PRC Grants Exigent Rate Increase Effective January 26, DMA Considers Next Steps

In a move rivaling anything that the Grinch could imagine, the Postal Regulatory Commission (PRC) announced on Christmas Eve that it would grant the United States Postal Service (USPS) request for an exigent postage increase of 4.3% (Order No. 1926 in Docket R2013-11).

The exigent rate increase is set to take effect on January 26, 2014. The 4.3% exigent rate increases are scheduled to be implemented in conjunction with the inflation-based rate adjustment of 1.7% (one cent for ordinary mailers), approved earlier by the Commission. The overall adjustment is 6.0% (a total of three cents from 2013 rates or 49 cents).

Other highlights of the new single-piece First-Class Mail pricing include:

  • Letters additional ounces – 1-cent increase to 21 cents;
  • Letters to all international destinations (1 oz.) – $1.15; and,
  • Postcards – 1-cent increase to 34 cents

The PRC decision deals a serious financial blow to both commercial and nonprofit members.

USPS argued that it needed this exigent rate increase to offset losses suffered as a result of the Great Recession of 2008-2009. In its majority decision, the Commission found that the Postal Service experienced financial harm as a result of the Great Recession and is legally entitled to implement price increases in excess of the CPI cap for less than two years.  However, the PRC declined USPS’ request to make the increases permanent. Instead, the PRC found that allowing the increases to remain in effect indefinitely would be inconsistent with fundamental postal policies underlying the price cap.

In granting the exigent increase, the PRC determined that the proposed price increases were reasonable in amount, equitable in that they are approximately equal for all categories of mail, and necessary to maintain and continue needed postal services. However, the Commission also concluded that the USPS conflated losses that are a result of internet diversion with losses that were a result of the Great Recession, and that it failed to provide justification for permanent price increases in connection with recession-related mail volume losses.

In its order, the PRC directed USPS to report quarterly on revenues generated by the rate increases, and to develop a plan to phase out the rates once they have produced the revenue justified by their request. USPS must file a report outlining its proposed plan for removing the exigent increase no later than May 1, 2014.

DMA is currently considering next steps, and will update members later this month.

 

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