Postal Updates

PRC endorses U.S. Postal Service rate case

Jul 20, 2021, 3 PM

Washington Postal Scene by Bill McAllister

The Postal Regulatory Commission has approved plans for a postal rate increase in excess of the rate of inflation this summer, sidestepping legal objections that mailing groups had filed over the changes.

In a decision issued July 19, the commission endorsed the United States Postal Service’s higher prices on letters, advertising mail and publications, declaring that the nation’s mail service remains in precarious financial health.

As for the claims mailing groups had filed over the increases, the commission said that’s a matter for the courts to decide. The proposed higher prices are fine, the commission said.

The changes will boost the price of a first-class stamp to 58¢ from the current 55¢ effective Sunday, Aug. 29.

Domestic postcards will rise to 40¢ from the current 36¢.

Metered 1-ounce letters will rise to 53¢ from the current 51¢, and large 1-ounce envelope flats will increase to $1.16 from $1.

International letters will rise to $1.30 from $1.20.

The ruling showed the commission accepted Postmaster General Louis DeJoy’s argument that breaking long-standing price caps that kept stamp price increases at no more than the rate of inflation was necessary to save the agency from even greater financial woes.

“It is the commission’s expectation that price increases like the one proposed in this preceding will enhance the Postal Service’s ability to make investments that increase efficiency and reduce costs, while also narrowing the formidable gap between costs and revenues, thus motivating the Postal Service to take further steps to reduce costs and increase efficiency,” the PRC said.

At the same time, the PRC stuck to its earlier rulings stating that the Postal Service’s continuing financial troubles forced it to abandon the old congressionally imposed ratemaking scheme that placed a price cap on stamps.

Rejecting the pleas of large mailing groups, the PRC found that rates under the old system “were not excessive to mailers but did threaten the financial integrity of the Postal Service.”

“Ultimately, with the Postal Service having a $1.3 billion net loss year-to-date, the Commission concludes that it is imperative that the new rates take effect and there is nothing in the most recently available information that would lead the Commission to change its conclusions … that new forms of pricing authority are necessary for the Postal Service to achieve financial stability …”

Mailing organizations had filed an appeal with the U.S. Court of Appeals for the District of Columbia Circuit challenging the PRC’s previous decision to set aside the old method of setting stamp prices well before the USPS posted notice that it was seeking a rate increase greater than the rate of inflation.

The USPS had stated that its prices for market-dominant products and services would increase by approximately 6.9 percent under its rate case.

It said first-class mail prices would increase by 6.8 percent and were necessary to offset declining revenue because of falling letter volume.

Stephen Kearney, executive director of the Alliance of Nonprofit Mailers, called the ruling “the largest unnecessary price increase in U.S. postal history.”

“The two postal agencies have made a giant mistake doing this,” he said of the PRC and the USPS.

“It was inevitable that the regulator would approve a set of massive rate hikes that it created,” Kearney said.

Michael Plunkett, president of the Association for Postal Commerce, faulted the PRC, saying its order “reiterates the flawed reason that ran throughout” its review of the USPS.

The order “demonstrates the commission’s unwillingness to wrestle with the practical consequences of its rules,” he said.

“Unfortunately, the businesses and consumers who rely on the Postal Service and depend on effective regulation to protect them from monopolistic behaviors have been let down by the commission which seems intent on further enriching the Postal Service to the detriment of mailers,” Plunkett said.

Postal Service spokeswoman Kimberly Frum said, “We are pleased with the decision by the PRC.”

“It recognizes that our prices are consistent with the new authority that was provided to us by the commission,” she said.

“The Postal Service still has some of the lowest letter-mail postage rates in the industrialized world and continues to offer a great value in shipping.”

Frum noted that the increases are part of the postmaster general’s Delivering for America plan, a 10-year blueprint for getting the USPS on the road to financial sustainability.

“The changes will help to address USPS operating losses exacerbated by declines in mail volume. They will also contribute to $40 billion of investments in people, technology and infrastructure over the next 10 years to modernize and improve the Postal Service’s operations and customer experience,” Frum said.

Art Sackler, manager of the Coalition for a 21st Century Postal Service, said the ruling was expected.

“Having granted the authority to charge much higher prices in the first place, no one expected the commission to decide other than to approve the new, exploitative rates,” he said.

“All eyes now turn to Congress, where lawmakers are considering sending the commission back to the drawing board, but this time taking into account all the changes to the postal system — including a noticeably improved financial position — that have happened during the pandemic,” Sackler said.

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