USPS Starts Preparing Rate Case

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WASHINGTON -- The U.S. Postal Service has begun preparing to file a rate case this year even though legislation may pass in this session of Congress that would keep postal rates steady until 2006, DM News has learned.

The legislation would let the USPS lower pension contributions to the Civil Service Retirement System after a review last year found that the pension system was almost fully funded. The USPS estimates it could save $2.9 billion in fiscal year 2003 and $2.6 billion in FY 2004, and postmaster general John E. Potter has said such savings could keep postal rates steady until 2006.

Quick passage is critical because the USPS has said it could submit a new rate case request with the Postal Rate Commission as early as April if the law is not changed. Without the lowered pension contributions, Potter has said, the next rate increase will come in 2004.

"We have begun the internal process," USPS chief financial officer Richard Strasser told DM News yesterday. "If the CSRS legislation is not enacted, we will have to at some point this year file a rate case."

Insiders say legislation could be introduced in days that could be attached to an appropriations bill that has to be passed by Congress before the State of the Union Address on Jan. 28.

Ralph Moden, USPS senior vice president, government relations, said, "we hope the legislation gets passed sooner rather than later. The longer the legislation takes to get passed, the more pressure that puts on us. You get to the point where you are not only preparing for [a rate case], but you may have to file."

Strasser also said that if a rate case is filed, it may include phased rates.

"At the closed session [of the Board of Governors meeting] on Monday, I outlined some of the preliminary thoughts we have as they relate to phased rates," he said.

Strasser also said that he indicated to the board that USPS chief marketing officer Anita Bizzotto would speak with the mailing community soon about phased rates.

Strasser said that if the rate case were to include phased rates, the USPS would file with the Postal Rate Commission as early as April. If the USPS decides not to include phased rates, the case could be filed by October.

In discussing phased rates at a ratemaking summit in July, the postal service called for increases over two consecutive years. This would benefit mailers, it argued, by providing for lower increases that mailers could plan for more easily.

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