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01/19/2016

Exigent Rollback Anticipated to Occur in April

Postal Action Alert Banner 2015

The mailing industry was interested to learn that the long anticipated exigent surcharge removal could be upon us in early April 2016.   During last week’s Mailers Technical Advisory Committee (MTAC) meeting, Postmaster General (PMG) Megan Brennan told the group that the USPS currently estimates the exigency surcharge price rollback of 4.3% to occur the first week of April.   The PMG further committed to providing notification at least 45 days in advance, which she said would likely occur around the end of February.

When the rollback occurs, mailers are expecting to see the full 4.3% decrease in current postage prices due directly to the surcharge removal.   The Postal Service stated back in November of 2015 that it would not seek a general CPI increase on Market Dominant Products in 2016.

As background: 

  • In December of 2013, the Postal Regulatory Commission (PRC) granted the Postal Service’s request for an exigent rate increase to collect $2.8 billion in 2014 after-rates contribution (profit). The 4.3% exigent rate increase went into effect on January 26, 2014.
  • USPS PictIn July of 2015, the PRC responded to a court order and allowed the Postal Service to collect an additional $1.191 billion in contribution loss – or $1.396 billion in additional revenue. Therefore, the surcharge remained in the base rates and brought the total revenue lost “due to” the recession to $4.634 billion.
  • On January 15, the PRC issued an Order on the USPS’ surcharge revenue reporting. In the Order, the Commission directed the USPS to provide 45 days notice before the rollback and to begin providing bi-weekly estimates of the incremental and cumulative surcharge revenue beginning February 1, 2016.

Absent any court or legislative intervention, the postage rates for Market Dominant products will decrease by 4.3% in early April.

USPS’ Exigency Appeal

  • Last August, the Postal Service filed a petition with the DC Court of Appeals, seeking review of the PRC’s July 29 order that allowed the USPS to collect an additional $1.396 billion in surcharge revenue. On January 4, the Postal Service submitted its brief to the DC Court of Appeals in support of the appeal.
  • Industry and association legal experts continue to believe that the USPS does not have a strong case since the PRC followed the court’s orders explicitly. The above mentioned brief provided no new evidence or significant arguments to the contrary.
  • The Court’s procedural schedule calls for PRC briefs to be filed by February 3, but they are seeking a three-week extension.  As this drags on, it becomes less and less likely that the Appeals Court would act prior to the exigent rollback.

Legislative Outlook

  • In September 2015, Senator Tom Carper introduced a comprehensive postal reform bill titled “The Improving Postal Operations Service & Transparency Act of 2015” or iPOST. The rates provision of the bill calls for baked in exigency and a rates freeze until January of 2018.   However, to-date, the bill has only three co-sponsors and does not have the support of the committee Chairman.
  • This week, the Senate Homeland Security and Government Affairs committee is holding a hearing titled “Laying out the Reality of the United States Postal Service” with testimony from Postmaster General Megan Brennan and Acting PRC Chairman Robert Taub, among others.
  • As of today, there is no indication that the House is planning to introduce postal legislation in the near term.
  • The Postal Service, along with its unions and some from the mailing industry, continue to push for legislative reforms that include making the exigent surcharge permanent. At this point, no measurable progress has been made from these efforts.

RR Donnelley continues to participate in industry coalitions and advocate for sensible postal reforms that will enable a sustainable future for the Postal Service.

We offer a comprehensive range of mailing services that help you optimize your postage spend.  Please reach out to your RR Donnelley Account Representative to understand your most effective mailing strategies, as well as how best to take advantage of the exigent surcharge rollback.

RR Donnelley will continue to provide you with important updates as they become available.

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For additional information, or to discuss postal mailing strategies, please contact your

RR Donnelley account representative or find us on the web at www.rrdonnelley.com

 

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