Postal Service Cannot Keep Emergency Price Hike Forever, Court Rules

Kathy Willens/AP

The U.S. Postal Service cannot indefinitely continue the emergency price increase that has been in place since January 2014, a federal appeals court ruled on Friday.

The Postal Service asked for and instituted the exigency rate in 2013, citing the effects of the recession on its business to justify the 4.3 percent increase. Under a 2006 law, USPS can only raise its prices by the rate of inflation except under extraordinary circumstances.

With significant controversy, the Postal Service argued the recession constituted such a circumstance, and its oversight body -- the Postal Regulatory Commission -- obliged, but set a cap on the amount of money USPS could bring in as a result of the higher prices. The mailing agency is set to hit that ceiling later this summer, and it challenged the need for the cap in court. The mailing industry argued the recession never should have justified a rate increase, while the PRC said it had decided correctly.

The appeals court sided mostly with the PRC, denying the USPS contention that the emergency rates should become permanent. Instead, the court said, the aftereffects of the recession have become “the new normal,” and the Postal Service must adjust to that reality.

“The Commission sensibly concluded that the statutory exception allowing higher rates when needed to respond to extraordinary financial circumstances should only continue as long as those circumstances, in fact, remained extraordinary,” Circuit Judge Patricia Ann Millet wrote on behalf of the appeals court. “The Commission permissibly reasoned that just because some of the effects of exigent circumstances may continue for the foreseeable future, that does not mean that those circumstances remain ‘extraordinary’ or ‘exceptional’ for just as long.”

The court also ruled, however, PRC had arbitrarily decided USPS could only count one year of revenue from a customer lost due to the recession when determining the cap for how much money the agency can collect from the emergency rates. The court remanded the “count once” provision back to PRC, instructing it to use a more evidence-based approach to determine the effects of a lost customer. If, for example, a postal customer lost his job and decided to cancel his cable television subscription, USPS would lose the business of the cable company mailing his bill for as long as he went without his subscription, not for just 12 months.

Both the Postal Service and the PRC said they were still reviewing the court’s decision and declined to offer any comments on it.

While the mailing industry called the decision good news, the court ruled against its argument that the recession was an invalid excuse for raising the rates in the first place. Despite that setback, Steve Kearney, executive director of the Alliance of Nonprofit Mailers, said the raised prices would now cost mailers closer to $3 billion rather than $60 billion.

“We’re very happy we won. The exigent surcharge should not be permanent,” Kearney told Government Executive. “That’s the main thing USPS was trying to accomplish.”

Peggy Hudson, the Direct Mailer’s Association’s senior vice president for government affairs, also applauded the decision.

“Today, DMA's position has finally been vindicated by the court,” Hudson said.

The court originally heard arguments in September, and postal stakeholders have been waiting anxiously in the months since for a resolution. The waiting game, however, is not yet over. In the coming weeks, PRC must decide not only how to better calculate the Postal Service’s losses from the recession, but also whether to cut off the higher prices in early August -- as originally scheduled -- while it determines that new calculation. 

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