Regulators Deny Proposed USPS Rate Hikes

Earlier this summer, we wrote about the Postal Service’s proposal to stay even partially solvent by raising rates on first-class mail and small parcels. Alas, the USPS will now have to go to Plan B (which we’re pretty sure involves selling lemonade and washing cars) to increase revenue, after regulators slammed down the hammer of denial on the rate hike.

Yesterday, the Postal Regulatory Commission, which has to approve any rate increases at levels higher than the current rate of inflation, said that USPS had “failed to justify” the exorbitant hike.

Said the PRC Chairwoman:

The Commission finds that the Postal Service has shown the recent recession to be an exigent circumstance but it has failed both to quantify the impact of the recession on its finances and to show how its rate request relates to the resulting loss of mail volume; therefore, we unanimously deny its exigent rate request

USPS had been banking on the increases to bring in around $2 billion in revenue in the first three quarters of 2011.

PRC Denies Postal Service Exigent Rate Request [PDF]

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  1. Loias supports harsher punishments against corporations says:

    Simply cancel Wednesday service. Who really NEEDS their mail on Wednesdays?

    • Pax says:

      But, it’s really not that simple.

      The only way that would save money, is if you reduce the hours – and thus, the PAY – of everyone involved in the delivery or receipt of mail. That doesn’t sound like a particularly bright idea, especially in a recession.

      Also: many courts are open on Wednesday. Many government agencies are open on Wednesday. If you absolutely, positively have to have something in their hands “before Thursday”, and it’s Tuesday … at least now, you have the option of paying for Overnight Express delivery.

      If they DO cut out a day, they should cut Saturdays, not Wednesdays.

      • Loias supports harsher punishments against corporations says:

        But then you have a 2 day gap in service. Plus, Netflix users rely on Saturday service, and that company is helping to keep the USPS solvent.

        Another, slightly more complicated option, is to have “rolling blackouts” in each zipcode. Certain reagions would be blacked out on a certain day a week, and perhaps those change evert few weeks. So, my zip code might be closed on Tuesdays for a month, then Wednesdays next month, etc. You could easily make government buildings exempt (to handle your courhouse issue).

        It could reduce the number of workers without reducing the number of hours.

        • Gulliver says:

          Rely on Saturday delivery? Come on now. You can’t go a whole two days without a netflix movie? They stream them you know? Just an aside about this, if you take into account the time value off money, an extra day without a check for some businesses could be vital. I worked for a $500 million company. The translated dollar figure for each day AR was outstanding was something in the neighborhood of $5 million dollars.
          I also what will happen to the person who sends in the credit card payment, that is due on Wednesday, and oops, no service that day. It posts on Thursday with that $40 late fee, which then has a over limit fee of another $40.
          Every plan has flaws. I would allow the postal service to charge what it wants. Raise the rate to 55 cents. That same envelope from Fed ex will cost over $10

        • MMD says:

          A constantly changing schedule of when we can and can’t expect to receive mail delivery? Really?
          Recipe for chaos. Any cost savings would likely be offset by the number of new call center reps the USPS would have to hire to handle the constant questions about when mail might or might not be delivered.

      • Tim says:

        As far as I recall, the proposal was only to cut normal delivery on one day, and to leave Express service that day … kind of like they do now with Sunday. I think.

        Nonetheless, if it’s that critical, use FedEx or UPS.

      • Griking says:

        If anyone absolutely needs to have something delivered on a specific day there are other carriers that can provide that service.

      • SunnyLea says:

        The problem with cutting Saturdays is that while there are other (if more expensive) options for weekday delivery, cheap Saturday delivery is one of the few real advantages the USPS can claim.

  2. SG-Cleve says:

    My plan:

    Deliver to homes three days per week. Half the homes get Monday-Wednesday-Friday, half get Tuesday-Thursday-Saturday. This cuts the number of carriers in half for home delivery.

    Every proposal I have seen that cuts delivery to three days says that everyone gets mail on the same three days, which does nothing for the number of carriers.

    Businesses would receive mail Monday through Friday, eliminating the need for a bunch of weekend carriers.

    • Dover says:

      I would like to add to your proposal and suggest that the look into delivering Priority Mail 7 days a week, much like Express Mail. This would be a real value-added service and would give the USPS a cost-effective edge over other parcel services.

