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Washington, D.C. November 13, 2000 - The independent Postal Rate Commission today approved the U.S. Postal Service request to increase the one ounce, First-Class stamp to 34 cents. Under the Commission's Decision, however, a post card would continue to cost 20 cents, and First-Class letters weighing more than one-ounce would have no rate increase. The Postal Service sought increases in both categories.
These First-Class rates are among hundreds of postal rates reviewed by the Commission since last January, when the Postal Service sought an overall average rate increase of 6 percent designed to raise $2.8 billion annually. By law the Commission has 10 months after the Postal Service asks for rate increases to make its Decision, which now goes to the Postal Service Governors for final approval. The Board of Governors is not expected to implement the new rates until January, 2001.
Of the $2.8 billion sought by the Postal Service in this case, only about $800 million was needed to cover anticipated increases in the costs of collecting, processing, and delivering mail. The difference was split between a quarter billion dollars allocated to pay down outstanding accrued losses and $1.7 billion allocated for a contingency to cushion unforeseen expenses.
The Commission made adjustments to the Postal Service request that recognized higher operating costs, but the Commission then concluded that the contingency cushion proposed by the Postal Service was unreasonably high. The impact of this decision on rates was to increase rates over-all by only 4.6 percent. The one-cent increase in the one-ounce, First-Class stamp represents a 3 percent increase and would generate about $1 billion.
Other increases of note proposed by the Postal Service and approved by the Commission concern periodical publications and the heavily advertised Priority Mail. The cost of mailing one-pound Priority Mail would increase from the current $3.20 to $3.50, while the two-pound rate would go to $3.95. According to the Commission, 33 percent of all Priority mail weighs one pound or less.
Periodical publications faced a 14.2 percent average increase under the Postal Service proposal, but the Commission reduced this increase to 9.9 percent after the Postal Service announced in mid-year a "break through productivity" program designed to reduce costs associated with processing magazines and newspapers. The Postal Service initiative followed testimony before the Commission that despite using new automated equipment, periodical costs continued to increase faster than inflation.
Rate increases for mail sent by nonprofit organizations and libraries also were reduced from the original Postal Service request after Congress passed legislation in October, 2000 that established a formula designed to restrain rate increases for mail sent by these groups.
Other Commission recommendations to the Postal Service included development of two new, discount rates for First-Class, the first to lower the rate for preprinted, barcoded courtesy reply envelopes used by consumers for bill payments, and the second to apply to letters bearing computer-generated postage.
The Commission reaches decisions on the basis of evidence developed in public hearings. Much of the evidence is complex technical cost analyses presented by organizations representing business mailers, but individuals and consumer representatives also participate actively. The Commission heard 122 expert witnesses during 40 days of hearings and reviewed more than 25,000 pages of evidence.
Three Commissioners also joined in a separate concurring opinion urging the Postal Service to explore potential service improvements and cost reductions that might result from offering electronic capabilities to additional mail services.
The Rate Commission is composed of five presidentially-appointed Commissioners, each confirmed by the Senate for a six-year term. All five Commissioners participated in the R2000-1 decision: Chairman Edward J. Gleiman; Vice-Chairman George A. Omas, and Commissioners Dana B. Covington, Ruth Y. Goldway, and W.H. "Trey" LeBlanc III.
 Postal Rate Commission http://www.prc.gov Voice: (202) 789-6800 Fax: (202) 789-6886 prc-admin@prc.gov |
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