USPS To Pursue Exigency Rate Increase

The United States Postal Service recently announced plans to pursue the exigency rate case that was originally filed back in July of 2010. The USPS will file at a later date the amount it plans to pursue, along with the timing of the price increase and what specific classes and processing categories of mail will be impacted. The USPS estimates that the lost contribution due to exigent circumstances to be $2.3 billion. 

The original exigency case

The exigency case filed in July 2010, citing the 2008-2009 economic recession as the exigent circumstances, was denied by the Postal Regulatory Commission (PRC). The USPS appealed this decision to the Washington DC Court of Appeals. In July 2011, the Court of Appeals remanded the case to the PRC, asking them to determine “how closely the amount of the adjustment must match amount of the revenue lost as a result of the exigent circumstances.” The PRC concluded that exigent rate adjustments are permitted only if, and to the extent that, they compensate for the net adverse financial impact of the exigent circumstances, and that the USPS must be able to quantify this net adverse effect using supportable methods commensurate with the amount of the proposed adjustment, and demonstrate that the amount of the proposed adjustment does not exceed the net adverse effect of the exigent circumstances.

Next steps

Obviously the data used for the original exigency filing is dated at this point, so the USPS will undertake a study to present a new filing. The USPS plans to use a "source of change" analysis to determine what portion of each market dominant product’s volume losses are attributable to the recession, then multiply that portion of the volume loss by each product’s unit contribution. The USPS will still use the original lost contribution amount of $2.3 billion, and will still use much of the documentation from the original July 2010 filing in its new filing. The original documentation will be supplemented with this new analysis data, along with new testimony. The USPS plans to make the new filing by November 21, 2011. No details have been share regarding the possible timing for the implementation for these price adjustments.

What it means for mailers

So, what does all this mean for mailers? Well, we've already told you about the normal planned price increase for the market dominant products, effective January 22, 2012. The USPS has not yet announced the proposed price increases for its competitive products, such as Express Mail and Priority Mail. We expect those price increases to be announced soon. For budgetary purposes, mailers should definitely include the January 22, 2012 proposed price increases, but should also probably budget for yet another increase in mid-2012 due to the exigency filing. While none of us have a crystal ball to tell us what those proposed increases will be, using the proposals in the original exigency filing would be a good place to start. Stay tuned as we keep you up to date on this issue.

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