    • kcvaliant says:

      Better yet. Quit giving out pennies on the dollar deals to large corporations and spam companies. Then you can cut out a day from having to deliver half the amount of mail and still make more money.

      • BStu78 says:

        That’s absurd. Bulk mail gets discounted for the same reason buying stuff at Costco is discounted. And the most generous discounts are given to mailers who actually opt to do a big chunk of the post office’s work for them. Its actually a good way of reducing expenses. Mailers can often do sorting more cost efficiently than the post office, so the post office LETS THEM and discounts their rates accordingly.

        The reason you can send a letter from Miami to Seattle is BECAUSE of bulk mailers whose business justifies the regular service. Bulk mail actually benefits people in ways telemarketing and email spam does not. The infrastructure to support it benefits us all. They WERE planning on raising rates on bulk mail, too, so its not like they weren’t going to be impacted. The notion that they should bare the brunt of the costs is just foolish and makes no considerations to reality. Bulk mail is currently a good way to promote a business and to do business. But that’s already changing. If the post office were to penalize bulk mailers, that would only hasten the process of transition to other mediums and we’d all lose. Postage rates would have to skyrocket and service would evaporate. It is not just in the Post Office’s interest to maintain a health bulk mail segment, its in all of our interests.

        • physics2010 says:

          Mail isn’t sorted by hand anymore until it gets to the local office so discounting presorted mail doesn’t make too much sense anymore. The bulk of the cost is still delivery, not presorting. The cost break is only to ensure a continous source of data.

    • kcvaliant says:

      Better yet. Quit giving out pennies on the dollar deals to large corporations and spam companies. Then you can cut out a day from having to deliver half the amount of mail and still make more money.

    • bananaboat says:

      My exact thoughts for a long time. Alternate day residential delivery should cut half the mail carriers. Of course knowing USPS they’ll just keep the same number of carriers, work them just three days per week and continue paying them full 6-day pay!

  3. TandJ says:

    Is the problem too many expenses rather than not adequate inciome?

    How many of us have envied our friends that work for the U S Postal Service for their great pay and even better benefits. And yet, most of them were unhappy. Money is not everything but postal employees got more than their fair share of it.

    Management needs to do more than lip service to cost containment. If it is a General Motors type of bankruptcy but with real termination of bloated union contracts, no-bid contracts, and such; than do it.

    It is time for reality in government and quasi-government agencies.

    Going Postal on waste is needed.

    • Dover says:

      +1 for last sentence.

    • HogwartsProfessor says:

      I have to agree with this. Employee benefits aside, there have to be ways they can cut back. I would suspect they don’t and never have. They don’t HAVE to since traditionally they can always fall back on a rate hike.

      Well now they’ll have to trim the fat from their budget just like the rest of us.

      • stanner says:

        Yeah, because everyone knows a service that sends a letter anywhere in the country for 43 cents is full of fat. That’s why commercial services do it for so much less. Wait, I mean so much better. No wait, um. Damn, they actually do a pretty efficient job already.

    • Gulliver says:

      The major problem is the USPS is treated as a separate private business, but is handcuffed by laws and begging for rate increases. They also MUST by law contribute cash to their pension fund in advance, unlike a private company. The amount a postal worker makes is not what is causing the problem. The reduced volume is the problem. The economies of scale kick in when a postal carrier is delivering 10 items to an address, but now they may only deliver 3. The same concept works for grocery stores. A customer buying 100 items is always more profitable than the guy buying one. The part I find funny is people complain about the expense, but you can deliver a first class letter from Miami Florida to Seattle Washington for 44 cents from DOOR TO DOOR. I’d say take the rate to 55 cents and it is still a bargain.

      • Silverhawk says:

        Yes, but have you priced out anything that isn’t a First Class letter lately? Their prices are astronomical. Mailing a couple of passport applications was over $20 for less than 5 ounces of 8.5×11″ paper. I could have spent another $5 and sent them via FedEx (if not for a PO Box), and I would have had REAL tracking, and it would’ve gotten there in a day instead of nearly a week.

  4. Foot_Note says:

    hmm, does netflix etc pay the real rates? ie; does the usps lose money, or make money on that type of service?

    • Tongsy says:

      I doubt they pay the full rate, but I also doubt USPS loses money because of them.

