(December 30, 2013)
When the Postal Regulatory Commission dropped its little Christmas bomb on mailers last Tuesday of the full 4.3% exigent postage increase, Hamilton Davison and I had a lengthy “now what?” discussion. We both expressed a few words (unprintable here) and are still seething, as I’m sure you are. But having had a few days to settle down and at least partially absorb the full 219-page PRC order, there are at least a few positives we can take away from what’s otherwise an utter abomination.
With The Decision having come out during an on-and-off holiday week such as last week, we’re still working out our options to respond, and if practical how we will fight further. We’ve begun a dialogue with the ACMA Board of Directors as well as our coalition partners at the Affordable Mail Alliance (AMA), and will keep you posted as we evaluate our next moves.
For now at least, I’d like to evaluate the extent to which catalog mailers got screwed – and where we may have dodged a few additional bullets.
- ‘Underwater’ postal products were not dealt a larger increase: As if we didn’t have enough of a battle on our hands, we had to deal with the likes of Valpak and the Public Representative (a PRC-assigned staff member, who on a case-by-case basis participates in rate proceedings to represent the interests of the general public independently from the actual PRC) appealing to the PRC (lobbying to the PRC) to require higher-than-average increases for such alleged “underwater” products as Standard Flats (SF). ACMA and its partner organizations filed a strong brief describing why taxing SF further was completely inappropriate – fortunately, this did not happ en. All mail classes and products are being hit with the same 4.3% increase.
- Rates not built in permanently: In its ruling, the PRC said the exigent increase will expire within two years or sooner, not into perpetuity as the Postal Service had requested. Thus, it does not appear that the increase will be factored into the rate base of future price increases. The PRC has ordered the USPS to submit a plan by next May on how and when it will remove the exigent increase. The PRC could have given the USPS several more years; in fact, the USPS is considering challenging the ruling because of this. Not getting the 4.3% “baked into” the rate base forever is a significant victory.
- PRC left underwater surcharge alone: In rejecting Valpak’s argument, the PRC effectively declined to take an opportunity to go over the 1.05-times-CPI cap surcharge for underwater products. Also Mark Acton, one of the two commissioners (along with Chairman Ruth Goldway) who approved the increase (Commissioner Robert Taub dissented), made clear the limits imposed in his approval:
“In the system of ratemaking,” he said, “the price cap is the rule, and the exigent rate provision the exception. This exception to the price cap is, and must therefore be, narrow.” Acton also said that “financial uncertainty will continue its reign into the foreseeable future. Granting the Postal Service some or all of the pricing relief it seeks in this docket may help in the short term, but does not alter that reality. The Pos tal Service, regardless of the outcome of this exigent rate request, will face liquidity challenges in the near term.”
The PRC also indicated that it expects the USPS to adjust to “the new normal” of reduced mail volumes by continuing aggressive cost-reduction measures. Clearly, this is what is required lest we see further above average-rate increases in the future.
So Now What?
None of these points takes away from the fact that you’ll now have to budget for a little over 6% more in postage (the 4.3% plus the annual CPI-capped increase). We’re going to evaluate every alternative we have to overturn this ruinous decision, although by design it’s hard to overcome a regulatory decision in appeals court. But we won’t go down without a fight and will notify the industry once we have news to report.
The rate increase is set to take effect at midnight, January 26th (in case you’ve been wondering, that’s the very beginning of Monday, the 27th).
Vice President & Deputy Director
American Catalog Mailers Association
© 2013 American Catalog Mailers Association, Inc.