Date Submitted: 11/2/2005

PRC Issues Rate Case Decision

The Postal Rate Commission today issued an Opinion and Recommended Decision generally supporting the Postal Service's April request for a 5.4% across-the-board rate increase. The decision essentially reflected the terms of the settlement reached between the Postal Service and most participants in the case.

Why are rates going up?

The Postal Service made clear since early this year that it had to file its request solely to generate funds to meet an escrow payment mandated by 2003 Civil Service Retirement System reform legislation. That payment is due on October 1, 2006, and, unless changed by Congressional action, further escrow payments will be required annually, and in increasing amounts.
Otherwise, although the agency has not raised rates since 2002, it has indicated it would need to do so sometime in 2007 to offset the impact of inflation on operating expenses, lately exacerbated by fuel cost hikes and their secondary effect on cost-of-living wage increases prescribed in postal union contracts.

When will rates go up?

Many intervenors had hoped that implementation of the higher rates resulting from the case could be deferred to mid-2006. Participants in the settlement negotiations tried to proffer their agreement in exchange for implementation no earlier than April, noting the relatively good condition of postal finances in mid-summer. However, the September hurricanes and the subsequent spike in fuel costs threatened to turn the black ink red and made deferral of additional revenue imprudent.

The Postal Service's Governors must vote on the PRC's Recommended Decision and are expected to accept it, given its alignment with the original USPS request. If such is their action, the Board of Governors would then set an implementation date that, traditionally, is sixty to ninety days later to allow time for the Postal Service and its customers to revise software and forms and make other preparations. Most observers estimate the date will be January 15, 2006, and others forecast the 1st or 8th, but everyone agrees the official selection will be known soon.

See chart on Rate Increase>>

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