PRC Rejects Board's Request to Raise Current Postal Rates

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The Postal Rate Commission yesterday rejected the U.S. Postal Service Board of Governors' request to raise rates beyond those that took effect Jan. 7, increasing the chances that the governors will impose the hike on their own.


The PRC reaffirmed its decision in a 13-page final opinion, making no changes to its earlier recommendations. Postal insiders said it now seems likely that the board will raise rates, which it has the power to do by a unanimous vote, possibly as early as its monthly meeting in May.


"The governors are reviewing the commission's latest opinion and will consider their response and an appropriate course of action at a future meeting," the USPS said in a statement.


Mailers were unanimous in their praise of the PRC.


"It was the right thing to do, the appropriate thing to do and certainly the legal thing to do," said Neal Denton, executive director at the Alliance of Nonprofit Mailers. "This is now in the hands of the governors. It would be extremely discouraging if the governors were to override the separate independent decision, and we remain very concerned that that's certainly on their minds."


In December, the board sent the recommended rates back to the PRC, saying it wanted the commission to overturn its recommendation to reduce the postal service's rate request from a 6 percent average increase to a 4.6 percent increase. Postal officials claimed that the PRC had exceeded its authority when it lowered the amount of new revenue designated for the USPS' contingency fund from $1.7 billion to $1 billion.


The USPS said the contingency provision was designed primarily to protect its finances against unforeseen costs because it cannot accumulate profits or change rates quickly in a financial crisis. These costs could include inflation, volume diversion, cost-reduction programs and labor contracts.


The USPS now is projecting a $2 billion to $3 billion loss this fiscal year.


The PRC sent a decision to the USPS board on Feb. 9 recommending an increase in bound printed matter rates of 8 percent to 10 percent more than the 17.6 percent average increase that took effect in January. However, the commission made no change to the contingency fund recommendation. In March, the USPS board sent the decision back to the PRC once again.


In its statement, the PRC said, "Upon careful consideration of the governors' March decision, the comments submitted by the [USPS] and other participants, and the existing evidentiary record of this proceeding, the commission concludes that the requested upward revision in the contingency allowance is neither justified nor appropriate."


In addition, the PRC said it "reaffirms its previous finding that the aggregate amount of revenue generated by the rates recommended ... is sufficient to provide the revenue needs of the postal service as they were documented during the evidence-gathering phase" of the rate case.


If the governors decide to raise rates, direct marketers and magazine publishers would be especially hard hit. The USPS originally called for average increases of 3.5 percent for First-Class; 14.2 percent for periodicals; 4.9 percent for enhanced carrier route; 9.4 percent for all other Standard-A mail; and 1.3 percent for package services, including parcel post.


The PRC's recommended average increases for each mail class were significantly lower. The rate increases were 1.8 percent for First-Class; 9.9 percent for periodicals; 4.5 percent for enhanced carrier route; 8.8 percent for all other Standard-A mail; 2.7 percent for package services, including parcel post; 17.6 percent for bound printed matter; 16 percent for Priority Mail; 7.2 percent for nonprofit periodicals; and 4.8 percent for nonprofit standard.


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