Appeals Court demands review of USPS “exigent” price increase

Appeals Court demands review of USPS “exigent” price increase

A US appeals court has ordered the Postal Regulatory Commission to take another look at the temporary price increase the Postal Service was allowed two years ago to recover revenue lost because of the 2009 recession. The US Court of Appeals for the District of Columbia Circuit granted a petition by the Postal Service to review the calculation of how much extra income it was allowed to collect in the “exigent” 4.3% price increase.

The ruling comes as the latest move in a long-running attempt by the Postal Service to break its inflation-based annual price cap in order to raise extra income to compensate for the damage caused by the unexpected 2009 recession.

Under US postal law, only an “extraordinary” event can be used to justify the USPS price cap being breached by a pricing proposal.

USPS first put in a request for an above-inflation rate increase in 2010 stating the 2009 recession as an “extraordinary” event that required the price cap breach. The request was initially denied by the regulator, which said the Postal Service hadn’t stated clearly enough how much financial damage the recession had caused. This was then sent to the appeals court, then sent back to the regulator for clarifications.

A second “exigent” rate rise request was made by the Postal Service in 2013, and approved by the regulator but only for a temporary period, until $2.8bn in additional income was raised.

The approval was challenged by both the Postal Service, which said the rate increase should not be temporary, and the mail industry, which said the rate increase should not happen at all.

In its latest opinion, the DC Court of Appeals threw out the mailing industry challenge, and partly granted the Postal Service’s request for the regulator to review its order.

The opinion from Circuit Judge Millett said the regulator had been wrong in how it calculated the financial damaged caused to USPS by the 2009 recession. The Postal Regulatory Commission counted the mail volume lost due to the recession only within the first year of its loss, but the court agreed with USPS that this decision should be reviewed.

A review could potentially change the amount of extra revenue the Postal Service can recoup from its temporary price increase, which was expected to end at some point this summer.

Commenting on the appeals court decision, the postal reform advocate Senator Tom Carper agreed the exigent rate increase needed review.

“This increase in rates has served as a life preserver for the struggling Postal Service and has helped the institution keep its head above water as it continues to lose money,” said the Ranking Member of the Senate’s Homeland Security and Governmental Affairs committee.

“I agree with today’s decision by the U.S. Court of Appeals for the District of Columbia Circuit to remand the rate determination to the PRC, and call on the body to reexamine how the emergency rate was calculated.”

Carper added that “piecemeal efforts” like the exigent rate increase were not enough to “fundamentally fix” the Postal Service’s financial problems without comprehensive postal reform legislation.

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