No Exigent Postal Rate Case—For Now

Despite the financial crisis burdening the U.S. Postal Service, Postmaster General John Potter says there won’t be any exigent rate case. At least not this year.

While the USPS expects to lose about $7 billion during its fiscal year, which ends Sept. 30, that fiscal reality won’t force an immediate rate case. “We’re reviewing everything as to where we can cut costs,” Potter said during today’s conference call regarding the USPS’s third-quarter financial results.

“There are some rumors out there we’re going to raise our rates double digits,” Potter noted. “That would only compound the volume problem.”

Mail volume has fallen by nearly 20 billion pieces in 2009, compared to the first three quarters of last year. Third-quarter mail volume totaled 41.6 billion pieces, down 7 billion pieces, or 14.3%, compared to a year ago. This marks the largest consecutive three-quarter drop in total volume since 1971.

The USPS ended its third quarter (April 1 – June 30) with a net loss of $2.4 billion. Potter said during the conference call that the USPS is on track to make reduce costs more than $6 billion by the end of its fiscal year.

But the lingering problem remains: The USPS is obligated to pay between $5.4 billion to $5.8 billion annually to prefund retiree health care benefits for all its retirees. This requirement, established in the Postal Accountability and Enhancement Act of 2006, is an obligation that no other government agency has to pay.

Pending legislation in the House (H.R. 22) and Senate (S-1507) is designed to temporarily relieve the USPS of this obligation. H.R. 22 aims to alter the USPS’s payment schedule for funding retiree health benefits to help it cut costs.

The bill, introduced on Jan. 6 by Rep. Danny Davis (D-IL) and Rep. John McHugh (R-NY), would allow the USPS to pay for healthcare benefits for current retirees out of its Retiree Health Benefit Fund—which currently hovers around $32 billion—instead of its operating budget.

“We’re trying to navigate our way through a challenging period of time,” Potter said. “We need legislation to get relief.”

But Potter is confident that legislation will be enacted to help the USPS and its financial situation. “I’ve spoken to leadership, and they’re actively engaged that some piece of legislation will move through before the end of this fiscal year.”