USPS Files for 5.4 Percent Rate Increase With PRC

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The U.S. Postal Service filed a rate case with the Postal Rate Commission on yesterday seeking an expedited recommended decision to raise rates and fees 5.4 percent for virtually all categories of mail to be implemented early next year.


The expedited recommended decision would shorten the usual 10-month litigation period that traditionally occurs in rate filings. Assuming commission approval, the matter then goes before the postal governors, who are expected to make the final decision later this year.


The rate case calls for an almost uniform 5.4 percent rate and fee increase spread over all classes and subclasses of mail and special services. The postage for a one-ounce piece of First-Class Mail would go from 37 to 39 cents. Other proposed increases:


· First-Class Automated letters mixed AADC (Automated Area Distribution Center), from 30.9 cents to 32.6 cents.


· 3.3-ounce Standard Automation AADC, from 21.2 cents to 22.3 cents.


· 3.3-ounce Standard Presorted Basic, from 26.8 cents to 28.2 cents.


· 3.3-ounce Standard Nonprofit Automation AADC, from 13.6 cents to 14.3 cents.


· 3.3-ounce Standard Nonprofit Presorted Basic, from 16.5 cents to 17.4 cents.


· Standard Enhanced Carrier Route Basic, from 19.4 cents to 20.4 cents.


· Standard Nonprofit Enhanced Carrier Route Basic, from 12.6 cents to 13.3 cents.


· 1-pound Priority Mail for local zones 1, 2 and 3 would increase from $3.85 to $4.05.


· 1-pound Bound Printed Matter, from $1.87 to $1.97.


· 1/2 pound Express Mail Next Day and Second Day Delivery, from $13.65 to $14.40.


· 1-pound Outside-County Periodicals, from 15.8 cents to 16.7 cents.


The USPS' request involves price increases for all rates and fees with a single exception: its Confirm program, which lets mailers track letter-size and flat mail through the postal system using barcodes, called Planet Codes. The filing said that Confirm is still in its early stages of development and that the USPS needs to review the category before increasing rates. A separate Confirm proceeding is expected to be filed at a later date.


"No postal rate increase is ever good news for businesses and nonprofit organizations that rely on the postal service to get their messages and packages out," Jerry Cerasale, senior vice president for government affairs at the Direct Marketing Association. "However, this is a significant reduction from the double-digit rate increase that had been previously discussed. Moreover, considering that we will have gone at least 3 1/2 years since the last rate increase, this filing represents relatively good news for all mailers."


The filing is unique in that the decision to seek a rate increase is solely because of the requirement of the Postal Civil Service Retirement System Funding Reform Act of 2003 that the postal service establish a $3.1 billion escrow fund.


The agency said the act helped the USPS avoid overfunding its Civil Service retirement obligation by reducing its payments to the program. But it also called for the establishment of the escrow account beginning in 2006, and the use of that money is subject to Congress' direction.


"Were we to be able to use these funds for operating expenses, there would be no rate increase until 2007," Postmaster General John E. Potter told attendees at last month's National Postal Forum.


Potter said the reduced CSRS payments, combined with $8.8 billion in cumulative cost savings and five consecutive years of productivity gains, allowed the postal service to keep its pledge to hold rates steady for 3 1/2 years. It also expects to end its current fiscal year with net income exceeding $1 billion.


Should legislation be enacted that eliminates the escrow funding requirement, this rate case will be withdrawn, the agency said.


A House and Senate bill has been introduced that eliminates the funding requirement.


Sen. Susan Collins, R-ME, who chairs the Senate Homeland Security and Governmental Affairs Committee, and fellow committee member Sen. Thomas Carper, D-DE, introduced a postal reform bill March 17 that would repeal the escrow provision of the 2003 act. The escrow account would require contributions of $78 billion over 60 years. These savings, if the escrow account was eliminated, would be used to pay off debt to the U.S. Treasury, fund healthcare liabilities and mitigate rate increases.


Rep. John McHugh, R-NY, also introduced a reform bill in January that would kill the escrow provision.


The USPS also said that if this requirement were removed, this would be the fifth consecutive mailing season without a rate increase. The last rate increase took effect on June 30, 2002.


However, USPS chief financial officer Richard J. Strasser Jr. said earlier this year that a rate increase would be needed in 2007 because of an increase in benefit costs and cost-of-living allowances and wages. He also said the agency is committed to smaller, more frequent filings.


"We are hopeful that the rate increase filing will bring to the attention of many members of Congress the need to pass postal reform legislation," said Bob McLean, executive director of the Mailer's Council. "The issue is not one every member follows. But, with the filing of the rate case, our expectation is that every member of Congress will now be much more focused on the issue and will seriously consider co-sponsoring the postal reform bills that have been introduced."


McLean added: "Our hope is that with the rate increase, members of Congress will now fully understand the added expense small businesses in America will have to endure because of the escrow account and move quickly to eliminate it."


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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