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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