The US Postal Service received permission to raise postage rates higher than the Consumer Price Index (CPI) due to lost revenue caused by the 2008 – 2009 recession, but only on a temporary basis. The Postal Regulatory Commission (PRC) ruling allows the USPS to recover the $2.8 billion it estimates was lost due to the recession.
PRC Chairman Ruth Goldway had told EcommerceBytes last month that the exigent request was “complicated.”
While it sounds like higher postage rates would be very bad news for online sellers, a good number of them won’t be impacted – the exigent rate increase does not impact Competitive products such as Priority Mail, but it does impact Market Dominant products, including First Class Mail.
On Christmas Eve, the PRC issued Order No. 1926 in Docket R2013-11 partially approving a request by the Postal Service for an 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 recession and is legally entitled to implement price increases in excess of the CPI cap for less than two years.
The PRC denied the Postal Service’s request to make the increases permanent. It found allowing the increases to remain in effect indefinitely would be inconsistent with fundamental postal policies underlying the price cap.
In a statement for the press, Goldway said the Commission’s decision closely follows the law. “The Postal Service will be reimbursed for exigent losses that can be reasonably quantified. We have determined that amount to be $2.8 billion to cover the 25.3 billion pieces of volume lost between 2008 and 2011. The funds will come from a rate surcharge that will last just long enough to recover the loss.”
In its order, the Commission directed the Postal Service 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.
The 4.3 percent exigent rate increases are scheduled to be implemented in conjunction with the inflation-based rate adjustment of 1.7 percent (one cent for ordinary mailers), approved earlier by the Commission. The overall adjustment is 6.0 percent (a total of three cents from 2013 rates or 49 cents).
The Commission’s decision was issued on a 2-1 vote.
