Just a month after higher stamp prices took effect, the U.S. Postal Service is considering another rate increase that could result in higher prices early next year.
The post office is reportedly facing losses of up to $2 billion this year despite the price increase that took effect Jan. 7 and included raising a first-class stamp by a penny, to 34 cents.
In approving that increase, the independent Postal Rate Commission rejected or scaled back several other requested price increases, cutting expected income by some $1 billion. At the same time, mail volume has dropped because of the slowing economy, further reducing anticipated income.
The postal Board of Governors ordered the agency's management Tuesday "to begin preparing a rate case as soon as possible to ensure the continued financial viability of the Postal Service," board Chairman Robert F. Rider said after a meeting in San Antonio, Texas.
The Board of Governors also directed postal management to reduce its capital budget for the 2001 fiscal year from $3.6 billion to $2.6 billion, postpone making future financial capital commitments and curtail nonessential activities.
"We're facing some serious losses right now," said Postal Service spokesman Greg Frey. "The Postal Rate Commission did not recommend what we asked for a year ago. They've taken approximately a billion dollars out of our recommendation."
The postal governors can overrule the commission and institute higher rates on their own, but only if they vote unanimously to do so. Senior officials could not be reached to comment on whether the governors may try to overrule the commission.
In addition to preparing to file a request for another rate increase, Rider said the board had ordered management to review all programs and projects, curtail or eliminate all nonessential activities and evaluate the Postal Service's long-term ratemaking needs.
The complex process of increasing postal rates can take nearly a year. Postal officials have long criticized delays that prevent them from responding quickly to market pressures and competitors' price changes.
Given the increasing competition from electronic communications, the ability to change postal prices quickly has become vital, agency officials say, and they hope Congress will change the law governing their operation.
The agency is also facing a decline in volume. Standard A mail volume, which consists largely of advertising, increased during the most recent reporting period, but volumes in most other major areas declined, the agency said. First-class and Priority Mail have been hurt by the economic downturn, officials said.