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FOR IMMEDIATE RELEASE May 8, 2001 Press Release #01-046
SOME POSTAGE RATES TO RISE JULY 1
WASHINGTON — The Governors of the U.S. Postal Service today announced that they voted unanimously in closed session to modify the April 10 decision of the Postal Rate Commission (PRC). The original decision of the independent Postal Rate Commission (November 13, 2000) was allowed to take effect under protest January 7, 2001, pending further review. The rate schedule which had been implemented on a provisional basis in January will be replaced by the modified schedule on July 1. Under the new schedule, rates for a one ounce First-Class letter remain the same at 34-cents, but the charge for an additional ounce will now rise to 23-cents. Postcards will increase by one cent to 21-cents, the first increase in the postcard rate since 1995. "We take this action mindful of our statutory obligation to assure the financial integrity of the nation's universal postal system. As the officials responsible for matching revenue with costs, we found that the additional revenue is essential and is adequately supported in the record compiled before the Commission," said Robert F. Rider, Chairman, Board of Governors, U.S. Postal Service. The Postal Service is facing a loss this year that could exceed $2 billion due to a variety of factors, including a weakening economy and soaring fuel and personnel expenses. The Postal Service has taken a number of steps including cutting capital commitments by one billion dollars this year and freezing hiring for administrative positions and cutting programs and activity budgets. In addition, cost reductions totaling $2.5 billion through fiscal year 2003 have been targeted. Modified Postage Rates Effective July 1
[Note: This is a brief summary of commonly used rates affecting retail consumers. Other rate categories have also changed. MORE INFORMATION AVAILABLE AT http://www.usps.com/ratecase/. A complete listing of rate changes will appear in a future issue of the Postal Bulletin.] BACKGROUNDER
SETTING POSTAGE RATES 1. PROCESS OVERVIEW With post offices in every community in the country, the U.S. Postal Service is a remarkable organization that processes and delivers over 40% of the total world mail volume, visiting every household and business in the country daily. Last year, the Postal Service delivered over 200 billion pieces of mail! Even more remarkable, the Postal Service has not received any tax money for operating expenses since 1982. The entire cost of operating the system is paid for by the customers who use its services. Like all businesses, the Postal Service must periodically raise the prices it charges for its services to cover increases in the cost of doing business and to sustain high quality universal service. The process for raising prices is outlined under the Postal Reorganization Act of 1970, and follows several stages. The first step is for the Postal Service to file a rate request with the Postal Rate Commission (PRC), an independent body. The Postal Service proposes rates for the PRC to consider based upon its own thorough analysis of costs and projected mail volumes. The Commission then invites any interested party to comment and participate in a series of hearings. During these hearings, Postal Service customers, competitors, mailing groups, and members of the public have the opportunity to provide evidence and arguments to the PRC reflecting their respective concerns. Following lengthy review and rigorous scrutiny lasting up to ten months, the PRC recommends a decision to the Postal Service's Governors. The Governors then have three options to consider: they may approve the PRC recommendations; reject them; or allow them under protest. The scope of the rate process, which is mandated by law, is overwhelming. It took a 2.5-ton truck, filled with over 100,000 pieces of paper, just to meet the filing requirements. Testimony was submitted by 177 witnesses over a total of 41 days of hearings before the independent Postal Rate Commission. A total of 76 parties, ranging from loyal customers to tough competitors, intervened in the case. It is the Postal Service's mandate under law to break even over time. Each class of mail is also expected to cover its share of the costs, a requirement that causes the percentage rate adjustments to vary in different classes of mail, according the costs associated with the processing and delivery characteristics of each class. Since the Postal Service receives no tax dollars for operations and relies solely on the sale of postal products and services to cover operating costs, price adjustments are necessary to respond to changes in the cost of doing business. 2. ALLOW UNDER PROTEST The Postal Reorganization Act grants the presidentially-appointed Governors of the United States Postal Service several options to exercise in response to a recommended decision from the Postal Rate Commission (PRC) Decision. One of these options is to allow the recommended rates and fees to take effect under protest and return the recommended decision to the Commission for reconsideration (and a further recommended decision). The Governors elected this option in this case in their decision dated December 5, 2000, primarily because of their concerns about the Commission's treatment of the Postal Service's revenue requirement, as well as certain rate design and costing issues. This is not an unusual step for the Governors to take. A similar approach was taken in the 1980 and 1990 rate cases, and on a more limited basis in the 1994 and 1997 rate cases. There is no set time frame or deadline for the reconsideration process. To meet our revenue needs to the extent possible in the interim, the Governors authorized the Postal Service to implement the recommended rates and fees while the case was being reconsidered by the PRC. The Board of Governors (the nine presidential appointees and the PMG and Deputy PMG) established January 7, 2001, as the implementation date. 3. MODIFY In their Decision of March 6, 2001, the Governors rejected the PRC's second Recommended Decision in this case, which the PRC issued after reconsidering the Governors' "allowance under protest." The Postal Service resubmitted its request for a second reconsideration by the PRC. Upon receipt and review of the PRC's second reconsideration, the Governors may modify the next Recommended Decision if they find that the PRC's final recommendation would not provide sufficient revenues to cover costs. The PRC issued this Recommended Decision on April 10, 2001. In one other instance, in 1980, the Governors modified the Recommended Decision of the PRC in the Docket R-80. 4. HISTORY OF THE R-2000-1 RATE CASE STATEMENT OF ROBERT F. RIDER
CHAIRMAN, BOARD OF GOVERNORS UNITED STATES POSTAL SERVICE MAY 8, 2001 Yesterday, the Governors of the Postal Service unanimously approved a modification of the postage rate schedule put into effect, under protest, on January 7, 2001. The Governors had twice requested the independent Postal Rate Commission to reconsider its previous recommendations because they failed to provide enough revenue to cover costs as required by law. In acting on the Commission's second recommended decision on reconsideration, the Governors reluctantly decided to adjust the rates to make up a shortfall of about $975 million. We take this action mindful of our statutory obligation to assure the financial integrity of the nation's universal postal system. As the officials responsible for matching revenue with costs, we found that the additional revenue is essential and is adequately supported in the record compiled before the Commission. As provided by the law, the existing rates are adjusted only to the extent required to match the revenue requirement as found by the Governors. The specific rates and the rationale for all of the changes are explained in the Governors' Decision released today. In modifying the rates recommended by the Commission, the Governors exercise little discretion over particular rate levels. As nearly as practical consistent with the revenue need and the record in this matter, we have followed the costing and rate design decisions of the Commission as reflected in its recommendations. Our final decision in this proceeding comes 16 months after the Postal Service filed its request for new rates, and almost two years after the need was identified and work begun to prepare the voluminous testimony and supporting materials required for submission to the Commission. The modified rates will take effect after three-fourths of the "test year" employed to compare costs and revenues in the case has already passed. During the earlier part of this year, unfortunately, the more cautious economic forecast of the Postal Service's rebuttal witness in the case has turned out to be more accurate than the more optimistic forecasts of the witnesses followed by the Commission in its recommended decision. The cumbersome and difficult course of this proceeding demonstrates once again the need for structural reform of the Postal Service's underlying legislation. The public should be assured of a financially viable, dynamic postal system able to serve everyone, everywhere, in an increasingly dynamic and competitive environment. A more responsive and timely pricing system better attuned to changes in the market is needed to provide this assurance. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