      • Foot_Note says:

        well i just wondered if, part of the reason netflix makes money, is cuse they arent “paying” real shipping rates, etc

        • Sepp_TB says:

          Part of the reason Netflix makes money is it simply stops sending you DVDs if you utilize the service too much. Google ‘Netflix Throttling’ and you’ll see plenty of examples. Basically, they take your monthly rate, figure out how many times it can ship to you until you’ve exhausted your rate in postage, and ships you just less than that. If you build up a reputation as a high volume user, they’ll stagger you right from the start. They probably get a discounted postage rate, most bulk pre-paid customers do, but not so much its bankrupting the USPS.

  5. Fubish says: I don't know anything about it, but it seems to me... says:

    I know people are going to start bashing the USPS, but let me tell you, the US has an incredibly good postal system compared to the rest of the world. And it’s CHEAP! Over the years in my travels and business I have dealt with mail systems in virtually every country in Europe and many other countries in South America and Africa and the USPS pretty much outshines them all. Maybe they ain’t the best, maybe they ain’t the worst… BUT they are consistently good. I think Americans have a very, very high level of expectation with the post office and sometimes when something get screwed up they blame the entire system. I think we ought to count our blessings

  6. teke367 says:

    “We don’t have to abide by regulators, we’re the Post office”

  7. Fumanchu says:

    I agree with the denial of a price hike, the usps needs to increase usage to be more profitable. Raising prices will just hasten the downfall of snail mail. They need to focus on raising revenue through things like the flat rate program.

  8. apd09 says:

    which we’re pretty sure involves selling lemonade and washing cars

    I hope they get a business permit from the local government first, otherwise they are running an illegal business.

  9. EZ says:

    Maybe the USPS should cut off the pension system instead and tell their employee base to actually BANK some money instead of relying on the company to foot their expenses in their retirement.

    • Gulliver says:

      Oh you mean break the contract the employee made? How about I get you to work for my company, tell you I will pay you $10,000 a month, then AFTER you start working, I decide, you know what, I am giving you a pay cut to $1,000 a month. Of course, you will find out when I give you your paycheck. I will respond, you should have banked what you made before.

    • Dover says:

      USPS employees are on FERS (Federal Employee Retirement System), which require employee contributions. It is a very generous program, but it still depends on employee contributions just like 401(k)s and other retirement plans.

  10. Straspey says:

    You know that USPS truck which stops in front of your house while a friendly USPS delivery person brings you that special package which you’ve been waiting for ?

    Well…

    Now your regular mail-delivery person will simply leave a notice in with your regular mail informing you that there’s a package waiting for you to pick up yourself at the post office, which closes at 4:30 PM and 2:00 PM on Saturdays.

    Oh – and…Don’t forget to bring along a proper photo ID.

  11. Dover says:

    In 1885, a letter cost 2¢ to mail. With inflation, that would be 47¢. Sounds like, over a large time span, they’re rates have increased at less than inflation. I’m cool with the rate hike.

  12. Beeker26 says:

    Exactly. If the volume of mail is down then they need less employees. Time to start laying off and offering early retirement. We all know that postal employees, much like auto workers, really get paid well above and beyond the norm, so perhaps it’s time to bring them down a few dozen notches.

    • Dover says:

      How do they need less employees? It takes the same person to run a delivery route whether each customer has 1 or 20 pieces of mail. Sure, they’d need a few less sorters and window clerks (though my post office is always under staffed), but they really can’t cut many employees before they cut services.

      • davidc says:

        No, it takes less employees in general, from mail sorting to delivery.

        ie: 1 street, 20 houses. 20 stops vs 10 stops vs 2 stops.

        2 stops is far less time then 20 stops.

        The issue really is with junk mail … or really … not *enough* junk mail. Junk mail is what causes a carrier to make all 20 stops, yet if they are only delivering 1 piece of said junk mail, then they are losing money.

        So there needs to be some sort of threshold for junk mail. Not sure where the break even is on it but lets just guess and say 5 pieces.

        The rule would basically be: Junk mail will be delivered to any house receiving 1 piece of first class mail, or when 5 pieces of junk mail have been collected.

        The effect? Junk mailers .. excuse me, Pre-Sorted Carrier Route mailers would end up working together to time when they sent things … like say Tuesdays and Fridays?

        Basically, like Newspapers, the USPS has to drastically change what it’s doing … having FedEx, UPS and USPS all covering the same routes and doing the same thing seems a bit of a waste.

  13. humphrmi says:

    On one hand, they probably need the money. Maybe not all that they asked for, but some of it.

