Tuesday, October 12, 2010

When No News is Good News

Sometimes no news is good news. And this is one of those times.  Maybe.

No News is Good News!But first, the background, for those who need a refresher.  Several years ago the Post Office agreed to a plan that would tie postal rate increases to the Consumer Price Index or CPI.  The plan was that on January 20th  of each year, the GAO would announce how much the CPI had risen over the previous 12 months;  the USPS would see a rate increase of an equal amount five months later.

That was the plan.  It was simple, understandable, and roundly accepted as a rational approach to allow the post office to increase fees reasonably and predictably.

Then came the Great Recession, lower mail volumes, higher postal worker pension fund payments due and—amazingly enough—the CPI retracted 3.4%.

This was unprecedented.  The CPI had never gone backwards before. No one knew what to do.

Deer in the HeadlightsLike deer in the headlights, brilliant minds froze at the prospect.  The USPS couldn’t reduce postal rates.  The USPS was, after losing huge money quarter after quarter.  But they couldn’t raise rates either; the CPI-based formula wouldn’t allow it.

What was the USPS to do?

Turning confusion into confrontation, the Post Office sought a rate increase—a hefty 5.6% rate increase—and they wanted it not in May but in January, advancing the date by more than 5 months.

Citing escalating losses, USPS management went to the Postal Regulatory Commission (PRC) and asked—nay, begged—for a rate increase, citing “exceptional [exigent] circumstances.”

Extraordinary Recession
The PRC didn’t see things exactly that way.  Instead, the PRC soundly rejected the USPS’s plea, writing that “The Commission finds that the Postal Service has shown the recent recession to be an exigent [extraordinary] circumstance, but it has failed both to quantify the impact of the recession on its finances and to show how its rate request relates to the resulting loss of mail volume.  Therefore we unanimously deny its exigent rate request.”

While the PRC acknowledged there was a recession, and recognized that it had likely had an impact on the Postal System, the PRC had no option but to deny the rate increase because the USPS did not give quantifiable evidence.

The USPS bean counters and legal beagles blew it.

So that’s the no news.  Postal rates will stay the same for a while longer.

It’s good for mailers; it’s not so good for the USPS.

No comments: