Mailer groups expect the U.S. Postal Service to file a case for an exigent postal rate increase Tuesday.
Under the Postal Accountability and Enhancement Act of 2006 (PAEA), the USPS is entitled to receive annual rate increases based on the rate of inflation. But this law also entitles USPS to file “exigent” rate cases under extraordinary circumstances and Postmaster General Jack Potter said last year the postal service might do so (http://directmag.com/news/usps-second-postage-increase-0124/).
If filed, it will be the first test of the concept of exigency under the postal reform law of 2006.
Some question its legality and necessity.
“We don’t think it’s legal at all,” said Tony Conway, executive director of the Alliance of Nonprofit Mailers. “And we don’t think these circumstances that the postal service is apparently going to use to justify this increase are up to what Congress intended when it drafted the [PAEA] legislation.
Conway slammed the USPS for its apparent intention to file this rate case as if the PAEA had never been passed.
“It’s as if the requirement in the ‘06 act to live within the rate of inflation never happened,” said Conway. “It’s three years later and they’re going back to what they know best: a cost of service approach to ratemaking.
“I think it’s the postal service is making a bad decision to go to the point of least resistance which is the customer base and increase prices in an exorbitant way—5% to 10%,” he said.
Others are apparently waiting to see exactly what the USPS proposes before they take concrete actions.
“We can’t do much until we see what the postal service comes up with,” said Jerry Cerasale, senior vice president of government affairs at Direct Marketing Association. “We all want to work together and we’re trying to do that.”
“The Direct Marketing Association was on record in our filing in the [USPS] annual compliance review saying we didn’t think these current circumstances met the met the exigent need legal requirement right at the moment,” said Cerasale.
Once this case is filed with the Postal Regulatory Commission, the PRC has 90 days to rule on it, explained Cerasale.
The USPS said it lost $2.9 billion in so far this fiscal year which ends Sept. 30, according to a preliminary filing with the PRC (http://prc.gov/prc-docs/home/whatsnew/MAY-10_PRC_-_Final_1107.pdf).
On top of that that, the USPS is obligated to prepay $5.4 billion each year until 2016 to cover the healthcare costs of retired employees.
Last fall, the Obama administration gave the USPS $4 billion worth of temporary fiscal relief to meet this obligation and pay it back at a slower pace (http://directmag.com/mail/news/mailer-fear-usps-reform-1005/index.html).
When the PAEA passed in 2006, mailers praised the new law as a way of giving mailers a more streamlined predictable system for postal rates based on the rate of inflation as spelled out in the Consumer Price Index. The previous system was more haphazard and litigious (http://directmag.com/mail/marketing_bare_bones/index.html).
