Sen. Susan Collins, R-Maine, asked Postal Regulatory Commission Dan G. Blair how important rate shock is to the agency’s decision on Standard flats mail, at a Subcommittee on Federal Financial Management, Government Information, Federal Services and International Security hearing last week.
The subcommittee is part of the Committee on Homeland Security and Governmental Affairs. Witnesses included Mr. Blair, Postmaster General John E. Potter and Kate Siggerud, director of physical infrastructure issues for the General Accounting Office.
“Do you look at what the impact of a rate increase is going to be on a specific segment of the mailing community?” Sen. Collins asked.
Mr. Blair said that the PRC looks at rate shock, along with the attributable costs of the subclasses and the institutional costs.
“In this particular case, I would urge the committee to consider that these proposed rate increases came on the heels of two settled cases over the course of the past seven years,” he said. “Because of the settled case, some mailers…were insulted from the higher rates they would have faced if the case was fully litigated. This time there was a fully litigated rate case, and prices were intended to be more fully aligned with costs.”
The new rates are shape-based and take the cost-causing attributes of each mail type into account, Mr. Blair said.
The governors of the U.S. Postal Service March 19 approved the PRC’s average 7.6 percent rate increase, with requests for reconsideration of the Priority Mail Flat Rate Box, the non-machinable surcharge for First Class Mail letters and Standard Mail flats.
“We attempted to align rates with costs,” Mr. Blair said. “We understand that these are high increases and a heavy burden for many mailers to bear.”
For Standard Mail flats the governors are concerned that the recommended price increases may impose an unnecessary degree of “rate shock” on the catalog industry and small businesses. The recommended increase for some catalog mailers is as much as 40 percent, which is more than double what the USPS proposed.
Sen. Collins said many small catalogers in her state will be negatively impacted by the rate increase, using Geiger Bros., Cuddledown and L.L. Bean as examples.
“When you have a sharp increases in postal rates, then mailers look for other ways to deliver their product and that causes a decline in volume, which is the last thing we want from the postal service,” she said.