June 22, 2015

Will Rate Increases Go On Forever?

Author: Judy Wolf

A few weeks ago, the DC Court of Appeals issued its decision on the exigent rate case. The court affirmed the most significant element of the ruling by the Postal Regulatory Commission back in late 2013, namely, that the increase could not go on forever.

But the court remanded another aspect of the Commission’s order, and it is now almost certain that the exigent increase will be extended beyond August, when it was expected to end. Depending on how the Commission does the next round of calculations, the increase could continue into the spring, or perhaps even longer. (The court's ruling is here.)

In its original order, issued on December 24, 2013, the Commission determined that the Postal Service had lost about $2.8 billion in contribution (profit) due to the recession. The Commission therefore approved the 4.3 percent increase the Postal Service had requested, but only until the agency had recouped this amount.

The increase went into effect in January 2014, and as of March 31, 2015, the Postal Service had collected almost 80 percent of the $2.8 billion. At the current rate of generating contribution — about $150 million a month — the exigent increase would have reached the authorized limit by the end of August. The court’s ruling, however, means that the Commission will need to do some more calculations for how much additional contribution the Postal Service can take in.

According to the Postal Service's brief to the court (filed on April 15, 2014), even with the court ruling as it has, the agency still deserves somewhere between $1.2 billion and $3.8 billion more. That would extend the exigent increase anywhere from spring 2016 to fall 2017.

The mailers will undoubtedly dispute these numbers and argue that the Commission should authorize a much smaller amount. The parties have waited over fifteen months for the court to issue its decision, but this case is far from over. 

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