Tuesday, June 3, 2014

USPS May Delay Next Price Increase

The U.S. Postal Service is thinking about forgoing its usual January price increase next year.

It’s not that postal officials have suddenly been afflicted with a case of generosity after jacking up most postal rates by more than 5% earlier this year. They’re merely preparing for what happens when (or, rather, if) the temporary 4.3% “exigent” portion of the recent rate increase expires.

USPS has gone to court in hopes of making the exigent increase permanent. But if that effort fails, the surcharge will expire after bringing additional postal revenue of $3.2 billion, which will take an estimated 18 months. Postal officials apparently want to avoid across-the-board rate cuts when the exigent increase expires.

“The Postal Service could delay the next rate adjustment so as to coincide with the rescission of the exigent surcharge,” USPS noted in a filing yesterday with the Postal Regulatory Commission.

“If the available percentage of rate authority attributable to inflation were 4.3 percent or greater, then the surcharge could simply be absorbed as part of the scheduled rate change." In other words, USPS could remove the exigent rate increase without actually changing the rates, by simultaneously imposing a normal (inflation-capped) rate increase.

At current inflation rates, the Postal Service’s authority to implement a normal rate increase would be capped not much above 2% when the exigent increase is slated to expire in mid-2015.

“Even if inflation were less than 4.3 percent, the Postal Service could . . . fold in the exigent surcharge into the basic rate structure of some products, while adjusting the prices of other products so as to come out at the cap.” In other words, some products could see no change in rates while others would get a decrease.

USPS’s Board of Governors could pursue other scenarios as well, the filing noted.

“The Governors of the Postal Service could decide to proceed with a January price adjustment for one class of mail — say, Periodicals — while delaying it for other classes.” USPS has been eager to impose additional price increases on magazines and newspapers because it claims to be losing money on the Periodicals class. Apparently, the recent unprecedented quarterly decrease of 8% in Periodicals volume wasn’t big enough for postal officials.

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@nonprofitpostal said...

Another awkward #USPS pricing message (if CPI is 4.3%--get real!) combined with a Periodicals threat. How about capturing savings from flat sorters, else you can wait in line with the rest of us for DOT contracting jobs while we wait for highway funding.

Southern Gent said...

USPS management has already stated that the flat sorting machines are a debacle. Far more in cost to buy them than the savings in the real world.