    On the other hand, it’s good to hear that the government is cracking down on spending based on the argument “Recession! More money please!”

    • humphrmi says:

      Oh, and I fully realize that this isn’t “government spending” per se, but it still comes out of our pockets.

      • evnmorlo says:

        They take a hard line when it comes to .02 added to a stamp, while many states have raised taxes and fees during the recession to collect tens of billions of dollars. The idea that USPS should operate in the government’s fantasy land of zero inflation when most costs increase 10%+ per year–including the federal budget–is absurd.

        • humphrmi says:

          Don’t get me wrong – I don’t oppose an increase. The problem is, the USPS went to the PRC and basically said “OH NOES! Recession! I can haz more money…” without justifying the increase, quantifying their losses, or explaining how they were going to use it.

  14. kmiles says:

    Is there something in the lawbooks that says they can’t sell advertising space on their big blue mailboxes? If not, they could potentially bring in revenue that way.

  15. evnmorlo says:

    This is some sort of “starve the beast” tactic to force privatization.

  16. Zclyh3 says:

    It’s simple. Time to lay off employees and reduce their benefits. USPS needs to act like a real business.

  17. whatdoyoucare says:

    I don’t know, perhaps they need to look at the way the pay people. Last Christmastime, my husband got to talking to a guy at the gym who was an employee of the USPS. He was excited that he was making triple overtime (over $75/hour). If that was UPS, they would have hired temporary help at a much much cheaper rate. Now maybe the dude was exaggerating, but even if he was only making double overtime, that is still more than they needed to be paying.

  18. MeowMaximus says:

    The post office ought to be free to charge what they want. That having been said, if they only delivered mail twice a week, that would be enough for me. I use UPS or FedEx for anything really important anyway.

  19. davidsco says:

    Make them work like a private company, Kick out the unions, teach the delivery people that driving their trucks to EACH house, turning of the truck, delivering to ONE house, then starting it up again is NOT an efficient way to deliver mail, Hire a Postmaster who can add 2 plus 2

    • ARP says:

      What private company delivers mail to any house in the country for a flat rate of less than $1?

      I find it amusing that people who are so against “entitlements” get upset when are really good deal gets slightly more expensive. It reminds me of the Tea Party who wrote a letter of complaint about the lack of availability of PUBLIC Transportation during their rallies.

      That doesn’t mean we shouldn’t look to cut waste, but jumping immediately to “privatize” where the end result is that it will be more expensive doesn’t make sense.

    • Kitamura says:

      The USPS wouldn’t be having a problem if they were allowed to charge money like a private company. I seriously doubt UPS would deliver your letter from Florida to Alaska for the price the USPS charges if they were allowed to.

      Sure, some fiscal management could probably help, but I’m betting that just like asking for rate increases, they’d have to beg the same people to cut benefits and stuff. And I’m guessing they’d probably say no to that too.

  20. ARP says:

    Mixed feelings here.

    Let’s see, what other delivery company will deliver an envelope to ANY address in the country for less than $0.50? None.

    The problem is that even with a reduction in volume, they need to maintain some basic level of infrastructure so that they can deliver to any address. No other delivery company has that problem (as they have variable rates). Quite honestly, I’m happy for them to raise rates on envelopes and bulk mailers since FedEx and UPS can’t touch this. But they should remain competitive with USP, FedEx with packages.

    However, I do agree that they need to justify the rate increse with hard numbers. It sounds like the regulators are opposed to a rate hike, but oppose to a rate hike without supporting evidence.

    • Brad Ackerman says:

      Try offering letter delivery for 50¢, and the USPS will send men with guns to make you stop — charging less than $3 is illegal. USPS Publication 542, paragraph 443.

      If USPS was uniformly acting as a private business, I’d be cool with letting them charge whatever they want. That means no monopoly privileges, no zoning exemptions, and no tax exemptions.

  21. Foot_Note says:

    oh and i forgot, lets not forget the USPS finally? said they wouldnt “Buy” back houses from mid-high level peoples who transfer from one place to another.. 1.5 mill i think was the last one (way overpriced?)…

  22. vystral says:

    It’s about time that the Postal Regulatory Commission grew some grapes and said, “Enough is enough.”

  23. brianisthegreatest says:

    Should I email this article to my friend, or write a letter..

  24. Macgyver says:

    Either fire people, or don’t give people an automatic raise every year just because it say so in the contract, it should be based on job performance.
    That’s why these unions sucks, they are the ones making it worse.

