Archive | October, 2010

Postal Service’s Requested Rate Hike Declined by PRC

7 Oct

The Postal Regulatory Commission (PRC) recently unanimously voted to decline the Postal Service’s request for a price increase.

While the Postal Service can seek price increases based on the Consumer Price Index (CPI), the Postal Service had asked for price increases higher than CPI levels based on exigent conditions. The PRC did not feel that the recent recession or the decline in mail volume experienced during the recession qualified as an extraordinary or exception circumstance.

In its decision, the PRC said,

“The Commission concludes that the law limits exigent rate increases to amounts shown to be needed due to specific exigent circumstances. It finds that in this instance, the Postal Service fails to quantify the impact of the recession on postal finances, address how the requested rate increases relate to the recession’s impact on postal volumes, or identify how the requested rates resolve the crisis at hand.

“The Commission concludes that the requested increases are not justified as lawful exigent rate adjustments.”

The proposed rate hike, slated for next January, would have added $3 billion to the Postal Service coffers.

What does this mean for the mailing industry?

For one thing, postage rates will remain the same for now. The Postal Service can appeal the PRC’s decision, but that will take time. Some people feel that the Postal Service can and probably will seek a PCI-based rate increase. If they do pursue this type of increase in prices, it will be a more modest increase – probably around 2%. Putting through any type of rate increase takes advance notification to the public, so it is unlikely any changes would go into effect before late winter.

Others feel that this ruling will benefit the Postal Service in the long run because it will force them to address issues previously identified as problems within the industry such as their current obligations for prefunding its retiree health benefits program, and the need to create a more efficient work flow by streamlining its procedures and network of mail processing plants. 

We will likely see more information released soon on upcoming changes and will keep you informed as we hear more.