This week, the U.S. Court of Appeals for D.C. Circuit released its long-awaited decision on the United States Postal Service (USPS) exigency case. In general, the decision provides very good news for the mailing community by agreeing with our assessment that the 4.3% exigent–emergency—rate increase adopted in 2013 should not be made permanent.
Shortly after the case was filed, SIIA-ABM joined in filing a legal brief urging the court to rule against a permanent application of the rate increase. In summary, the Court upheld the Postal Regulatory Commission (PRC) decision in part, and remanded the decision in part for further consideration by the PRC. The Court’s key findings are as follows:
1. The court agreed with the mailers that an exigent rate increase cannot go on forever.
2. The court also upheld one of the two standards adopted by the Commission to limit the duration of the exigent surcharge, the “new normal” standard.
3. The court found, however, that the second limiting principle adopted by the Commission – the so-called “count once” standard, which limited recovery for volume losses to a single year – was arbitrary and capricious.
4. The court denied the mailers’ separate appeal, finding that the mailers’ challenges involved econometric issues whose resolution was entitled to judicial deference.
What does this mean for the 4.3% increase? As usual, it’s hard to fully interpret the outcome of this court case, particularly because it is a split decision. Again, the most important issue was whether the rate increase would be applied on a temporary or permanent basis, and on that issue we prevailed.
In remanding the case back to the PRC to further determine the amount of the loss, it is unclear how this will play out—e.g. to what extent it will lead to additional temporary rate increase. The lost mail volume and revenue during the recession was the basis of the USPS request for the rate increase, and it was also the basis for the PRC to allow the increase, on a temporary basis, in order for the USPS to recoup the lost revenue. The USPS contends that the full revenue loss was not accurately measured initially, and therefore is likely to seek some additional rate increase to fully recover that loss. It appears this amount will be up for recalculation per the Court’s decision.
Prior to this decision, the 4.3% rate increase was scheduled to dissipate in August of this year. With this ruling, it is now possible that the increase will be extended a bit longer, but still just temporarily. Or, possibly, the 4.3% will be dissipated in August as scheduled, but after the USPS and PRC are able to more accurately determine the complete revenue loss during the recession, rates could increase again at a rate and duration that isn’t now known.
We will provide more information on this as it becomes available.
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