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Postal Rates Expected to Remain Unchanged Until April of 2016

Fri, Jul 31, 2015

The PRC decision on Exigent Rates is released

The PRC just released its’ decision in the Exigency Remand and has ordered that the USPS is entitled to recover an additional 1.191 Billion in contribution from the 4.3% exigency surcharge. This means the surcharge is likely to continue for another 8 months longer than it would under the PRC’s Original Order, which would be in the April 2016 timeframe. 

The net result – postal rates will likely decrease. This is great news for mailers developing marketing and communication plans for 2016.

There are a number of questions and of course speculation on different impacts to the mailing industry and we have tried to answer most of them here. Universal Wilde and our team members will certainly stay on top of any additional information and will be certain to keep everyone informed.  

When will the 4.3% exigency increase end?

The PRC ruled that the USPS can recover an additional 1.191B in contribution (approximately 8 more months) beyond what was approved in the original order.  Based on the performance reports the USPS has been filing, and volumes and revenues for the past year, it appears the new limit will be hit in the March/April 2016 time frame.  

How will we know when the rollback occurs?

The PRC ordered the Postal Service to keep filing quarterly reports.  That allows the entire industry to “handicap” and guess the date when the rollback will occur.  Once the USPS is in the quarter when the rollback is due to occur, it must file monthly reports.  The USPS must give 45 days notice before the rollback rate change takes place.

Will there be a CPI case in 2016?

There isn’t a clear indication at this time. Anytime there is a rate change it is a “hassle.”  The required exigency rollback would be an opportunity for the USPS to file another CPI rate adjustment.  This would result in rates going down less than 4.3% across the board.  With the difference being the cumulative CPI from November 2014 through (probably) November 2015.  The USPS has to file any CPI rate change at least 90 days before it plans to implement a rate change.  If the USPS was “on target” to be required to rollback rates in April 2016, it would need to prepare and file its CPI case before the end of 2015 to satisfy time requirements.  With fuel prices declining, the CPI adjustments over the preceding 12 months, throughout 2015, have been going down with the most recently updated figure for July 17, 2015 showing .728%.

If the cumulative CPI rate authority is very small, the USPS may be less inclined to include a CPI increase with the mandatory rollback.  The USPS could choose to wait and file at a later date when the amount of the cumulative CPI changes, and permitted rate cap authority for a postal increase is more meaningful.

Is it really over?  Is there any way that this rate increase could last longer?

The exigency rate case proceeding seems to be over.  In its decision, the PRC refused to take up any of the new or different arguments the Postal Service was making to expand the case.  If the Postal Service had its way, the PRC would have revisited its original decision to determine when the recession ended.  The USPS was urging the PRC to find that the impact of the recession lasted much longer.  Under the Postal Service’s theory, an additional $10B of contribution, and an exigent increase that would have lasted an additional 6 years, was on the table.

By keeping its decision very narrow, the PRC Remand Order is not likely to lead to further proceedings or appeals.  The PRC also rejected an argument made by mailers to use a different approach to calculating the contribution lost.  The mailers had urged the PRC to look at the years during the great recession when the Postal Service showed it has sustained losses.  Had the PRC looked back to those years, the amount of contribution lost would be much less than the 2014 fiscal year figures the PRC had used in its original order.  The PRC did not touch any issue that was previously approved or accepted by the Court of Appeals.  By limiting its decision to the one error the Court of Appeals found, the Count Once rule, the PRC has made it very unlikely that further proceedings or motions will be brought.

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Categories: pricing, Postal Service