Next round in the exigent case: USPS seeks five-year extension of surcharge; the mailers say enough is enough

June 26, 2015

Today was the deadline for submitting initial comments to the Postal Regulatory Commission concerning the exigent rate increase after the case was remanded by the US Court of Appeals in its June 5th ruling.  Judging by the comments, this case is far from being settled.  The Postal Service is looking to extend the surcharge for almost five years, while the mailers want to see it end in August.

Comments were submitted the by the Postal Service, the PRC’s public representative, two postal workers unions, and several of the mailers.  (There's more about the court's ruling in this previous post, and the comments filed today can be found in PRC docket No. R2013-11(R).)

The main question on the table is how much additional revenue the Postal Service should be allowed to take in through an extension of the exigent surcharge.  Under the Commission’s previous order, the maximum was $2.8 billion in contribution (profit), or about $3.2 in gross revenues.  That limit will be reached in mid-August.

The Court of Appeals vacated a portion of the Commission’s order (the "count once" rule used by the Commission to determine the losses) and sent the matter back on remand.  As the comments filed on Friday indicate, there’s a wide divergence of opinion about how to interpret the court’s ruling — and that’s putting it mildly.

In its comments, the Postal Service offers three sets of calculations responding to the court's ruling.  According to the first set, the Postal Service says it is entitled to $1.2 billion more in contribution, which would extend the surcharge for about eight months.  That calculation is based on the premise that losses in one year carry over into the next until the "new normal" is reached, which the Commission said occurred at the beginning of FY 2010 for Standard mail and FY 2011 for First Class.

But that’s just the minimum. The Postal Service goes on to make a case that the "new normal" actually didn't occur until FY 2013.  Based on that idea, the losses due to the recession were 105.7 billion pieces of mail and $11.4 billion in contribution.  That translates into an additional contribution of $8.66 billion, which would extend the surcharge for almost five more years.

USPS releases May 2015 financial statement

June 24, 2015

The Postal Service has released its financial statement for May 2015.   There’s some good news and some not so good.

Compared to May 2014, volumes and revenues for First Class, Standard, and Periodicals are all down, generally about 5 percent.  For market-dominant mail overall, volumes and revenue are both down 5.2 percent.  

That represents a somewhat steeper decline than previous months during this fiscal year, but the Postal Service notes that there was one fewer retail day this May than last, which probably explains at least some of the drop. 

The good news is that Shipping and Package Services continue to climb.  Compared to last May, volume is up 15.8 percent and revenue is up 12.5 percent.

For year-to-date (the first eight months of FY 2015), volume is down 0.7 percent, and revenue is up 1.7 percent.

For the month of May, the Postal Service posted a small loss of $126 million in Controllable Operating Income (compared to a loss of $70 million last May). 

Overall, the Postal Service would continue to show a profit if it weren't for the $5.5 billion it's supposed to be paying to the Retiree Healthcare Benefit Fund (RHBF).  For the year-to-date, the Controllable Operating Income is $1.49 billion.  That’s up from the same period last year, when there was a profit of $1.28 billion.

Figuring in the RHBF expense ($3.8 billion so far this year) and a worker’s comp adjustment, plus some interest income and expense, the financial statement shows a net loss of $2.778 billion for the year-to-date.  That’s better than the same period last year, when the loss was 3.469 billion, but it will probably still be cited as further evidence that the Postal Service is in trouble.

The May financial statement can be found on the PRC website here.

APWU takes PRC to court over service standards

June 23, 2015

The American Postal Workers Union has taken the Postal Regulatory Commission to court over its decision to dismiss the union’s complaint that the Postal Service is failing to meet its service standards.

As explained on the USPS website, these service standards, as set forth under 39 C.F.R. § 121.1, state how long it will take the mail to be delivered, e.g., two days, three to five days, and so on.   Since 2012, the Postal Service has relaxed these standards two times as part of its Network Rationalization plan to consolidate processing plants — once in July 2012 (when some overnight mail was eliminated), and again in January 2015 (when the rest of overnight mail ended).  

There is mounting evidence that the Postal Service is not meeting even these more relaxed standards, and the APWU has been trying to get the PRC to do something about it.  But each time the APWU has filed a complaint, the Commission has dismissed it.  Now the APWU is looking to the DC Circuit Court of Appeals for relief.


Complaints and dismissals 

The APWU has been filing complaints about the Postal Service's failure to meet its service standards for almost two years.  (The materials can be found in PRC Docket No. C2013-10.)

In September 2013, the APWU filed a complaint with the Commission saying that the Postal Service was not meeting the new standards established in July 2012.  In November 2013, the Commission dismissed the complaint (in part). 

In December 2013, the APWU filed an amended complaint, and in February 2014, the Commission dismissed it as well. 

In March 2014, the APWU filed a motion for reconsideration.  It took months for the Commission to act on the motion, but on May 27, 2015, it dismissed the complaint for a third time. 

Two days later, the APWU filed a petition challenging the PRC's order with the U.S. Court of Appeals, District of Columbia Circuit.  Last week, the APWU followed up with a short “Statement of Issues to Be Raised” that previews the arguments it will make in the case.

These arguments echo points made by Commissioner Ruth Goldway, the former chair of the PRC, in her dissenting opinion on the Commission's order dismissing the complaint.  Goldway believed that the Commission should have heard the complaint, and the union will probably be quoting her opinion as it proceeds with its appeal.


USPS, APWU, and mailers respond to the court's ruling on the exigent case

June 12, 2015

This week the Postal Service, APWU, and several associations of mailers filed briefs with the Postal Regulatory Commission responding to the DC Court of Appeals’ June 5th ruling on the case of the exigent rate increase.

On Monday the Postal Service filed a motion asking the Commission to suspend the removal of the exigent surcharge, which is due to occur sometime in August.  Yesterday the APWU filed comments supporting the motion, while the mailers filed comments urging the Commission to deny it.

The Court of Appeals affirmed most of the Commission’s 2013 order granting a 4.3 percent exigent rate increase, but the court vacated a key part of the order, namely the way it had counted each year’s losses only once. 

The court said that the losses should be counted again in the following year(s) until the Postal Service could be expected to have adapted to the “new normal” of lower volumes.  (There’s more about the court’s ruling in this previous post.)

The Postal Service's motion argues that since the total amount it will be allowed to take in with the surcharge is inevitably going to be increased substantially, the Commission should allow the surcharge to continue beyond the limit previously authorized, $2.8 billion in contribution (profit). 

The Postal Service's motion provides an analysis showing that correcting for the “count once” flaw in the Commission’s order would increase the amount of money lost “due to” the recession by nearly $1.2 billion, bringing the total to about $4 billion in contribution.  That would extend the period for the surcharge to next March or April.

The Postal Service's motion also indicates that it intends to argue that the maximum allowed for the exigent increase should be even larger.  The motion does not say how much more the Postal Service will be seeking, but in a brief filed during the court case, the Postal Service said that it could deserve as much as $3.8 billion more, which would extend the surcharge for at least two more years.

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