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EcommerceBytes-NewsFlash, Number 2553 - May 30, 2011 - ISSN 1539-5065    1 of 3

Court Sends USPS Rate Hike Petition Back to PRC

By Kenneth Corbin
EcommerceBytes.com
May 30, 2011




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A U.S. court of appeals has dealt the regulatory authority that oversees the U.S. Postal Service a partial setback, ruling that it must re-examine its decision to block a proposed rate increase.

The U.S. Court of Appeals for the D.C. Circuit this week ruled that the Postal Regulatory Commission (PRC) erred in its decision to block a hike in mailing rates that skipped ahead of the pace of inflation as measured by the Consumer Price Index.

As a result, the court is ordering the PRC to re-evaluate its determination and explicitly address the impact of the recession and general declines in mailing volume that the Postal Service argued necessitated an unusually high rate increase.

By statute, the PRC is authorized to regulate rate increases, with the general presumption that mailing rates will move in step with the rise in inflation. But in this case, the Postal Service was seeking a so-called "exigent" rate increase, claiming that its dire fiscal circumstances warranted an above-inflation rate hike of roughly 5.6 percent.

In making its case, the Postal Service has cited the "dramatic, rapid and unprecedented decline in mail volume" over the last several years. The Postal Service has made the same argument in support of its proposal to drop down to five-day weekly delivery, a move that the PRC has argued forcefully against.

The Postal Service had issued its exigent rate increase request in July of last year. The PRC denied the request in September, prompting the Postal Service to take the matter to court.

With last week's ruling, the court agreed with the PRC that the Postal Service is required to clearly demonstrate the connection between the extraordinary circumstances and the financial health of the business. However, the court sided with the Postal Service that the lost revenues from the recession need not be quantified to match literally with the proposed rate increase.

As a result, the decision granted in part and rejected in part the Postal Service's petition, sending the matter back to the PRC to reassess the question of financial impact.

In a statement emailed to AuctionBytes, PRC spokesman Norm Scherstrom said the agency viewed the outcome as favorable, and that it would work to formulate a more precise set of criteria for the Postal Service to justify its rate hike.

"The commission is pleased that the court affirmed the commission's finding that a causal relationship must exist between the exigent circumstance and the amount of the proposed rate increases, and that the Postal Service failed to show that relationship," Scherstrom said. "The case will be remanded to allow the commission to exercise its discretion to clarify to what extent the Postal Service must show how proposed rate increases relate to the exigent circumstance's impact on Postal Service's finances."

About the Author
Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects for more than four years, most recently as the Washington correspondent for InternetNews.com, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn here .

About the author:

Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects since 2007, most recently as the Washington correspondent for InternetNews.com, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn here.

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