PRC Rejects Proposed Exigent Rate Hike

Oct 01, 2010 12:59 AM  By

The Postal Regulatory Commission today unanimously rejected the U.S. Postal Service’s request for an exigent rate case hike, ending nearly three months of deliberations. The USPS request was for an average 5.6% rate increase.

This marked the first request for an exigent rate increase the PRC has considered. PRC Chairman Ruth Goldway said ever since March 2 – when the USPS indicated it would file the exigent request – her panel was aware that it would be “unprecedented and whatever decision we make will be controversial.”

Tony Conway, spokesperson for the Affordable Mail Alliance (AMA) and executive director of the Alliance of Nonprofit Mailers, applauded the PRC’s decision. The AMA had asked the PRC to dismiss the exigent rate case proposal.

“I think the PRC agreed with most of arguments that the AMA put forth,” Conway says. “The USPS framed this as exigent, and that the problem was a result of recession and diversion of mail to the electronic medium, which has been going on for 15 years.”

The PRC found the recession to be an exigent circumstance, Conway says, “but the whole issue of cost control and was a really compelling argument we made.” The USPS has done some cutting back, he notes, but its costs are still excessive, its network is in desperate need of downsizing “and it needs to aggressively get after those problems.”

The PRC’s decision is “a signal to postal customers that this channel of communications will remain affordable and viable,” says Jerry Cerasale, senior vice president of government affairs for the Direct Marketing Association and member of the Affordable Mail Alliance. “Let us hope that mailers take this signal to press ahead for a vigorous holiday mailing season.”

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). With the estimated price cap at 0.6%, detractors of the exigent rate case request vehemently opposed the average exigent price increase of 5.6%; Standard Mail flats or catalog rates would’ve gone up 5.1% if the rate case passed.

Goldway said the price cap is the centerpiece of the law and “was seen as essential for promoting efficiency and creating an environment of rate stability that would encourage mailers to stay in the mail and use it more, while providing the Postal Service with incentives to reduce its costs.”

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.

The USPS lost $11.7 billion during the past three years and has seen its mail volume fall from a record 213 billion pieces to the 168 billion it’s expecting this year. The Postal Service asked the PRC to find that mail volume declines resulting from the recent recession are an extraordinary or exceptional circumstance.

The PRC agreed with the USPS that the recent severe recession, and the decline in mail volume experienced during the recession, do qualify as an extraordinary or exceptional circumstance under the law. But Goldway said the Commission found that the requested exigent rate adjustments are not due to the recent recession, or its impact on mail volume.

“Rather, they represent an attempt to address long-term structural problems not caused by the recent recession,” Goldway said. “The Commission finds, therefore, that the Postal Service has failed to meet its burden under the law and the Commission is unanimous in denying its request for an exigent rate increase.”