The U.S. Postal Service proposed on Wednesday to increase its rates more than the standard, inflation-based cap that typically constrains price bumps, citing its financial condition and the uncertainty of legislative action to justify the emergency measure.
Known as an “exigent rate increase,” the Postal Service Board of Governors must demonstrate to its regulatory body -- the Postal Regulatory Commission -- “either extraordinary or exceptional circumstances” that require higher rates.
“Of the options currently available to the Postal Service to align costs and revenues, increasing postage prices is a last resort that reflects extreme financial challenges,” Mickey Barnett, chairman of the board, wrote in a letter to postal customers.
Barnett added USPS would “reconsider its pricing strategy” if Congress passed a comprehensive postal overhaul bill.
This marks the second time the Postal Service attempted to raise its rates above the normal amount, which is tied to the Consumer Price Index. In 2010, USPS argued the economic recession necessitated an exigent rate increase, but the PRC rejected the proposal. The commission found the Postal Service did not adequately demonstrate its financial condition was due to the struggling economy.
The new prices would go into effect Jan. 26, 2014. Under the proposal, the price of a stamp would increase three cents, to 49 cents. The Postal Service said if implemented, the new rates would generate $2 billion in revenue.
Postal stakeholders, such as the magazine and direct mailing industries, organized in 2010 to defeat the proposal and have again taken collective action to campaign against the plan. At a recent Senate hearing to discuss postal reform, private industry leaders said any large price increases would prove counterproductive, as they would drive away more business than the added revenue would cover.
Rep. Darrell Issa, R-Calif., author of the House Republican-backed postal reform bill and chairman of the Oversight and Government Reform Committee, said he “empathizes” with USPS’ decision, but it is ultimately the wrong one.
“Today’s rate increase is a desperate cry for help from an insolvent Postal Service,” Issa said in a statement. “Revenue and volume are down dramatically and our mail delivery service, hamstrung by congressional mandates and onerous labor contracts, has been unable to sufficiently reduce costs.”
He added the announcement is a direct result of Congress’ inability to overcome those who wish to keep the status quo, but that bipartisan, bicameral compromise is “within reach.”