Last Friday the US Postal Service filed an appeal of the Postal Regulatory Commission’s decision in the exigency rate case. Yesterday the DC Circuit Court of Appeals set November 29 as the deadline for motions and document submissions by the parties in the case, and December 13 as the deadline for motions for summary judgment. The court has not set any dates for oral arguments or submission of briefs.

Petition for Review 10-1343

Clerk’s Order 10-1343

Postcom reports that the US Postal Service has filed an appeal of the Postal Regulatory Commission’s decision in the exigency rate case:

On October 22, 2010, the Postal Service filed an appeal with the U.S. Court of Appeals for the D.C. Circuit regarding the September 30, 2010 ruling of the Postal Regulatory Commission (PRC) denying the Postal Service exigent price request.

The Postal Service is requesting a review of the PRC’s interpretation of the law that governs how prices can be set under “extraordinary and exceptional” circumstances – an exigent” price increase. The Postal Service is also requesting that the Court of Appeals confirm that the Postal Service has the right to the exigent price increase, as originally filed with the PRC.

The Postal Service disagrees with the PRC’s interpretation of the statutory language and believes that the PRC applied an incorrect standard in evaluating the request for an exigent price increase.

The Postal Service believes we need clarity regarding the exigent price increase rules under current law should the Postal Service find itself in a similar situation in the future.

The Court of Appeals will ask for briefs from both the Postal Service and the PRC. Oral arguments also may be scheduled by the court.

The Postal Service continues to evaluate other options to address the PRC’s ruling. The exigent price request would have generated about $2.3 billion in much needed revenue for the first nine months of calendar year 2011.

As laid out in the Postal Service’s March 2nd Action plan, requesting an exigent price increase was the one option the Postal Service could exercise under current law to help address its current dire financial situation.

Increasing revenue is only one part of the solution. The long-term financial viability of the Postal Service will remain questionable unless the actions recommended on March 2nd are implemented. These include:

• Addressing the statutory retiree health benefit pre-funding requirement, averaging $5.5 billion;

• Allowing the Postal Board of Governors to direct the Postal Service to move to five day delivery;
• Requiring an arbitrator to consider the financial health of the Postal Service when making a determination;
• Allowing the Postal Service greater freedom to close Post Offices;
• Permitting the Postal Service to offer new products and services; and
• Giving the Postal Service greater pricing flexibility

Sometimes victory is in the eye of the beholder. The National Association of Letter Carriers, which intervened in the exigency rate case in support of the USPS, now says that it considers the PRC decision a victory. It notes that while it argued that the effects of the recession on the USPS satisfied the PAEA requirements for an “extraordinary” rate increase, it never actually took a position on whether the rate increase should be granted:

PRC rejects exigent rate increase, punts financial crisis to Congress

Commission backs NALC on definition of exigent circumstances, faults USPS case

Noting that the U.S. Postal Service and its employees had successfully adapted to the adverse effects of the Great Recession—cutting costs enough to more than offset the loss in mail revenue due to the recession—the Postal Regulatory Commission on Sept. 30 rejected the Service’s request for a 5.6 percent “exigent” rate increase.

The PRC did not dispute that the severity of the recession constituted “extraordinary or exceptional” circumstances, but it concluded that the Postal Service had failed to demonstrate that its recent financial losses were “due to” the Great Recession. Rather, the Commission argued —ss the NALC has for the past two years—that recent large financial losses are the direct result of the congressional mandate to massively pre-fund retiree health benefits.

The USPS filed for the emergency increase in July.

“Congress and the Obama administration should sit up and listen to what the PRC is saying,” National Association of Letter Carriers President Fredric V. Rolando said. “The time for delay is over. We must adopt Congressman Stephen Lynch’s bill [H.R. 5746] and repeal the pre-funding provisions of the law as soon as possible.”

The Lynch bill would allow the USPS to pre-fund its future retiree health benefit costs with the massive postal surplus in the Civil Service Retirement System, calculated by independent experts for both the PRC and the USPS Office of Inspector General.

The NALC called on Congress to adopt Rep. Lynch’s legislation during the so-called “lame duck” session of Congress after the mid-term elections, which would lay the groundwork for repeal of the annual pre-funding payments now currently in the law in the early days of the next Congress.

