The Postal Regulatory Commission (PRC) approved a 4.3 percent exigent rate increase for the United States Postal Service (USPS) on Tuesday, but rejected the USPS’s request to make the increase permanent. The exigent increase is in addition to a 1.7 percent hike approved in November to keep pace with inflation. The USPS hopes the new revenue will bring in $1.8 billion per year.
The average increase for nonprofits is estimated to be $0.009 per piece of standard mail, $0.011 per piece for periodicals and $0.019 per piece for first-class mail, according to Tony Conway, executive director of the Alliance of Nonprofit Mailers in Washington, D.C.
“(The PRC commissioners) are the Grinch this Christmas,” said Jerry Cerasale, the Direct Marketing Association’s senior vice president of government affairs, via a statement. “It was time for the PRC to stand up and it failed. It is a sad day for mailers.”
The postal service asked for the exigent rate increase in September to make up for an estimated $2.8 billion shortfall it suffered due to the Great Recession. PRC Spokeswoman Gail Adams said the exigent rate increase would be in effect for no longer than two years. “Part of our ruling is that the postal service report to us quarterly on the revenue generated by the exigent rate increase,” she said. “Based on those reports, we’ll be able to tell if they’ve recouped what they lost. We believe it will be less than two years.” Adams said two years is a hard cap on the exigent increase.
The Postal Accountability and Enhancement Act of 2006 (PAEA) requires the USPS to show just cause to the PRC for rate increases greater than the rate of inflation, also known as the consumer price index (CPI). The USPS last asked for an exigent rate increase in 2010, which was denied because the post office could not quantify its losses, according to the order granting this exigent increase. Both the exigent increase and the CPI increase will go into effect on January 26.
“The Postal Service will be reimbursed for exigent losses that can be reasonably quantified,” said PRC Chair Ruth Goldway. “We have determined that amount to be $2.8 billion to cover the 25.3 billion pieces of volume lost between 2008 and 2011.”
According to Goldway, the postal service estimated losses to be about $6.6 billion, but the PRC said that all but $2.8 billion of that was due to Internet diversion, with mail volume dropping due to new communications technology. “We made what we think is a more accurate distinction between volume loss from the Great Recession and volume loss cause by internet technology developments,” she said. “We felt that it was perhaps unfortunate that both happened at the same time, but one was a technological issue that was not an emergency that we could not by law help with.”
Goldway said she anticipates both the USPS and industry groups to appeal the decision. “Ever since the PAEA was enacted, the postal service has taken the commission to court on just about every major decision. It’s a new law and the postal service wants to challenge it,” she said. “Mailers felt the postal service didn’t deserve any increase. They believe that a recession is a normal part of the business cycle and not an emergency.”