The U.S. Postal Service’s decision to pursue an exigent rate increase after the Postal Regulatory Commission denied a motion by the USPS to “stay” its request for exigent price relief until Dec. 15, 2011 has sparked opposition to the USPS’s stance.
The Postal Service really only has two issues, says Larry Davis, vice president of marketing for gifts merchant Ross-Simons.
“Not enough revenue and costs that are too high,” he says. “Other than that, they have a great product. And quite honestly, they aren’t going to fix either of these two issues by appealing their rate case.”
The USPS seems to moving in the right direction to fix its cost problems, Davis adds. “It needs Congress to unshackle them from a legacy footprint, unwieldy labor contracts and a health-care pre-funding requirement that would sink most of the Eurozone. Their recent efforts on costs are to be applauded.”
On the revenue side, the USPS has a great deal right now, Davis says. “It can adjust their prices by the inflation index year in and year out. Any price increases beyond that would need to be based on extraordinary circumstances. This is simple economics. If the USPS increases its prices beyond the inflation rate, it will only be less competitive and volumes will drop faster. What the USPS needs to do is focus on ways to increase mail volume.”
If legislation passes that enhances the Postal Service’s financial stability, the Postal Service will review its position any may choose to withdraw the exigent rate case if warranted.
| More on the USPS:
• 5-Day Delivery Facts & Information
• ACMA Head: Don’t Rule Out Exigent Postal Rate Hike
• PRC Asked To Re-examine Exigent Postal Rate Case
• USPS Files Brief Against PRC Decision
• PRC Rejects Proposed Exigent Rate Hike
Under the Postal Accountability and Enhancement Act of 2006 (PAEA), postal rate hikes are capped at inflation as measured by the Consumer Price Index (CPI). This would mean rate hikes would be capped at an estimated 0.6%. The USPS was seeking an average price increase of 5.6% in the exigent rate case. (Standard Mail flats or catalog rates would have gone up 5.1% if the rate case passed.)
An exigent rate adjustment must meet the following three provisions: due to either extraordinary or exceptional circumstances; reasonable, equitable, and necessary under best practices of honest, efficient, and economical management; and necessary to maintain and continue the development of postal services of the kind and quality adapted to the needs of the U.S.
Jerry Cerasale, senior vice president of government affairs for the Direct Marketing Association, says an exigent rate increase would be on top of the now scheduled 2.1% increase effective Jan. 22, 2012.
“This is not the time to drive more mail from the system,” Cerasale says. “The USPS will rely upon over one-year old data to support driving postage higher. Rather than digging up the past, the USPS should be looking forward and right-sizing its network, transportation and employee complement. The future of the U.S. Mail depends upon forward thinking. This request is in error.”