USPS "exigent" rate rise may take months to decide, regulators warn

US regulators said today that any move by the US Postal Service to seek an “exigent” increase in postal rates could take months to review. The Postal Regulatory Commission convened today for its first public meeting since the USPS decided to pursue its long-running bid for an above-inflation price rise to counter the financial impacts from the 2008-09 recession.

Officials said that they did not yet know what evidence the Postal Service would present to back up its latest effort to claw potentially $2.3bn in extra postal income through higher product pricing. USPS will have to present evidence to show the recession did have an “extraordinary” affect on its bottom line that was outside its control.

Even once evidentiary hearings are complete, the Commission could find it difficult to come to a decision on the rate change within a 90-day period.

“Based upon what we know now, it’s unlikely that we will have a decision on the case before early next year,” said Vice Chairman of the Commission Mark Acton today. “That’s our best guess at this time.”

However, a decision on the inflation-linked 2.1% postal rate rise proposed by the USPS for January 2012 could come from the Commission as early as Monday of next week, officials said.

Delays

The extraordinary scale of the changes that the near-bankrupt US Postal Service must go through to shave $20bn off its annual budget by 2015 is leading to a colossal regulatory bottleneck at the moment.

Along with the various product pricing changes, the USPS is looking to close thousands of post offices, hundreds of major mail processing plants and adjust its mail service standards to suit a collapsing First Class Mail volume. Meanwhile, the Postal Service is also looking to expand revenues with new or improved postal products, all of which could require regulatory attention.

The USPS proposals to close up to 3,700 post offices next year is already flooding the regulators with appeals cases.

The Postal Service confirmed publicly today that it is temporarily suspending all post office closures from November 19 to January 2 in order to focus on the holiday season surge in mail volumes, but the moratorium relates only to the physical closure of post offices. The closure review process, and notification of new post office closures, will continue.

The Commission received 61 separate appeals to post office closures in the last month alone, with the paperwork expected to build from there. Under the rules, the regulators have 120 days to come to a decision on a closure appeal.

The workload could cause difficulties in speeding a decision on any exigent rate proposal.

Ruth Goldway, the chairman of the Commission, said her hope was that USPS would improve its post office closure process so that the number of appeals would reduce. However, she expected that the process would still put considerable strain on the limited extra resources available to the Commission to cope with the USPS reforms and restructuring.

“We’re doubling up, multi-tasking, seeing what we can do to gain additional resources through the Administration,” she said, warning: “Our workload will continue to grow.”

Congress

Delays are also expected in Congress regarding much needed reforms to USPS pension and healthcare arrangements, as well as reforms to add more flexibility to the postal business.

Officials at the PRC said it appeared that the House and Senate were waiting for the Congressional “Supercommittee” to decide whether a national deficit plan should contain help for USPS before current bills move to the respective floors for the next legislative stage. The Supercommittee is expected to reveal its recommendations on November 23.

Word from Capitol Hill is that floor debates on the House and Senate bills could be scheduled for December, but are more likely to be bumped into 2012.

Nevertheless, Goldway said today she was a little more optimistic at the moment that signals from Congress were driving towards legislation being passed.

“All of us in the postal community feel somewhat more hopeful than we did the last time we had a public meeting, because both the House and the Senate seem to be focusing on the serious financial problems that the Postal Service has,” she said.

“We all may have somewhat different opinions about some of the aspects of the legislation, but in general we’re really pleased the Congress has taken on this issue.”

This week saw a Continuing Resolution released in Congress, which should be passed next week in order to keep the US government funded through to December, that is expected to give the Postal Service until December 18 to pay its already-delayed $5.5bn payment for pre-funding its Retiree Health Benefits Fund.

The resolution will give USPS more time to make its payment, though it does not currently intend to make the payment at all, with executives preferring to default if pushed.