Postal Rates: AMA Objects to PRC Ruling on CPI

The Affordable Mail Alliance objects to a Dec. 10 ruling by the Postal Regulatory Commission that allows the U.S. Postal Service to bank a negative CPI (Consumer Price Index) instead of using it to lower the subsequent CPI rate adjustment cap.

The PRC’s ruling states that the USPS uses the last 12-month period to determine the CPI cap, says Jerry Cerasale, senior vice president of government affairs for the Direct Marketing Association and AMA member. “The law also allows the USPS to bank any unused portion of a cap to be used later—it must be used within five years,” he says.

For example, if the CPI were 10% and the USPS raised rates 8%, it would bank 2%, Cerasale explains. So in the next year if there is a 10% CPI, USPS could raise rates 12% (10% CPI plus 2% banked). “The question in this ruling was could USPS ignore the deflation of the previous year when asking for new postage,” he notes. “The PRC said yes, and that the negative CPI could be banked.”

Both the AMA and DMA disagree: “Banking a negative CPI which the USPS could use in the future means that the inflation capped postage rates will never reflect a negative CPI, and USPS customers will always pay more,” Cerasale says. “We are now reviewing any options we may have.”

Cerasale says the AMA believes any negative 12-month period CPI should be used to lower the next CPI rate adjustment cap. This way, “the USPS could not avoid using a mailer-friendly CPI adjustment,” he says.

What’s more, Cerasale says a 1.7% rate increase is possible in May.

Within the PRC’s ruling, it says the USPS acknowledged that it continues to be uncertain how the rules defining the price cap should be applied. “Concurrently, the Postal Service requested the Commission to initiate a rulemaking regarding calculation of unused rate authority,” the ruling says. “The Postal Service’s concern about the price cap calculation focuses on rule 3010.26, and on the relationship between the annual limitation on rate increases and unused rate adjustment authority.”

Postal rate hikes are now capped to the CPI, or rate of inflation. Unused rate adjustment authority is not an adjustment to the annual limitation. It is a separate and distinct reservoir of potential rate increases that is available for use for up to five years.

It’s not clear what the USPS’s take on the ruling is. “We are evaluating the PRC’s position and will continue to work with the Board of Governors to determine the best approach to pricing that balances the needs of the Postal Service with those of our customers,” USPS spokesperson Joanne Veto says.