“Contrary to the irresponsible rhetoric of hyper-partisan leaders in the Republican party, the Lynch bill does not involve any taxpayer money and cannot honestly be called a ‘taxpayer bailout,’” Rolando added. “We want to use our own money—excess pension funds amassed over decades as a result of employee and employer contributions to the CSRS—to pre-fund our future retiree health benefits.”

Ruling a victory for NALC

“The Commission finds that the Postal Service has shown the recent recession to be an exigent circumstance but it has failed both to quantify the impact of the recession on its finances and to show how its rate request relates to the resulting loss of mail volume,” said PRC Chair Ruth Goldway. “Therefore, we unanimously deny its exigent rate request.”

Although NALC did not take a formal position for or against the exigent rate case, it did intervene to ensure the proper implementation of the exigent rate case provision of the law. In so doing, we argued that the events of recent years clearly complied with the definition of “extraordinary or exceptional” circumstances set out in the law.

The union also fought a motion by the Affordable Mail Alliance (AMA), a coalition of mailers, to limit the definition of exigent circumstances to those involving terrorist attacks and similar disasters.

“We are gratified that the whole Commission endorsed our view and rejected that of the self-selected group of mailers that formed the AMA,” President Rolando said.

via PRC ruling an NALC victory.

NAPSLegRegUpdate 093010

We are disappointed to learn that the Postal Regulatory Commission (PRC) has denied our price filing. But we are encouraged by their acknowledgment and understanding of the larger financial risk we face through the mandated prefunding of Retiree Health Benefits.

Clearly, the Postal Service is a viable business. Maintaining that status requires elimination of several legislatively-imposed constraints that hamper our ability to operate efficiently and profitably.

Specifically: 1) enable us to alter frequency of delivery consistent with use of the mail; 2) allow us to close unprofitable post offices; 3) restructure our obligation under a 2006 law to prefund retiree health benefits, an obligation not applicable to any other private or government entity; 4) permit us to create and offer products and services beyond mail; 5) assure that arbitrators consider the financial health of the Postal Service when agreement cannot be reached with our labor unions; and 6) resolve overfunding of our pension systems. Legislation has been introduced in Congress to address these issues.

We will need to take a much closer look at the ruling from the PRC in order to make an informed decision about what options we have and what may be the best course of action for our customers, our employees, our stakeholders and the American public.

The Postal Service ends the current fiscal year with approximately $2 billion cash and available credit, meeting all our end-of-year financial obligations, including a $5.5 billion payment to the Retiree Health Benefit Fund as required by law.

As we have stated repeatedly throughout the year, the Postal Service sought a deferral of this $5.5 billion payment to minimize the risk of defaulting on our financial obligations in Fiscal Year 2011. Unfortunately, no legislative action has been taken at this time.

The financial risk remains. We will carefully manage every dollar we spend in the upcoming fiscal year. Our current forecast shows that we will not have sufficient cash to make the $5.5 billion payment due on Sept. 30, 2011, and any major disruption, whether in volume loss or unforeseen circumstances, could cause us to default on financial obligations earlier in FY11.

In the midst of financial and regulatory challenges, the Postal Service achieved record productivity gains in 2010 and a reduction of over 100,000 career employees and cost savings of over $10 billion during the last three years.

As always, service to our customers remains our number one priority. No financial challenge or uncertainty will change that. We will continue to work with Congress and our stakeholders to implement necessary changes to ensure a viable Postal Service for decades to come.

John E. Potter

Postmaster General of the United States

CEO of the U.S. Postal Service

The Postal Regulatory Commission is to announce its decision in the “exigent rate case tomorrow morning at 11 EDT:

Washington, DC –The Postal Regulatory Commission invites press and interested parties to a short briefing on its decision in the U.S. Postal Service Request for an above inflation, “exigent” price increase for its market-dominant products. This is the first time that the issue of what is an “exceptional or extraordinary” circumstance will be decided under the Postal Accountability and Enhancement Act of 2006 (PAEA). Questions from the Press will be entertained following the briefing.

The Commission will announce its decision on a closely watched case, the Postal Service exigent price increase request filed on July 6, 2010, seeking to increase prices by an average of 5.6 percent on its Market-Dominant products, including, but not limited to, First-Class and Standard letters and flats, Periodicals, and Standard packages.

Under the PAEA, price increases for Market-Dominant products are capped at the rate of inflation as measured by the Consumer Price Index for All Urban Consumers (CPI-U). The Postal Service may request Market-Dominant increases above the rate of inflation, however, due to “extraordinary or exceptional” circumstances.

