Postal Service files case for rate hike

Stamps for First Class mail might soon cost 39 cents. The U. S. Postal Service on Friday filed paperwork with the Postal Rate Commission, a five-member panel charged with regulating postage rates, to request an increase of 5.4 percent for most categories of mail.

The agency prepared the filing in less than two months after its board of governors told the Postal Service to begin the process in late February. It aims to put new rates into effect in early 2006.

The Postal Service requested the rate hike despite strong first- and second-quarter financial results from high mail volume, due in part to catalog mailings and direct marketing by financial services companies.

The Postal Service operates on a break-even basis. In the past, it has raised rates every three years, making money the first year, breaking even the second and losing money the third. Richard Strasser, chief financial officer of the Postal Service, said in February that the agency expects to earn $1 billion in net income this year and break even next year.

But this rate increase is designed to cover $3.1 billion the Postal Service must put in to escrow beginning in 2006. If Congress were to intervene and release the agency from this obligation, the Postal Service would withdraw the request for the increase.

Because this rate hike would not cover any growth in operating expenses, industry experts fear that it could be followed by another increase in 2007.