Sunday, April 5, 2015

Are Postal Rates Headed Up, Down, Or All Around?

A slow appeals court, delays in the usual inflation-based rate increase, and the end of the exigent surcharge could converge to create a wild ride for postal rates during the next few months.

Rather than the usual, once-a-year increase, rates might go up, down, or do a loop-the-loop and barrel roll before the summer is over. No one planned it this way. In fact, the plans and expectations of everyone involved seem to have gone awry.

The deviation from normalcy began in late 2013, when the Postal Regulatory Commission approved an “exigent” 4.3% surcharge to compensate the U.S. Postal Service for its losses caused by the recent recession.

The PRC ruled that the surcharge would expire when it netted USPS $3.2 billion, which sounded simple enough at the time. But projecting at least 45 days in advance – the minimum amount of time to implement a rate change – exactly when the $3.2 billion target will be reached is no simple or uncontroversial matter.

Attacked by both sides
Both the Postal Service, which wanted a larger and more permanent surcharge, and mailers groups, which argued for no surcharge, appealed the PRC decision. After an appeals court heard their oral arguments in September, many mailing experts expected the court’s decision by the end of 2014.

USPS even held off on its usual January increase, figuring the decision was imminent.

However, nearly seven months after oral arguments, there’s still no word from the court, which could increase the surcharge, extend it, make it permanent, or even reject it.

Postal officials ended up filing for inflation-based increases after all, with implementation scheduled for April 26. But they miscalculated the effect of some efficiency incentives built into the rate proposal, causing the PRC to send the Postal Service back to the drawing board.

Even if the USPS revisions are filed tomorrow, the new prices probably won’t take effect until at least early June. And legal wrangling could delay implementation once again.

Possible postal maneuver
The Association for Postal Commerce figures that the implementation date for the inflation-based increases could end up being just a few weeks before the surcharge expires this summer. And, for all we know, the appeals court decision could land right between those two dates.

There is talk that, not wanting to implement back-to-back price changes, the Postal Service will schedule the inflation-based increases to occur simultaneously with the surcharge expiration. That would result in a net average increase of about 2.3%, with some mailers getting rate decreases and some significant increases.

It might also enable the Postal Service to dodge a thorny problem caused by the temporary surcharge: the prospect of reducing Forever Stamp prices by two cents, which could confuse the public and undermine the whole concept of Forever Stamps.

By rejiggering its proposed inflation-based rate hikes for other First-Class Mail, postal officials might be able to implement a rate hike on Forever Stamps that would cancel out expiration of the two-cent surcharge.

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