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USPS can’t keep rate increase forever, court rules

REUTERS/Mike Blake/Files

The U.S. Postal Service will have to roll back a portion of its largest rate increase in 11 years after a federal court ruled that the higher postage prices in place since January 2014 can’t be permanent.

Postal regulators had agreed to a 3-cent emergency postage hike for first-class letters, to 49 cents from 46 cents, after the Postal Service said it needed to recoup billions of dollars it lost during the recession. The 4.3 percent increase came on top of the customary 1.7 percent postage prices have risen to adjust for inflation.

But regulators set a cap on the amount of revenue USPS could recoup with the higher prices. The cap will be reached this summer.

[Read about the historic rate increase ]

USPS and the industry representing bulk mailers filed legal challenges as soon as the price increase took effect, with mailers challenging the recession’s justification for higher rates and the post office — which had pressed regulators for a 6 percent increase — arguing that the hike should be permanent.

The U.S. Court of Appeals for the District of Columbia Circuit ruled that the emergency rates should not become permanent. The aftereffects of the recession have become “the new normal,” the ruling said — 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.”

But the court also said the Postal Regulatory Commission had acted arbitrarily in calculating that postal officials should collect about $3 billion from the rate increased, and told the commision to re-examine its methods. As of Friday, it was unclear when the rates will be rolled back and by how much.

“The continuation of the exigent pricing surcharge is critical to the Postal Service’s financial health…” Katina Fields, a USPS spokeswoman, said in a statement.

The mailing industry claimed victory.  “We are happy that the court rejected the Postal Service attempt to make a temporary surcharge last forever,” Stephen Kearney, executive director of the Alliance of Nonprofit Mailers, said in a statement. “Maintaining the affordability of mail will help ensure that our nation’s postal system remains healthy for years to come. Stamps should be forever, but not surcharges.”

Rolling back the price from 49 cents may be easier than it seems. While the price of a first-class letter jumped to 49 cents in January 2014, the Postal Service did not print new stamps to reflect the change. Instead, it relied on its popular line of “Forever” stamps, which now costs 49 cents instead of 46. With the court ruling, USPS will again revise the price of the Forever stamp.