Panel rejects Postal Service request for postage rate increase

The panel that regulates the U.S. Postal Service denied a proposal to increase postage rates Thursday, blaming the agency’s business model for its recent financial hardships.

The Postal Regulatory Commission said in a news conference that the Postal Service had failed to justify the requested 5.6% increase.

In July, the Postal Service proposed increasing the price of first-class postage from 44 cents to 46 cents in an attempt to compensate for decreasing revenue and declining mail volume. This was the first time the panel considered a rate increase higher than the rate of inflation, commission Chairman Ruth Goldway said.

In August, the Postal Service reported a $3.5-billion net loss for the fiscal third quarter — $1.1 billion more than the same quarter last year.

The commission’s decision was unanimous among its five members, Goldway said. She said the commission acknowledged the decline in mail volume during the recession, but said she believed the rate increase was an attempt by the Postal Service to deal with the agency’s long-term structural problems.

Goldway said the Postal Service’s most pressing financial problem is the agency’s yearly $5.5-billion payment to a prefunded future retiree fund, which is required by law.

Postmaster General John Potter said he was disappointed by the decision but encouraged that the commission acknowledged the financial strain of the annual payment.

Congress denied the Postal Service a deferral for its latest payment, Potter said. The agency made the payment but still runs the risk of defaulting on other financial obligations without legislative action.

Postage rates have increased twice since new regulations were enacted in 2006. The regulations require rate increases to remain below current inflation rates, said Norman Sherstrom, a commission spokesman. Before 2006, rate increases were determined by a “break even” standard that required the rate to cover the Postal Service’s costs.

jsteffen@tribune.com

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