Rate board denies struggling USPS request for rate increase, higher fees fought by industry

By Natasha T. Metzler, AP
Thursday, September 30, 2010

Rate board denies Postal Service price hike plea

WASHINGTON — The independent panel that oversees the U.S. Postal Service voted Thursday to deny the agency’s request to increase the cost of mailing a letter by 2 cents, keeping first-class stamps at 44 cents.

Ruth Goldway, chairman of the Postal Regulatory Commission, suggested at a news conference that the problem with the proposal was more in the packaging than the plea.

In July, the Postal Service proposed raising first-class postage from 44 cents to 46 cents as part of a strategy for dealing with a worsening financial crisis. The request required the commission’s approval, because the margin of increase was higher than the existing rate of inflation. But the five-member panel unanimously said no.

In light of the decision, the Postal Service has a number of options, including a legal appeal, filing a new special rate-increase request to the commission, or requesting a smaller rate hike that would be automatically approved for rising within the rate of inflation.

“We will need to take a much closer look at the ruling from the PRC in order to make an informed decision about what options we have and what may be the best course of action for our customers, our employees, our stakeholders and the American public,” Postmaster General John Potter said in a statement.

The Postal Service lost $3.8 billion last year, and agency officials were seeking other rate increases as well the basic stamp hike, including higher fees for periodicals, post cards and parcels.

Goldway said the requested rate adjustment was not due to recent recession, as indicated by Postal Service officials, but rather was an attempt to address long-term structural problems.

“The case they needed to make, as far as we understand the law, is to relate the revenue they’re requesting to the losses that were the impact of the recession,” Goldway said after the meeting. “Instead, they explained how terrible the recession was, and then they said we have this liquidity crisis.”

Goldway targeted the Postal Service’s $5.5-billion-a-year payment schedule on future retiree health benefits as the agency’s major financial problem.

“We are encouraged by their acknowledgment and understanding of the larger financial risk we face through the mandated prefunding of retiree health benefits,” Potter said.

He noted that the Postal Service was denied a deferal of this $5.5 billion, and that current projections show the agency won’t have enough cash to make the payment next Sept. 30.

The commission’s decision was applauded by the Affordable Mail Alliance, a coalition of postal customers including consumer groups, small business, charities, utilities, national retailers and banks.

“The PRC today has helped countless businesses stay competitive and saved tens of thousands of jobs,” said Tony Conway, a spokesman for the alliance. “The commissioners recognized that imposing an additional tax on Postal Service customers is not the way to address its financial troubles. Our members look forward to working with the Postal Service on the long-term restructuring needed to restore the Postal Service to competitiveness.”

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