USPS Informs the PRC that they will proceed with the Exigency Rate Increase

Faced with a decision that had to be made by November 7, 2011 — the USPS officially announced today that they were left with no other choice but to pursue the Exigency Rate increase, which was initially filed with the PRC (Postal Regulatory Commission) in the summer of 2010.

See press release below!

=============================================

FOR IMMEDIATE RELEASE
Contact: David Partenheimer
Nov. 7, 2011
202-268-2599
david.a.partenheimer@usps.gov
usps.com/news

Statement on Proceeding with Exigent Pricing Relief

As a result of the Postal Regulatory Commission’s (PRC) Oct. 31 order denying a motion by the Postal Service to “stay” its request for exigent price relief until Dec. 15, 2011, the Postal Service today informed the Commission that it will continue to proceed with the case. If legislation passes that promotes the Postal Service’s financial stability, the Postal Service will review its position and may choose to withdraw the case if warranted.

The Postal Act of 2006 capped price increases for Mailing Services products and services at the rate of inflation as measured by the Consumer Price Index (CPI). However, the law does allow for increases beyond the CPI cap due to exceptional or extraordinary circumstances. That was the case in July 2010 when the Postal Service filed for an increase above CPI, citing the exceptional circumstances of significant mail volume losses. The Postal Service financial crisis has worsened since then.

While legislation continues to be introduced to address critical Postal Service issues, the uncertainty over Congressional action leaves the Postal Service little choice but to proceed with the case for now.

The Postal Service announced new Mailing Services prices last month and will announce new Shipping Services prices later this month. The new pricing will be effective January 22, 2012.

The Postal Service receives no tax dollars for operating expenses and relies on the sale of postage, products and services to fund its operations.

# # #

=============================================

*Reaction*

Although PMG Donahoe, earlier this year (see my e-mail of August 19, 2011) said there was legal justification for reopening this matter – doing so at this point in time given the Postal Service’s short and long term problems would only serve to exacerbate matters and alienate customers. This apparent about face has disappointed industry to say the least. For those of you who have been following this – I have provided a brief explanation of the events that led to this most recent decision.

*Exigency Rate Increase Background*

On 7/6/2010, the Postal Service filed for a 5.6% average rate increase claiming that the US economic recession, which began in late 2008 and lasted thorough 2009, represented an *extraordinary and exceptional circumstance* or more briefly said, an Exigent condition. The Postal Service justified this action by saying that without an increase the future sustainability of the organization is at risk.

To the surprise and relief of industry, the PRC on 9/30/2010, issued a unanimous decision *denying* a Postal Service request for a rate increase. The Commission found that the Postal Service had failed to justify rate increases in excess of its statutory CPI price cap. In addition, the PRC said that although the Postal Service *had shown the recent recession to be an exigent circumstance* — it failed both to quantify the impact of the recession on its finances and show how its rate request relates to the loss of mail volume resulting from the recession.

Following the PRC denial the Postal Service, on 10/22/2010, announced its decision to appeal the ruling with the United States Court of Appeals. Then *PMG, Jack Potter*, wanted the court to review the PRC’s interpretation of the postal law (PAEA; Postal Accountability and Enhancement Act) that governs how prices can be set under *extraordinary and exceptional circumstances*. The Postal Service essentially argued that the PRC misread the statute and applied an incorrect standard in evaluating the request for an exigent price increase. Three days later, on 10/25/2011, *PMG Potter announced that he was retiring from the USPS*.

Knowing that the appeal would stretch well into 2011 – succeeding *PMG Pat Donahoe* and the USPS BOG (Board of Governors) decided to file for a CPI based 1.74% average increase on January 13, 2011. This was subsequently approved by the PRC and the new price increases went into *effect on 4/17/2011*, *which are the rates we have today**.*

By 7/11/2011, the Court of Appeals made their decision and sent (remanded) the USPS Exigent Rate filing back to the PRC for further clarification. Two months later, which allowed time for industry and the USPS to publically comment on the court’s decision, the PRC, on 9/20/2011, officially issued the clarification requested. The PRC also invited the USPS to offer additional evidence and arguments why the exigent increase should be granted and to supply that information by 10/4/2011. The USPS responded by asking for a delay until 12/15/2011, which was denied by the PRC but allowed the USPS an *extension to 11/7/2011*.

*Jim Dooley-Green*
*Santa Ana District Postal Customer Council*