Strasser: Gas Costs Force Rate Increase

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WASHINGTON -- Mailers hoping for a delayed rate increase shouldn't hold their breath.


Rising fuel costs make higher postal rates necessary in January to cover expenses, a top U.S. Postal Service official said last week. However, the USPS Board of Governors has made no decision or set an effective date.


Meanwhile, in his speech at the quarterly Mailers' Technical Advisory Committee meeting, Richard J. Strasser, USPS executive vice president and chief financial officer, also came out against the reform bills being debated in Congress.


The USPS filed a case with the Postal Rate Commission in April seeking an expedited recommended decision to raise rates 5.4 percent for virtually all mail categories. There had been rumors that the rate increase would be delayed until spring, but it now appears that the date will be Jan. 16, Martin Luther King Jr. Day.


"Fuel is becoming our nemesis," Strasser said.


Expenses in July were $5.5 billion -- $35 million over plan -- largely because of fuel costs, he said. Year to date, expenses were up 3.7 percent over last year because of higher fuel costs and cost-of-living adjustments.


"We've incurred $260 million in escalated fuel expenses so far this year, and it's going to reach the $300 million mark over what we anticipated in our financial plan for this year," he said.


Strasser said the retirement escrow account payment, higher fuel prices and salary adjustments mean the USPS needs more than the 5.4 percent increase it has requested. But he said the agency is committed to the current rate case and has no plans to amend it.


Also at MTAC, Strasser called the current postal reform legislation "disastrous." He is the first postal manager to publicly oppose the bills. James C. Miller III, chairman of the USPS Board of Governors, also raised concerns this month about limiting the board's authority.


In April, postmaster general John E. Potter testified before Congress about the need for reform and expressed what he thought should be in the legislation.


Both bills -- H.R. 22 and S. 662 -- contain provisions to replace the current Postal Rate Commission with a more powerful Postal Regulatory Commission. The House passed H.R. 22 last month while the Senate is likely to debate S. 662 when it returns from the August recess.


Strasser emphasized that he was offering his personal opinion, not postal policy. He said the postal service's current improved productivity performance and ability to sustain high levels of service and customer satisfaction should not be taken as automatic.


"It is the result of a board of governors and a management team that is extremely focused and motivated to do this," he said. "There will be no motivation for somebody in my role when somebody else somewhere away from this organization is going to decide what the service standards are, what the bonus system for your employees is, and then say, 'Go do this, postal service.' "


Strasser said he has been told that mailers are more interested in dealing with a postal regulatory commission over postal management, but called that misguided.


"You can't mandate productivity in this organization," he said. "This is an organization of 700,000 career employees who you have to motivate. I'm sorry, but I really felt that I needed to tell the industry that passing legislation for the sake of passing legislation is not a good idea. If our authority and responsibility is transferred to an outside agency, you will get a government bureaucracy."


In general, mailers at MTAC said they wondered why Strasser waited so long to offer his concerns. In an interview, Strasser said the USPS hasn't "spoken out publicly, but a number of us have made our thoughts known for several months on the issues. ... I just felt compelled at this point because of the scare we got in Congress. I have kept quiet, but I decided I've got to express my opinion because this train is coming down this track."


The "scare" he referred to was the relative swiftness with which the House passed H.R. 22.


"And then there was the lobbyist report that there was a compromise struck for Congress," Strasser said. "That scared the daylights out of me."


Strasser was citing a report that surfaced in July that said the White House is offering a compromise on postal legislation that could break a stalemate with lawmakers. No agreement has been announced publicly, however.


Charley Howard, vice president of postal affairs and special projects at Harte-Hanks and an MTAC member, said Strasser's comments didn't surprise him.


"We have known for a while that the postal service was not happy with the bills," Howard said. "He seemed to be speaking about it out of frustration."


Melissa Campanelli covers postal news, CRM and database marketing for DM News and DMNews.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters


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