USPS May Spread 15% Rate Hike Over Three Years

Washington–The cash-strapped U.S. Postal Service may scrap its plans for a flat rate increase of up to 15% next year for one that would still raise rates by the amount–but over a three-year period.

Postal officials have been floating the idea in a series of private meetings with key mailer organizations, sources said–with varying results.

One opponent of the plan is H. Robert Wientzen, president of the Direct Marketing Association. “This has come out of the blue,” he said in an interview. “It is not an acceptable answer.”

Wientzen added that the idea resulted from discussions with the USPS last year, when mailers said they could “tolerate small increases if they’re predictable and well within the range of inflation. But we’re not talking here about increases even roughly within the range of inflation.”

Neal Denton, executive director of the Alliance of Nonprofit Mailers, commented that “The idea represents out-of-the-box thinking [by postal officials] and I think [postal] customers would be much more comfortable talking about it if they were not staring down the barrels of another rate increase likely to become effective this summer.”

PRC officials said they would be willing to consider the matter “if it is done in a way that the basic protection of mailers is preserved.” They added that there appears to be no legal impediment to such a case being filed with them.

Some say that the hike could top 15% for direct mailers.

“From the information we have, 15% is probably low,” said Jerry Cerasale, executive vice president-government affairs with the DMA. “I’m not sure what it means for all classes, but for Standard A mailers it could be in the higher end of the teens.”

There was no immediate comment from postal executives.

Meanwhile, word has come down from Richard Stasser, CFO of the USPS, that postal management will ask the BOG next week to override the PRC’s recommendations and authorize an immediate 1.4% rate hike, according to Denton. On top of January’s 4.6% increase, this would give the USPS the 6% rate hike it originally asked the PRC to endorse.

Strasser could not be reached for comment.

Gene Del Polito, Association for Postal Commerce President, said the possibility of a 1.4% rate increase in July would “have little effect on Standard A mailers.”

The USPS was authorized by its Board of Governors earlier this year to begin preparing a case to file with the PRC. The objective: to obtain a rate increase of between 10% and 15% next year to help the USPS overcome this year’s projected $2 billion to $3 billion loss.

Del Polito, who is also reviewing the postal service’s proposal for a three-year phased in rate increase, also said the picture could change dramatically if the rumored appointment of President Bush’s Domestic Policy Advisor Stephen Goldsmith as Postmaster General to succeed the retiring William J. Henderson becomes a reality.

Goldsmith leads as short list of candidates to succeed Henderson. Others on that list include Deputy Postmaster General John Nolan; USPS COO Jack Potter and John Kelly, package services president.

The announcement of Henderson’s successor could come as early as next Tuesday.

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