* USPS net loss $5.2 bln vs $3.1 bln a year earlier
* Mail volume down, shipping and packages up
* Officials call on Congress to overhaul agency
By Emily Stephenson
WASHINGTON, Aug 9 (Reuters) - The U.S. Postal Service's net loss widened to $5.2 billion during the three months that ended in June, and the cash-strapped agency warned on Thursday that without help from the U.S. Congress it will face low cash and be unable to borrow money this fall.
The Postal Service, which relies on the sale of stamps and other products rather than taxpayer funding, has been struggling for years as Americans increasingly communicate online and as payments to its retiree health benefits program and other obligations drain its cash.
The mail agency suffered its first-ever default last week on a legally required $5.5 billion payment for future retiree health benefits. The agency's inspector general said the Postal Service could face a $100 million cash shortfall in mid-October.
Lawmakers, who have said they plan to overhaul the Postal Service and staunch its losses, left last week for a month-long recess without reaching an agreement on postal legislation.
"We remain confident that Congress will do its part to help put the Postal Service on a path to financial stability," Postmaster General Patrick Donahoe said in a statement.
"We will continue to take actions under our control to improve operational efficiency and generate revenue by offering new products and services to meet our customers' changing needs."
While there is not yet a great risk that the Postal Service's financial straits will impede mail delivery, the agency has said it needs a significant restructuring to get back on sound footing.
The Postal Service said its net loss of $5.2 billion, compared to $3.1 billion for the same period in 2011, largely came from funds the agency must set aside for the retiree benefits payment. Even though the Postal Service defaulted and expects to skip a second payment due next month, it still must account for the payments in its financial statements.
Even without the payments, a postal official told the agency's Board of Governors on Thursday that the Postal Service lost about $1 billion on normal operations as Americans' ongoing shift to email strangled mail volume.
Shipping services and package delivery were a bright spot in a bleak report, growing 9 percent in revenue compared to the same quarter a year earlier. But mail volume fell 3.6 percent to 38.5 billion pieces, the agency said.
Operating revenue during the quarter was $15.6 billion, a decrease of less than 1 percent from a year earlier, USPS said.
Lawmakers in both houses of Congress have said for more than a year that they want to pass legislation to overhaul the agency. The Senate has passed a postal bill that would let the agency end Saturday mail and tap into a surplus in a federal retirement fund to offer retirement incentives to workers.
Leaders in the House of Representatives have said that bill does not go far enough, but they left last week for a recess until after the Sept. 3 Labor Day holiday without bringing their version of the postal reform bill up for a vote.
Postal officials said again on Thursday that the agency will prioritize using its limited cash to pay suppliers and employees and said they do not believe Congress would ever allow the service to stop delivering mail.
"There should be no concern about consistent mail delivery," Donahoe told the Board of Governors. "It is not in jeopardy."