Sept. 30 (Bloomberg) -- The U.S. Postal Service was denied a rate increase after its regulator said the agency failed to justify the request. The decision left first-class stamp prices unchanged at 44 cents and disappointed the postmaster general.
The Postal Regulatory Commission in Washington today said the service hadn’t made the case for its proposed average increase of 5.6 percent, compared with an inflation rate of 0.6 percent. The service said in July that the recession had cut mail volume and revenue.
“There will be no rate increases as a result of our decision for any class of mail,” Ruth Goldway, chairman of the regulatory commission, said at a Washington news conference.
Groups representing banks, magazine publishers and retailers praised the commission’s decision after criticizing the proposed rate increase and saying it may hasten a decline in mail volume.
The requests were “not due to the recent recession, or its impact on mail volume,” Goldway said. “Rather, they represent an attempt to address long-term structural problems not caused by the recent recession.”
The Postal Service will review the decision and consider additional options for remaining viable, Postmaster General John Potter said in a statement. The agency said it has $2 billion in cash and available credit, meeting its financial obligations.
“We are disappointed to learn that the Postal Regulatory Commission has denied our price filing,” Potter said. “We are encouraged by their acknowledgment and understanding of the larger financial risk we face through the mandated prefunding of retiree health benefits.”
The commission would be likely to approve a revised request from the Postal Service for an increase at about the rate of inflation, Goldway said. The Postal Service may raise rates annually as much as the rate of inflation.
The service has projected a deficit of $238 billion through 2020. Mail use has been dropping as customers use the Internet to pay monthly bills and read publications previously delivered by mail. Profitable types of mail are falling faster than less-profitable categories.
Today’s decision “has helped countless businesses stay competitive and saved tens of thousands of jobs,” Tony Conway, a spokesman for the Affordable Mail Alliance, said in an e-mailed statement. The group lists as members Time Warner Inc.’s Time Inc., mail-order pharmacy supplier Medco Health Solutions Inc., publisher Meredith Corp., direct mailer Harte-Hanks Inc. and printer R.R. Donnelley & Sons Co.
The higher rates would have been the first for the Postal Service in two years, the agency said in July. The Postal Service also is seeking approval from Congress to end Saturday delivery for the first time since six-day service began in 1863.
The Postal Service has also been trying to win permission from Congress to postpone required payments toward future retiree health benefits, Potter said Aug. 5. Goldway said today the service had spent $5.5 billion this year on the retiree benefits.
Senator Tom Carper, a Delaware Democrat, last week introduced legislation that would ease Postal Service pension and retiree benefit payment requirements and make it easier for the agency to close post offices or eliminate Saturday delivery.
Packages typically used to ship books, videos and merchandise faced an average increase of 7 percent under the request rejected today. The rate would have increased 23 percent for parcels under 1 pound, Maura Robinson, Postal Service vice president for pricing, said in July when the request was announced.
To contact the reporter on this story: Todd Shields in Washington at Tshields3@bloomberg.net.
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