Tuesday, May 24, 2011

Court Decision May Lead to Hike in Postal Rates

Mailers may be facing an unexpected, emergency increase in most postal rates later this year because of an appeals court decision that was issued today. (May 25 update: A knowledgeable person states that the ruling will not result in a rate increase, just some new guidelines from the PRC. Stay tuned.)

The U.S. District Court of Appeals for the District of Columbia sided mostly with the U.S. Postal Service in its appeal of a Postal Regulatory Commission decision last year denying "exigent" rate increases of more than 5%. The court sent the case back to the PRC for reconsideration.

The PRC erred, the court said, in requiring that "the proposed rate adjustments be tailored to offset the specific effects of the claimed exigency," which in this case was the economic recession that helped cause the Postal Service's financial crisis. Rates for most classes of mail -- including First Class, Standard, and Periodicals -- can increase no faster than the rate of inflation except in the case of "exceptional or extraordinary circumstances."

"A financial crisis can often result from multiple contributing factors, of which only one may be 'extraordinary or exceptional,' but that would still justify an exigent rate increase,” the court said.

The decision seems to present at least three challenges for the PRC:

1) The court said the PRC should "exercise its discretion" in interpreting an ambiguous law and determine "how closely the amount of the [rate] adjustments must match the amount of the revenue lost as a result of the exigent circumstances." But the ruling offers no guide as to how much discretion the PRC must exercise, other than saying the PRC was too strict with the Postal Service in its Sept. 30 ruling. In other words: "Exercise discretion, but not too much discretion."

2) The PRC must decide how much of a rate increase is justified by the recession even though the Postal Service presented sketchy data on the amount of money it lost because of the economy -- and how much was from such other causes as the increasing use of e-mail.

3) In the 10 months since the Postal Service asked for exigent rate increases, an inflation-based set of rate hikes was proposed and implemented.  The PRC must apparently decide whether to recalculate -- or to have USPS recalculate -- the requested exigency-based rates in light of those non-exigent increases.


Alan Robinson said...

I have heard the same thing that the PRC has the option of coming to the same conclusion but has to re-write its decision.

The problem for mailers is: Was the Exigent rate case decision a short run or a long run victory? It is possible that an above CPI rate increase could be forced as part of a reform package to deal with the USPS losses.

PaleWriter said...

Looks like any other 'legislation from the bench' decision.

PRC acted in accordance with the law. The PO felt stiffed. A smug Judge (probably politically motivated) hacks the law and directs the PRC to 'pretty please' play nice with the PO.

Frankly, this is disgusting.

When will the legislative branch man-up to stop this judicial nonsense?

Anonymous said...

On its face, the record of Senator Collins on this is not exemplary. She put herself behind a bad bill. She wrote an inappropriate letter to the Commission. She submitted a brief to the court, which the court neglected, appropriately. The Postal Service won big. The Commission was told to go back and do its job. And Collins claims victory. She should have her tail between her legs.

wadoryu4me said...

There is a simple solution to all of this. It's time to privatize the post office and give a "sink or swim" mandate. Surely the land that the Post Office has would fetch a nice sum. Who knows, a great distribution system might even spawn when they lose 1/2 their employees and they are no longer under government (and judicial) guidance.

Anonymous said...

It's amusing because by reading the Affordable Mail Alliance release you would think the USPS customers won a great victory.


mulp said...

A 10% increase in postal rates would still leave US postal rates lower than Europe where privatization has been such a huge success.

But note, the privatized postal services still retain a monopoly on First Class mail because competitors will not accept a requirement to prove universal service.

EU First Class rates run about 70 cents vs the less than 50 cents likely for the USPS in the near future. (Yeah, that rate allows more grams, but few letters use the extra grams allowed.)

For those who claim email and internet makes mail obsolete, is that a promise to provide universal internet access to every address for the same price as USPS access?

And I find many things delivered by mail under "book rate", or ever under Priority rate basis to be impossible to appreciate over the Internet - high quality photo layouts especially.

I understand the pressure on bulk mailers and I do get catalogs and such I love to read. One option would be a version of "forever stamps" - buying postal service in advance or futures contracts. Buying options for a fixed future mail volume at a set price today would shelter bulk mailers, and give the USPS a committed future volume of mail for planning purposes.