The Postal Service asked to raise postage rates on first-class mail, periodicals and other services above the inflation rate in July, The Washington Post reported.
An increase above the inflation rate is permitted in exigent, or urgently necessary cases, but the commission said a poor business model causes the Postal Service's problems.
In a ruling Thursday, the commission said while the recession and recent declines in mail volume could justify an increase, the Postal Service's long-term structural problems are the cause of recent shortfalls.
The agency did leave an opening for a larger rate increase if the Postal Service used different arguments, the newspaper said.
"The Postal Service didn't make the case, didn't make the connection between the problems they suffered during the recession and the revenue they were requesting," Postal Regulatory Commission Chairman Ruth Y. Goldway said.
The Postal Service is expected to announce billions of dollars in losses for fiscal 2010 and ends the year with about $2 billion in available cash and credit, the report said.
Postmaster General John E. Potter expressed disappointment with the ruling and called the postal service "a viable business."
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