Rates Likely to Increase in July Again

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The U.S. Postal Service will likely amend rate increases for several classes of mail beginning on July 1. Postal observers expect the USPS' Board of Governors to vote unanimously to overturn a ruling by the Postal Rate Commission on the 2000-01 rate case. The board will probably announce its decision at its monthly meeting May 7 and 8 in Washington.


The governors, however, could make the decision on May 1during a scheduled teleconference. According to a Federal Register notice, matters to be considered include reconsideration of the PRC's decision and personnel matters, which most likely means deciding on a successor to outgoing postmaster general William J. Henderson. In addition, the governors will discuss a wish list of items they would like to see in any postal reform legislation that Congress might consider.


"All indications we have are that the governors will reject the Postal Rate Commission's rate increase and there will be another set of rate increases [but] not as large as the last one," said Jerry Cerasale, senior vice president of government affairs at the Direct Marketing Association. "So, within six months, we may have one rate increase and then another rate increase immediately thereafter or even slightly before."


Cerasale was referring to the possibility that the USPS will file for a 10 percent to 15 percent rate increase this summer that would take effect next spring.


"This is just silly," Cerasale said. "It is not the way that businesses are working in the United States today as they attempt to control costs rather than just try to raise rates."


Though some expect the governors to increase the current rates for a limited number of classes and categories, such as First-Class or postcard rates, others predict an across-the-board increase affecting all classes of mail. The actual size of the potential increases is unknown.


"This is pure speculation right now because the board has not even met to discuss it yet," said USPS spokesman Gerry Kreinkamp.


If the governors raise rates, direct marketers and magazine publishers could be hit especially hard. 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.


Earlier this month, the PRC rejected the governors' request to raise rates beyond those that took effect Jan. 7. The governors have protested what they interpret as inadequate revenue provided by the PRC-recommended rates. The PRC recommended rates in November and reconfirmed those rates Feb. 9 and April 10.


In seeking higher rates, the USPS has cited updated postal costs -- which include increases in wage and benefit expenses and increases in transportation and fuel costs -- as justifications for an increase. In addition, USPS officials argue that their original request should have been granted. The USPS now is projecting a $2 billion to $3 billion loss this fiscal year.


In the November recommendation, the PRC lowered the USPS contingency request by $700 million. That reduction, along with other changes in the USPS proposal, reduced the overall average increases from 6 percent to 4.6 percent.


The governors voted Dec. 5 to implement the new rates under protest on Jan. 7. The governors then remanded the case back to the PRC. However, because the USPS filed no further evidence to update financial projections, the PRC insisted on the rates developed in the earlier decisions.


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