US regulators refuse to speed up review of USPS network cutbacks

US regulators have denied a US Postal Service request to speed up their review of plans to radically reduce the size of America’s mail processing network. USPS, which said last year it could run out of cash by October 2012, wants to reduce the size of its processing network from the current 460 mail plants to less than 200.

Such a major change to the nation’s mail service requires an Advisory Opinion from the Postal Regulatory Commission, which cannot prevent USPS plans, but must be completed before the plans can go ahead.

Last month the Commission laid out a timetable for reviewing the plans that would see the Opinion issued in July 2012 at the earliest. USPS subsequently requested expedited proceedings, stating its belief that the process could be completed by mid-April.

Today, the Commission rejected the request, stating that the “complex” case needed time for witness testimony to be provided, adding that “several” stakeholders were considering filing rebuttal motions against the USPS plans. Adding rebuttals to the process could see the Opinion taking until late July to complete.

USPS had wanted to begin closing mail plants from mid-May, once its current moratorium on mail plant and post office closures is over, as agreed with US Senators.

The Commission said in a decision issued yesterday that its current schedule was “slightly more than one month longer” than a schedule that had been suggested by USPS, and that no new information had been provided by USPS to persuade Commissioners that the change in schedule was warranted.

It concluded: “The significant reduction in schedule duration, as proposed by the Postal Service, would deny participants adequate opportunity to understand the Postal Service’s proposals, and deny the Postal Service an adequate opportunity to understand participants’ evidence and prepare rebuttal.”

Officials at today’s Commission meeting said that although the USPS schedule would not be possible, “the staff is working very hard to try to expedite the Commission’s analysis so the determination can be provided promptly following the conclusion of due process.”

Commenting on the decision by the Commission, US Postal Service spokesperson Sue Brennan told Post&Parcel today: “We are disappointed that the Postal Regulatory Commission (PRC) declined to give us their advisory opinion prior to the expiration of the moratorium on post office and processing facility closures. However, we will continue to move forward with our processes and communicate fully with stakeholders, as we pursue efforts to optimize our network and cut costs.”

Congress

The delay to the process of removing the excess capacity from the USPS mail processing network makes the Postal Service more reliant on Congressional action to allow continued financial sustainability, particularly from the end of its 2012 fiscal year this autumn.

The Postal Service is seeking a dramatic cut in its network size because it has lost 25% of the volume from its dominant postal category, First Class Mail, in the last five years, and is looking to right-size to bring down its costs in line with falling income. The network cutbacks would come hand-in-hand with an alteration of mail delivery standards in which First Class Mail would no longer include overnight delivery for end-to-end mail.

USPS is also currently looking to close about 3,600 post offices once its moratorium is over, hoping to reduce its retail network operating costs by $200m a year.

Congressional action is needed to help USPS reduce its labour costs, particularly in pension and healthcare benefit arrangements, and potentially reduce delivery frequency by eliminating Saturday deliveries.

Two bills are currently moving to the floors of the US Senate and House, but offer quite different solutions to the ongoing annual USPS losses, which could reach as much as $14bn a year this year.

Last month saw Congressional officials assessing the costs of the proposals, finding that the House proposal could achieve $18bn in savings for the Federal budget over 10 years, but that the Senate proposal would add a $6.3bn cost to the Federal deficit up to 2022.

Hopes are for the Senate bill to reach the floor of the Senate next week, with many amendments expected for the bill, which did have bipartisan support but is by no means assured of success, particularly in the House, where controlling Republicans wanting tougher cost-cutting measures and savings for the Federal budget.

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