The Rate Increases Are Coming!

The following is a perspective by postal commentator Gene Del Polito for Direct magazine. The views expressed are solely the author's.

When the U.S. Postal Service (USPS) first announced that it would be asking for a straight-forward, across-the-board 5.4% increase in postal rates in its 2005 rate case filing, you could have heard a collective sigh of relief that the USPS was asking for more. The Postal Service made clear that its 2005 request was being made simply to cover the $3.1 billion payment it would have to make to an employee retirement-related escrow account. What too many people didn't hear was that the Postal Service intended to file yet another rate case in 2006 with an eye on raising rates yet again in 2007.

The 2006 filing will be neither "straight-forward" nor "across-the-board." In fact, mailers have come to call the R2006 rate case the "mother of all rate cases, largely because mailers expect R2006 to be a very complex case.

It's been a while since the Postal Service addressed (as it has always done in past rate cases) the various technological, operational, and economic developments that change the cost base for many services, and the manner in which those cost changes should be reflected in pricing. That's just one of the features one should expect to see in the next postal rate case. For sure, the schedule of services will change, the requirements for mailer worksharing will change, the recognition of worksharing in the postal rate structure will change, and the expected per-piece contribution mail makes to postal overhead recovery will change as well.

If there is any eagerness among mailers to put 2005 to bed, it's only because they know that they and the Postal Service will need time and resources to begin the work on R2006. That case will be burdensome in many ways not only to the Postal Service, but also to the many, such as PostCom, who represent mailer interests in such proceedings before the Postal Rate Commission.

But anyone who thinks R2006 will be followed by a prolonged respite from future rate cases needs to think again. R2006 will be followed by an R2007 and probabaly an R2008. About the only thing that will prevent those future "Rs" from happening is postal reform. Enacting a new postal law, however, won't do a thing to forestall the likelihood of annual postal rate increases. No, it will simply do away with the need to link rate increases to a lengthy, complex, and costly regulatory process.

The rate increases are coming! The rate increases are coming! Get used to them. They'll become fixtures in your future postal life.