The good news is that we finally have some certainty about the future of the exigent postage rates. The bad news is that mailers have to wait until spring to see the rates finally rolled back.
Regular readers of our postal updates will remember that in June the U.S. Court of Appeals for the District of Columbia issued its long-awaited decision on the Postal Regulatory Commission (PRC) ruling. The PRC ruling allowed the Postal Service to impose an above-inflation postage rate increase on a temporary basis in order to recoup losses incurred during the Great Recession. The court confirmed the temporary nature of the rates, but directed the PRC to reconsider the calculation of the amount of revenue the Postal Service could collect as a result of the exigency.
Last week the PRC issued its response in which it determined:
- Based on its revised calculations, the Postal Service may collect an additional $1.4 billion in revenue to compensate for additional volume lost during the Great Recession.
- The exigent postage rates currently in effect will remain in effect until the additional revenue has been collected.
- The USPS must continue quarterly reporting to the PRC regarding the amount of additional revenue collected and provide the industry a 45-day notice before removing the exigent rates.
Based on the amount of revenue raised by the exigent rates in the slightly more than 18 months they have been in effect, it is estimated that the exigent rates will remain in effect for an additional eight months or so before the new revenue cap is reached. We can look forward to the roll-back of these rates sometime next spring, perhaps as early as March.
While the extension of the exigent postage rates is disappointing, the PRC responded conservatively to the court order. The PRC refused the urgings of the Postal Service and the postal unions to reconsider large portions of its original decision not questioned by the court, and limited its decision to how lost volume (and therefore lost revenue) was to be calculated.
Looking ahead to 2016
Whether or not there will be a CPI-based postage rate increase in 2016 (and the timing of an increase, if there is one) remains up in the air. The rate cap is currently under 1% and is trending downward. The most logical scenario at this point would be for the Postal Service to implement a single rate change in the spring that would roll-back the exigent rates, with perhaps a small concurrent offset based on CPI, if the cap is still positive.
The Postal Service releases its FY2015 third quarter financial report on Monday. It is expected to show an operational profit, but an overall loss based on accruals for prepayments of retiree healthcare benefits and workers compensation adjustments.
My colleague, Bob Rosser, and I will be participating in the Mailers Technical Advisory Committee (MTAC) meetings next week and will share what we learn in future SpeakingDIRECT posts.
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