March 26, 2007

Governors Request Reconsideration

On March 19, the Board of Governors set Monday, May 14, as the effective date of all the changes in rates and fees for all classes except Periodicals, which is delayed until July 15. Although the Governors asked the Commission to reconsider some of the prices, the Postal Service and its customers should plan to implement the prices as recommended by the Commission in its February 26 decision. 

There is no set timetable for the reconsideration exercise, nor is there any assurance that different prices will be recommended. As discussed below, the Governors elected to put the Commission’s Recommended Decision into effect but returned three matters for reconsideration, for the reasons stated below.

Standard Mail Flats – The Governors are concerned that price increases recommended by the PRC may impose an unnecessary degree of "rate shock" on the catalog industry, particularly small businesses. The recommended increase for some catalog mailers is more than 40 percent, which is more than double what the Postal Service had proposed. Therefore, the Governors requested the Commission to reconsider whether some rebalancing between Standard Mail letter and flat rates may be appropriate.

Nonmachinable Surcharge – First-Class Mail letters: The PRC decision does not differentiate between machinable and nonmachinable First Class Mail 2-ounce and 3-ounce letters. The Governors believe this warrants further analysis to ensure there are incentives for mailers to provide letters that can be processed at lower cost on efficient sorting equipment. In the meantime, however, the surcharge will take effect as recommended on May 14.

Priority Mail Flat Rate Box - The PRC recommended a price of $9.15, which is $1.05 above the current rate and 35 cents higher than the Postal Service proposal of $8.80. The Governors believe a rate below $9 would be more appropriate for this popular consumer and business product and would be cost-justified.

The Governors concluded that these three issues would benefit from further consideration. The Governors approved the Recommended Decision and returned those three matters to the Commission asking the Commission to move as expeditiously as possible to give mailers a practical opportunity to plan effectively for future mailings.