U.S. postal regulators to allow price increase on stamps

In an attempt to remedy the ongoing financial troubles of the U.S. Postal Service (USPS), federal regulators want to allow stamp prices to increase beyond the rate of inflation.

Earlier this month, the Postal Regulatory Commission (PRC) issued its findings related to the decade-long statutorily mandated review of the system for regulating rates and classes for “market dominant” products that was first established in 2006 by the Postal Accountability and Enhancement Act (PAEA). The law required the PRC to review the past 10 years of the existing market-dominant rate and classification system to determine if the system achieved the nine objectives, considering the 14 factors, established by U.S. Congress.

The PRC wants to allow the USPS to increase the price of its first-class stamps—now at 49 cents—by an additional 2 percent above the rate of inflation. The postal service would also be allowed add an additional one per cent to price of stamps if it meets certain operational and service standards.

PRC FINDINGS

After extensive review, the PRC concluded the system achieved some of the goals of these areas, but the overall system has not achieved the objectives taking into account the factors of the PAEA.

  • The system was largely successful in achieving the goals related to the structure of the ratemaking system; however, the PRC concluded the ratemaking system has not increased pricing efficiency.
  • The system has not maintained the financial health of the USPS as intended by the PAEA. While the USPS has generally achieved short-term financial stability, both medium- and long-term financial stability measures have not been achieved.
  • High-quality service standards have not been maintained during the past 10 years under the PAEA.

NOTICE OF PROPOSED RULEMAKING

As a result of these findings, the PRC also issued a notice of proposed rulemaking to address the shortcomings identified in its review. Key proposals include:

  • a two-pronged approach to complement, rather than replace, the CPI-U price cap by providing discrete, clearly defined amounts of additional authority (the intent is to put the USPS on the path toward generating positive net income and retained earnings);
  • two percentage points of rate authority per class of mail per calendar year for each of the first five full calendar years following the effective date of these proposed rules;
  • up to one percentage point of rate authority per class of mail per calendar year, contingent on the USPS meeting or exceeding an operational efficiency-based standard and adhering to service standard quality criteria;
  • a required rate increase for any non-compensatory product of a minimum of two percentage points above the percentage increase for the class; and
  • the establishment of two bands—ranges with upper and lower limits—for workshare discount passthroughs.

INDUSTRY RESPONSE

“Given the Commission’s statutory responsibilities, this decision was not surprising but it was still disappointing,” said Art Sackler, manager of the Coalition for a 21st Century Postal Service, a trade group comprised of Amazon and the National Retail Federation, among other big mailers. “The more-than-doubling over five years at current inflation rates proposed by the Commission would be harmful to postal customers and the Postal Service. While an increase in postage rates may bring some short-term relief to the Postal Service, it may create more harm than good by potentially forcing much more mail out of the system. And once mail leaves, it rarely come back.”

Sackler said the “surest way to restore stability at the Postal Service would be for Congress to pass the bipartisan Postal Reform Act (HR 756), rather than have the Commission require postal customers to pay for obligations imposed by Congress on USPS that exceed any in the private sector and are a major contributor to USPS’ financial difficulties.”

“This common-sense legislation would stabilize the Postal Service without an excessive increase in postage rates. The Postal Service remains an important part of our economy, supporting more than 7.5 million jobs and $1.4 trillion in annual sales revenues. He said higher stamp rates could drive more price-sensitive consumers to online communications, decreasing postal revenue further.”

APPROVED PRICE ADJUSTMENTS

In November, the PRC approved planned price adjustments for first-class mail, USPS marketing mail, periodicals, package services, and special services products.

The new prices, scheduled to take effect Jan. 21, 2018, include a one-cent price increase for the Forever stamp from 49 cents to 50 cents. Postcards and metered letters will also increase by one cent from 34 cents to 35 cents and from 46 cents to 47 cents, respectively.

A complete listing of approved pricing and classification changes may be found on the prc.gov in Docket No. R2018-1, Order No. 4215.

 

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