Ded-i-ca-tion  n [from Latin dedicatus, consecrate, proclaim, affirm] 1:  self-sacrificing devotion to a specific charge, goal, or sacred trust 2:  the devotion to service that has distinguished employees of the United States Postal Service for more than 225 years.

Until 1971, Congress set postage rates through legislation, and the relationship between the revenue from those rates and the actual costs of operating the postal system varied greatly. Since 1971, however, the Postal Reorganization Act has required the Postal Service to establish postal rates that cover the cost of operating the postal system.

The rate-making process is lengthy and complicated and begins when management determines that current rates will not be adequate to meet our mandate of “covering future costs”. The Postal Service, with approval of the Board of Governors, submits a request for a recommended decision on rate and fee changes to the Postal Rate Commission (PRC), an independent establishment of the executive branch of the government. The submission is accompanied by detailed rate proposals supported by extensive documentation and lengthy testimony.

The PRC’s proceedings usually take 10 months. It holds public hearings, during which interested parties such as mailers, competitors and consumer representatives are authorized to challenge the Postal Service’s proposals and submit their own testimony and proposals. At the conclusion of the hearings, the PRC sends its recommended decision to the Governors. The Governors may approve, reject, allow under protest, or, under certain limited circumstances after more proceedings, modify the PRC’s recommendations.



We filed for new rates on September 24, 2001, and on March 22, 2002 the Postal Rate Commission issued a Recommended Decision accepting the new rates essentially as we proposed them. Citing the need for “extraordinary acts” in “extraordinary times,” the Chairman of the Postal Rate Commission on October 25, 2001, began the process that led to a settlement agreed to by 57 of the 63 participants in the postal rate-making process. Such a settlement of an omnibus rate case is unprecedented in the history of the Postal Service.

These rates, which went into effect three months ahead of schedule on June 30, 2002, added approximately $1 billion to our revenue in 2002. Rate increases averaged 7.7%.

When we developed our proposal for a rate increase in the summer of 2001, we did not anticipate an economic recession, terrorist attacks in New York City and Washington D.C. on September 11, 2001, or the use of the mail to transmit anthrax. All of these events have caused a sharp drop in mail volume and revenue. Implementing rates early enabled us to limit our financial losses. Although we have generated significant savings from improved operating efficiencies and our new cost savings programs, our expenses continue to increase due to resource cost inflation and the need to serve an expanding delivery network.

As part of the settlement process and the Transformation Plan, the Postmaster General committed to not implementing additional rate increases until calendar year 2004.