  25. vdragonmpc says:

    Its about time they woke up to the waste. I remember when the USPS destroyed Emory Worldwide (remember them? they handled packages for the USPS) They basically told Emory that they would not accept the needed infrastructure costs that they put in and killed the contract. All of the employees were terminated around Christmas in the late 90s.

    Then they installed a junk system just to prove they could. It was insane. Ethernet was standard but thats not what the post office wanted.

    After seeing the rampant waste at their facilities I can say that they could definitely send mail for .25 still.

  26. lovemypets00 - You'll need to forgive me, my social filter has cracked. says:

    If volume is down, it’s probably because so many people are sending emails instead of letters, and making payments electronically instead of by check.

    My mail is mostly Netflix now. Every time I could switch to electronic payment vs mailing a check, I did it. Why? Because I don’t have to hope the payment makes it “in time” according to the credit card company’s (or whomever) rules. Even the IRS accepts a tax payment as “on time” as long as it’s postmarked on April 15.

    I have a lot of confidence in the postal service’s ability to deliver the mail, but virtually no confidence the company on the other end will process my payment on time. So now it’s electronic statements (less paper) and electronic statements (less stamps and no more late fees).

    Hopefully the postal service will think of something to keep themselves afloat. I’d hate to have to pay Fedex $10+ to deliver a birthday card.

    • lovemypets00 - You'll need to forgive me, my social filter has cracked. says:

      Second electronic statements should be payments instead…

  27. Levk says:

    Man really… raising prices will just make other people go to emails and other sources of delivery >>

  28. MMD says:

    If the USPS actually offered competitive package delivery services, such as tracking information that actually means something, maybe they could regain some market share from UPS and FedEx. As it stands now, I won’t send anything time-sensitive through USPS. I’ve been burned too many times by following my “tracking numbers” with shipping information that’s updated only when they feel like it…

  29. Eagle_020 says:

    I wouldn’t be so opposed to USPS upping their rates if they actually delivered what we pay them for NOW.

    I’m currently disabled, and to make ends meet (since SS Disability pays the rent and not much else) I do some selling on eBay. I can’t count the number of times I’ve paid for Priority Mail so my buyer would get their items quickly, only to have carriers leave it sitting on my porch for 2 or 3 days. More than once a package was left beyond the time frame in which it should have arrived at it’s destination.

    I understand that Carriers have a tough job. One even in my youth I’m not sure I’d want. But if it IS your job, then DO it. I mean, it’s not like I sell TV’s or dishwashers you need to deliver. I think once….ONCE..I had an item that weighed 10 pounds. And 99% of what I sell is under 2 pounds. Not like I’m trying to break the carriers back.

  30. mcgyver210 says:

    Every-time the USPS raises rates they loose business & then demand for more rate increases. While at the same time they have possibly the worst employee customer service. We have had many issues with our carriers over the years but one consistent is the carriers are not customer service friendly & don’t care. One example: They put mail in box & when they can’t fit a box in the same box they bring the box to the door but leave the mail for you to still go get. Now if they even remotely cared about customer service they would bring the mail with the box. They also are not supposed to accept gifts but they do every Christmas.

    The USPS needs to trim the fat since every-time I see a carrier they are on the cell phone or texting which has to slow them down not to mention not very professional.

    The USPS is like all Government run agencies Out of Control with spending & never being able to work within a reasonable budget same as Private companies have to do.

  31. SphinxRB says:

    Why doesn’t the Postal Service and Regulators, figure out a plan that cuts cost, raises rates; to a point that the Postal Service will be operating in the black, instead of the red. I’m sick of hearing about the rate hikes, just raise them to what they need to be to make a profit. Cut home delivery to 2-3 times per week.

    • mcgyver210 says:

      The USPS isn’t supposed to make a profit & no matter what we give to a Government Agency they always want more in the form of New or Increased Fees, Taxes or Rates.

      I once worked for the Government many years ago so I do speak with first hand experience. The USPS is just like all Government Agencies tons of waste & lazy employees although I know not all of them are.

  32. Jimmy37 says:

    Because of Congressional meddling, the USPS can’t cut its costs much. Eliminate Saturday delivery?? Nope, Congress passed a law against it because their 95 year old mother told them to. Fire employees?? Good luck with that. Unions whine to Congress about how unfair it is.