Appeals court sends ‘exigent’ rate increase decision back to PRC

A federal appeals court said May 24 that the Postal Regulatory Commission must reexamine the US Postal Service‘s request to enact “exigent” rate increases, or price hikes higher than the rate of inflation.

The US Court of Appeals for the District of Columbia Circuit said the PRC had incorrectly rejected the rate increase when it claimed the USPS had to show the impact of only the recession, and not other circumstances, on its finances. However, the court agreed with the commission that there would have to be extreme circumstances for the Postal Service to enact an exigent rate increase. The appeals court has not yet issued the parameters by which the PRC must reassess the request.

“We are encouraged by the court’s decision to return the exigent filing to the PRC for further consideration,” the USPS said, in a statement. “While we continue to evaluate the court’s opinion and ruling to understand the full implications and options it presents to the Postal Service, we have renewed confidence that we are entitled to a rate increase under the exigency provision.”

The PRC denied the financially struggling USPS’ request to enact exigent rate increases of about 5.6% – above the inflation-based amount it is allowed to raise rates annually – in September, saying that the organization failed to justify the increases. The Postal Service, which ran a loss of $2.2 billion in the second quarter of its 2011 fiscal year, had said the increases were necessary because of the large drops in mail volume it had seen due to the recession.

The proposed exigent rate increases were part of the USPS’ plan to return to financial stability, which also included cutting home delivery to five days per week. Sen. Tom Carper (D-Del.) introduced a bill last week that would allow the USPS to cut Saturdays from its home delivery schedule.

“The commission is pleased that the court affirmed the commission’s findings that a casual relationship must exist between the exigent circumstances and the amount of the proposed rate increases, and that the Postal Service failed to show that relationship,” the PRC said, in a statement. “The case will be remanded to allow the commission to exercise its discretion to clarify to what extent the Postal Service must show how proposed rate increases relate to the exigent circumstance’s impact on the Postal Service’s finances.”

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