Postal regulators deny request for rate hike

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By Ed O'Keefe
Washington Post Staff Writer
Thursday, September 30, 2010; 10:52 PM

Postal regulators Thursday denied requests by the U.S. Postal Service to raise postage rates in January beyond the rate of inflation, ruling that the mail agency's recent financial woes were caused by a flawed business model and not the recent recession.

The decision means a rise in stamp prices and other postage rates will not take effect in January as the Postal Service had hoped - at least not yet.

In July, it requested the right to raise postage rates on first-class mail, periodicals and other services beyond the rate of inflation. A 2006 law allows the service to file an exigent, or urgently necessary, case to raise prices that much if it can prove that "exceptional or extraordinary circumstances" warranted the increase.

Alhough the recession and recent declines in the volume of mail are "exceptional or extraordinary circumstances" that could justify a price increase, the Postal Service's long-term structural problems have caused recent budget shortfalls, the Postal Regulatory Commission said in its first ruling on an exigent case.

Regulators said, however, that the Postal Service could file another exigent case to raise rates, using different arguments.

"The Postal Service didn't make the case, didn't make the connection between the problems they suffered during the recession and the revenue they were requesting," the commission's chairman, Ruth Y. Goldway, said in an interview. The request seemed more part of the mail agency's 10-year business plan than one prompted by an emergency, she said.

Thursday's ruling came the day before the Postal Service is set to announce billions of dollars in losses in fiscal 2010 amid declining mail volume. It ends fiscal 2010 with about $2 billion in cash and available credit, said Postmaster General John E. Potter, who expressed disappointment with the regulators' decision.

"Clearly, the Postal Service is a viable business," Potter said. But he added that legislative constraints on the mail agency are hampering its ability to operate efficiently and profitably.

Potter is lobbying lawmakers for the flexibility to close unprofitable post offices and set delivery routes and pricing without seeking congressional approval. Senate Democrats unveiled a bill last week supported by Potter that might come up for consideration in Congress's lame-duck session, aides said. But Republicans oppose most of the proposals and are expected to introduce competing legislation soon.

Business leaders cheered Thursday's ruling.

The Affordable Mail Alliance, a coalition of major mail customers, was organized after the service proposed the rate increase. Its spokesman, Tony Conway, said Thursday's decision "has helped countless businesses stay competitive and saved tens of thousands of jobs."

"The commissioners recognized that imposing an additional tax on Postal Service customers is not the way to address its financial troubles," Conway said.


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