23.

Filing a motion to stay the exigent rate case a further two months, USPS said it would be preferable for pending legislation to be resolved before it has to decide whether to pursue the exigent rate case.

But, the Postal Service indicated that in case Congress does not provide powers for its price cap to be breached, it would like the option of continuing the exigent rate process.

“Obviously, it would be grossly premature to attempt to anticipate what, if anything, might come out of these initiatives. Yet by the same token, neither would it seem prudent to ignore these developments entirely,” said USPS in its filing.

Baucus Bill

Separately, another US Senator came forward yesterday with his own bill to “aid” the Postal Service, while preventing it from closing remote rural post offices.

Max Baucus, introduced his bill today just a couple of weeks after his fellow Democratic Senator from Montana, Jon Tester, had an amendment to a financial appropriations bill, setting restrictions on post office and mail plant closures, approved by the Senate Appropriations Committee.

The Baucus bill prevents closure of post offices where another branch is not available within 10 miles, which the Senator said would save about 90% of the 85 post offices in Montana currently being considered for closure.

The proposal would also seek to help the financial troubles at the Postal Service by returning a $6.9bn overpayment made by USPS into its federal pension fund. However, the proposal would only be a temporary measure in assisting the USPS, which is expected to record a $10bn loss for its current fiscal year, which ended last month.

“This bill provides the life preserver the Postal Service needs to stay above water while we work together to find longer-term solutions to preserve the postal services and jobs Montanans depend on,” said Baucus.

Elsewhere, various legislative proposals are floating around Congress at the moment, based on bills introduced various by Congressmen including Senators Tom Carper, Susan Collins and John McCain, and Representatives Darrell Issa, Stephen Lynch and Gerry Connolly.

Leading the Congressional charge in recent weeks within the Senate is the Government Affairs Committee, chaired by Joe Lieberman, which has requested a mark-up of legislation likely to come from Democrat Senator Tom Carper with input from Republican Senator Susan Collins. In the House, the Oversight Committee chairman Darrell Issa is seeking to push through his legislation, which has some Republican support in the Senate but little or no Democrat support in either chamber of Congress.

Carper’s legislation would seek to provide a rebate of USPS pension overpayments and a potential restructuring of future benefit prefunding, while the Issa legislation would not allow such a rebate, instead forcing a balanced USPS budget through more infrastructure consolidation and closure.

Most of those within Congress want to see USPS given a greater freedom to modernise and run itself “like a business”, offering new products and services, while an issue of whether it should be able to eliminate Saturday deliveries remains contentious at this stage within both parties.

In the mean time, USPS has been given extra time to pay its latest $5.5bn benefits prefunding installment in order to stay financially afloat, and much rests on the expected determination by the Government Accountability Office over whether USPS has actually overpaid into its pension funds, and how much should be returned if up to $75bn has been overpaid as suggested.