The Exigent Rate Case the U.S. Postal Service Filed July 6 with the Postal Regulatory Commission has stirred up quite the controversy.
An upstart group called the Affordable Mail Alliance on July 26 asked the PRC to reject the USPS’s proposal to raise prices. The rate hike is 10 times the rate permissible by law, the group says.
Under the 2006 postal reform law, rate hikes should be tied to the Consumer Price Index (CPI), or rate of inflation. The estimated price cap is 0.6%, while the average exigent price increase is 5.6%. Postage for Standard Mail flats, or catalogs, would go up 5.1% if the increases are approved and implemented Jan. 2, 2011.
This is the first time the USPS is requesting price increases above the rate of inflation, which is allowed under postal reform law as long as the Postal Service can demonstrate “exceptional or extraordinary circumstance.” The USPS feels the steady drop in mail volume since 2007 and its mounting financial losses count as extraordinary circumstance.
The AMA strongly disagrees. Its motion points out that economic downturns are a part of life and not extraordinary or exceptional circumstances.
The USPS, meanwhile, wants the Postal Regulatory Commission to reject the AMA’s motion. Postal Service officials said in a statement released Aug. 2 that the Alliance made “manifestly misleading comparisons” and advanced a “strained and fatally flawed interpretation” of existing law.
The entire mailing community is outraged by the whole thing. “The Postal Service’s plan to right its ship is to hit its customers first,” says Jerry Cerasale, senior vice president of government affairs for the Direct Marketing Association and a member of the Affordable Mail Alliance. “It should be looking to reduce excess capacity and control the inflation of postal costs.”
Indeed, says Tony Conway, the executive director for the Alliance of Nonprofit Mailers, the USPS system “is twice as big as it needs to be. The rate increase shouldn’t be the first shot. It should be the last shot.”
A dangerous precedent The PRC has until Oct. 4 to render a decision in the proposed exigent postal rate case.
If the exigent rate case is passed, a 5% increase in postage will come out of circulation volume for most catalogers, says Hamilton Davison, executive director of the American Catalog Mailers Association, which is also part of the Affordable Mail Alliance. That will push mail volume down further “and reduce the use of USPS products across many of its categories,” he says.
It’s not just about the higher costs: ”We are also very concerned about the precedent this sets,” Davison says. “Can the USPS hit mailers anytime there is a budget gap? We feel that is not what Congress meant to accomplish when writing a rate cap mechanism into postal reform in 2006.”