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EXIGENT RATE REMAND CASE

Donna-Hanbery-No-Caption-smWritten by Donna Hanbery | Saturation Mailers Coalition

Hundred of Pages, Thousands of Dollars ― All Over Two Words

Last year, the Postal Service tried to raise postal rates in its first “exigent” rate case. The statute governing the Postal Service caps rate adjustments to CPI except under “extraordinary” and “exceptional” circumstances. The Postal Regulatory Commission (PRC) found the Postal Service had shown it was facing some extraordinary and exceptional circumstances caused by revenue losses from the recession, but denied the requested rate relief on the grounds that most of the Postal Service’s problems, including its financial woes, were due to other structural problems, including the huge prefunding burdens for retiree health care costs. The PRC denied the Postal Service’s rate hike request on the grounds that it failed to show the proposed revenues requested, and the rates proposed, were “due to” the exigent circumstance.

 

 

The Postal Service took the case to the Court of Appeals. The Court of Appeals largely agreed with the PRC decision but sent the case back to the Commission with a mandate to the Commission to conduct an analysis to determine and define how closely the amount of any requested exigent rate adjustment must match the amount revenue lost as a result of the exigent circumstances. In other words, the Court of Appeals directed the PRC to define “due to.”

 

When it comes to legal proceedings, let alone rate and regulatory proceedings in Washington, two words can result in hundreds of pages of legal argument and thousands of dollars in legal expense.

 

It was expected that the Postal Service would argue for a looser, more relaxed connection between any extraordinary or exceptional problem it might be facing and the resulting revenue and rate increases it might request. What was not expected, and surprised and angered many in the mailing industry, was an apparent request by the Postal Service to re-open last year’s exigent case to allow the Postal Service to seek anywhere from $2.3 billion to $6 billion in lost revenues. In the Initial Comments filed by the Postal Service before the PRC it provided several tables of figures purporting to show the appropriate “recession related” losses of revenue and contribution that were “due to” the harm the Postal Service suffered by the exigent circumstances of the recession.

 

The Comments pointed to the range of numbers and proposed that the PRC accept, and approve, that the Postal Service was entitled to the $2.3 billion lost revenue as the minimum amount that was “due to” the exigent circumstances of the recession.

 

Many parties to the remand case proposed a strict interpretation of the words “due to.” The Saturation Mailers Coalition filed Comments urging that the Commission to interpret the statute to require that any additional revenues sought by the Postal Service must be limited to amounts that are due solely to the exigent circumstance, based on a reasonable estimate of the actual financial harm caused solely by the exigent circumstance, factoring out the effects of non-extraordinary factors. Numerous other parties filed Comments, including Senator Collins, the author of the statute the PRC is charged with interpreting. Collins urged the Commission to “apply a strict standard of insuring that the Postal Service’s proposed rate increases are quantitatively, demonstrably, and causally linked to the exigent circumstances.”

 

Everyone was ordered to file initial Comments at the same time. Predictably, many in the mailing industry cried foul when it appeared the Postal Service was trying to take another bite at the apple by reopening the exigent case from 2010. Motions were filed with the PRC asking the PRC to dismiss any request by the Postal Service to expand the scope of the Court of Appeals mandate. The PRC responded by asking parties to limit their initial filings to addressing the question of interpreting the meaning of the “due to” statutory language. As of the writing of this column, the PRC has not determined how it will handle any new information or rate request filed by the Postal Service.

 

As rumors have circulated that the Postal Service was seeking to get an exigent increase of 4% on top of a CPI increase except for January, the Postal Service’s subsequent filing of Reply Comments with the PRC suggest that this is not the Postal Service’s plan. Postmaster General Pat Donahoe has made repeated statements to the industry that it is his intention to keep rate adjustments for 2011 and 2012 within the CPI rate cap. In a footnote to the USPS Reply Comments, the Postal Service explained that its fight to justify that it was entitled to a revenue increase of $2.3 billion for exigent harm, is coincidentally equal to the sum of the 1.7% rate increase it implemented in April 2011 and an increase of 2.1% to 2.3% that it plans to implement in January. It appears the Postal Service is fighting to have the right to increase rates in January 2012 in the range of 2.1% to 2.3% as an “exigent” increase. This would give the Postal Service the right to “bank” its unused CPI authority for a future rate adjustment.

 

Confused? Join the club. The Postal Service, the industry, other postal stakeholders including the Commissioners at the PRC (and legions of lawyers) will be spending a lot more time, effort, and dollars trying to sort out what this all means for the present and future in terms of ratemaking authority and precedent. For now, it appears that mailers can probably take some comfort in the continued assurances that have been made by Postal Service management that it wants to improve the customer experience, retain and attract business mail volume, and keep rate adjustments in 2012 to a January CPI increase.

 

Donna E. Hanbery, Executive Director

Saturation Mailers Coalition

33 South Sixth Street, Suite 4160

Minneapolis, MN 55402

(612) 340-9350 Direct Line

(612) 340-9446 Fax

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