What the Exigent Increase ruling could mean for postal rates in 2016

Yesterday, the Postal Regulatory Commission (PRC) made a final ruling on the exigent increase that we have been following over the past 2 years:

• January 2014 – PRC approved a 4.3% Exigent Increase to cover the losses the USPS incurred from the Great Recession (2008-2011). Surcharge is to last 2 years or until losses are covered at a total of $2.766 billion.
• January 2014 – USPS appeals PRC ruling that the Exigent Increase should be a temporary surcharge. (Filed with the U.S. Court of Appeals)
• June 2015 – U.S. Court of Appeals issued a ruling on the appeal. The Court agreed that the Exigent Increase should be a temporary surcharge; however they disagreed with the method by which the PRC used to calculate the sum of money lost due to the recession. The Court pushed the case back to the PRC to use a different method of calculation to determine the true loss; which would be greater than the original $2.766 billion.

On July 29th 2015, the PRC ruled that after recalculation, the Postal Service is entitled to an additional $1.191 billion, which puts the total Exigent recovery at $3.957 billion. The Postal Service is very close to recovering the initial $2.766 billion, which took about 19-20 months to collect at a 4.3% surcharge. Based on the initial recovery time, the Postal Service will likely collect the additional $1.191 billion in 8 months. Therefore, by Spring of 2016, the 4.3% Exigent surcharge should be removed, thus bringing some financial relief to the mailing industry.

There are still some questions that Production Solutions continues to follow, and will keep you updated on as more information becomes available:

1. Will Congress ever write new postal legislation to strengthen the Postal Service’s financials? If so, when and how will it change the predictability of postage rates (or lack thereof)?
2. Will we have another CPI increase in January 2016? Or, will the Postal Service wait until Spring 2016 and remove the Exigent Surcharge and add another CPI adjustment?

You can read the full PRC decision on their site and feel free to contact a member of our Client Relationship or Business Development teams if you have questions.