Postal Pieces: USPS Files for Rate Changes
On January 15, 2015, the Postal Service announced, and sent to the Postal Regulatory Commission (PRC) for review, a price change filing for a CPI increase in its market dominant products.

In a filing that exceeded 350 pages, the Postal Service included tables showing the rates that would go into effect on April 26, 2015, combining a CPI rate cap increase averaging 1.966% on top of the existing exigency rates. The Postal Service also filed a schedule of what the rates would be with the CPI increase after an across-the-board rollback of the 4.3% exigency surcharge.

If the PRC order on the exigency case is upheld so that the Postal Service is required to rollback the 4.3% exigency surcharge as soon as the Postal Service has recouped $2.8 billion in revenues that the PRC found the Postal Service lost "due to" the Great Recession, the alternative, lower, schedule of rates would likely go into effect in August or September 2015.

The Postal Service price change filing did not include proposed rates for competitive products. It did include several proposals that were aimed at addressing previous PRC concerns about "underwater products" (products that are not paying their share of attributable costs) and changes designed to promote and incent certain preparation options for Standard Mail and Periodicals.

Key elements of the filing included the following:

• An average price change increase based on cumulative Consumer Price Index rate cap authority of 1.966%.

• The Postal Service did not propose any change in the current price of the single piece "Forever" stamp. That would stay at 49 cents.

• The Postal Service proposed higher-than-CPI rates for Standard Mail Flats and Parcels that had been critiqued as "underwater" in prior PRC reviews of the Postal Service's compliance reports.

• The Postal Service created new and separate pricing for Flats that are prepared to be processed on FSS sorting equipment.

• The Postal Service introduced a new 5-digit carrier route pallet price to reward mailers that prepare and enter Flats on 5-digit pallets.

For free papers that do addressed Saturation Mail, the price adjustment was below the CPI price increase, with an increase of .6%. For papers mailed as commercial Saturation Flats using the EDDM, or simplified address format, the price increase ranged from 1.7% to 2.5%, depending on the entry point. A chart of the Standard Mail Flats postage rate for Enhanced Carrier Route showing current and proposed rates accompanies this article.

For mailers that have used a Detached Address Label, the DAL surcharge increase was modest going from 3.4 cents a piece to 3.6 cents a piece. The Postal Service filing noted the price sensitivity of program mailers that use a DAL. The price adjustment also included a pound rate increase for pieces weighing more than 3.3 ounces that was less than CPI, averaging 1%. For years, SMC has advocated a reduction in the pound rate to help free paper publishers and shared mail advertising programs attract more insert pieces and to encourage vertical growth of mail programs.

The PRC filing starts the 45-day process for the PRC to review any rate proposals. In general, the PRC review is limited to whether or not the rates are lawful under the Postal Accountability and Enhancement Act and whether or not work-share discounts are justified if they exceed avoided costs.

In this case, some additional wrinkles are the submission of a price adjustment case by a Postal Board of Governors that no longer has a quorum. Lack of Presidential appointments and inaction by Congress has resulted in several vacancies on the Board of Governors. According to one postal commentator, an ironic "hoot" in this filing could arise with a legal challenge to the submission of a case by a Board acting through a Temporary Emergency Committee appointed to handle the CPI rate filing on the last day the Board met with a full quorum.

For mailers like free paper publishers that operate advertising programs and need to communicate price changes to customers, the filing is notice of a probable increases in prices consistent with the proposed prices on the accompanying chart (attached below), that will take effect on April 26, 2015.

Downloads

Hanbery Winter 2015 Chart


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