Commissioners and Commission staff

11:00 a.m., Thursday, September 30, 2010

Hearing Room
Postal Regulatory Commission
901 New York Avenue, NW, Suite 200
Washington DC 20268

From the Postal Regulatory Commission web site:

The Commission will meet in CLOSED session at 10 a.m. on Thursday, September 9, 2010 to consider Deliberations and Decision in Docket R2010-4, Rate Adjustment due to Extraordinary or Exceptional Circumstances. The Commission will hold an OPEN meeting at 2:30 p.m. on Friday, September 10 to consider and adopt its Fiscal Year 2012 budget. Both meetings will be conducted in the Commission Conference Room at Commission Headquarters, 901 New York Ave., NW, Suite 200.

via Postal Regulatory Commission: Home.

Press release from the Affordable Mail Alliance:

Union Challenges Existence of Postal Service Financial Crisis

Washington, DC – Underscoring the recklessness of the massive rate increase proposed by the United States Postal Service on July 6, American Postal Workers Union President William Burrus made clear on Friday that his Union does not believe the Service is currently in an unprecedented financial position. He made it clear that the Union will not back away from its contract demands during the current round of negotiations with the Postal Service, despite its supposed financial crisis. This furthers the case against the Postal Service request for a rate hike 10 times the rate of inflation.

“Mail volume is depressed and revenue is down, but we have faced similar circumstances before,” President Burrus said. “The history of the Postal Service is replete with forecasts of doom and gloom.” Click here to read or view President Burrus’ full statement.

A law passed in 2006 limits postal rate increases to the rate of inflation except when “extraordinary or exceptional” circumstances make a larger increase necessary for the Postal Service to continue operating “despite best practices of honest, efficient and economical management.” The Consumer Price Index has gone up less than 1 percent in the past year, the USPS is proposing rate increases of 10 times that rate. The Postal Service claims that its losses result from the “exigent circumstances” of the long-forecast recession and the long-term loss of mail volume to the Internet.

Also opposing the rate increase proposal is the Affordable Mail Alliance, an unprecedented coalition of more than 1,000 postal customers and trade associations representing the majority of the mail sent in the United States, who have joined together to strike down the rate hike. The Postal Service’s projected shortfalls are not the sole result of the recession or the increased use of the Internet, but the Service’s long-standing failure to control its costs. These chronic problems do not qualify as “exigent” circumstances under the law. Until the Postal Service deals with these long-term problems, any demands for above-inflation rate increases – in effect, a new tax on customers – is unwarranted and unproductive, and will likely drive away customers while exacerbating the Postal Service’s problems.

That is the central case put forward in multiple filings by the Affordable Mail Alliance with the Postal Regulatory Commission, the independent body that will decide early next month whether to allow the proposed rate hikes to take effect.

“President Burrus’ statements confirm that the Postal Service’s current condition is not the product of a sudden crisis,” said Jerry Cerasale, Affordable Mail Alliance spokesperson and Senior Vice President, Government Affairs of the Direct Marketing Association. “This is yet more evidence that a rate hike 10 times the rate of inflation is unnecessary and unproductive – for postal customers and the Postal Service itself. Such a rate increase would delay the cost controls and other reforms that are long overdue.”

He added that the Postal Service needs to do what most American businesses have been forced to do in the past few years: to make better and tougher decisions, offer services customers need, address workforce problems, and cut back on needlessly high spending.

Washington, DC – The Affordable Mail Alliance – a growing coalition of non-profits, Fortune 500 companies, small businesses, major trade associations, consumer groups, and citizens representing the vast majority of the mail sent in the United States – filed comments urging the Postal Regulatory Commission to help rein in the USPS’s excessive costs by denying the proposed rate hike.

“The Post Office needs to reevaluate their approach,” said Jerry Cerasale, Affordable Mail Alliance Spokesperson and Senior Vice President of the Direct Marketing Association. “Instead of trying to keep things afloat with a giant tax on consumers, the USPS should focus on improving management and controlling costs to get out of this mess. To do otherwise is just bad business.” Read the rest of this entry »

The Postal Regulatory Commission will begin consideration of the US Postal Service’s request for an “exigent” rate increase on Thursday September 9. On the next day the PRC will hold its regular monthly closed session- there will be no open meeting in September. The commission will then continue to meet on weekdays as needed until it comes to a decision on the request. The latest possible meeting date would be Friday, October 1.