PRC Suggests Instituting Rate Case Settlement

CHICAGO — Most postal experts at the Direct Marketing Association's fall show embraced the idea of a settlement for the rate case proposed by the U.S. Postal Service in September.

The idea was suggested by George Omas, acting chairman of the Postal Rate Commission, at the pre-hearing conference for postal rate case R-2001-02. The last time a rate case settlement was implemented was 1994.

A rate case settlement means that all parties agree not to take the case to the oral and hearing stages and instead settle on what the increase will be. In addition, a settlement would let the mailing community focus on securing funding to help pay for the extraordinary expenses the USPS faces as a result of the Sept. 11 terrorist attacks and subsequent anthrax scare.

“I have often heard it said that there could never be a settlement in an omnibus rate case. There are too many conflicting interests, and too much money is at stake,” Omas said. “But it seems to me that if there was ever a time when business as usual was not an attractive course of action and when cooperative efforts to promptly resolve issues through settlement might be the right course of action, that time is now.”

Mailers at the DMA conference agreed.

Max L. Hart, director of direct mail fundraising at Disabled American Veterans, Cincinnati, and chairman of the DMA Nonprofit Council, said, “We support the idea of a rate case settlement, as long as the rates proposed are the ones proposed in the current rate case and not higher and as long as the implementation date is no earlier than Nov. 1 [2002].”

Lee M. Cassidy, executive director at the DMA Nonprofit Federation, said, “While I need more details, the idea does have promise … especially since there will be cost savings for the interveners who won't have to spend the money required for the [typical] negotiations.”

Neal Denton, executive director of the Alliance of Nonprofit Mailers, said, “A rate case settlement will allow mailers and the USPS to focus efforts and resources on the more important task of securing funding to help in these extraordinary expenses. …Otherwise, mailers and the USPS may be left holding the bag on the costs associated with new mail security.”

Denton, who did not attend the DMA conference, said mailers are likely to consider it fair if the USPS does not attempt to overreach. For example, he said, the USPS could abandon the notion of a settlement, retract the case and refile with updated cost and revenue projections.

“Mailers may consider conceding the requested rates proposed by the USPS without a protracted rate case battle,” he said, “but any attempt by the USPS to greedily grab for more cash or speed the implementation will surely collapse the window of opportunity.”

Denton said a negotiated settlement could favor mailers. While the original USPS proposal presumes a new rate implementation date during the autumn mailing season next year, negotiations may let parties choose a date that allows mailers time to enter holiday appeals and catalogs while offering significant new USPS revenue gains. Some have suggested Nov. 3 as an appropriate implementation date to meet the needs of mailers and postal officials.

The DMA's board of directors voted unanimously at its meeting here last week to create a task force to oversee various anthrax-related and postal-related programs.

Charles Morgan, company leader of Acxiom Corp. and outgoing chairman of the DMA's board, said that the board also voted unanimously to have the task force work with other groups in the mailing community to push for a negotiated rate case settlement.

The board also voted to have the task force work on obtaining a large bailout from Congress.

“The postal service needs a lot more money from Congress,” Morgan said. “I think they need a $5 [billion] to $10 billion bailout right now to deal with all of these crises.”

The board also voted to have the task force work with Congress to move toward postal reform.

Finally, Morgan said the task force's overriding, broader charter would be to instill confidence in the mail.

Meanwhile, Omas appointed Daniel Foucheaux, postal service chief counsel, to act as settlement coordinator. Last week, Foucheaux called a meeting of interveners to discuss Omas' remarks and determine whether a settlement could be reached. Foucheaux will report to the PRC this week on whether a settlement is possible and what steps the commission might take to reach an outcome.

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