Postal Service Seeks Hikes As Much As 10%

January 16, 2015       Mark Hrywna      

The United States Postal Service (USPS) yesterday requested an overall average postage rate increase of almost 2 percent, with higher averages in some categories to address “underwater products,” including a 10-percent hike for First Class and Standard parcels.

The Postal Regulatory Commission (PRC) has 45 days to respond to the request that, if approved, would take effect April 26.

In a news release announcing the new rates, USPS said the move is the latest in the series of steps it has taken as “part of a comprehensive approach to achieve financial stability.” The 1.966 percent rate hike would use the USPS’ full authority accumulated under the Consumer Price Index (CPI) cap. USPS estimates the increase would generate an additional $900 million and improve the FY 2015 financial outlook by $400 million.

“By growing volume, revenue and contribution, the Postal Service will continue to meet America’s mailing and shipping needs into the future. While improving efficiency in streamlining its network and seeking legislative changes, the Postal Service must address an outdated business model.”

USPS said it’s proposing above average increases for “underwater” products, including Standard Mail Flats and Periodicals. In its 2012 Annual Compliance Report, USPS proposed a three-year schedule of above-average CPI increases for Flats. Overall, the average increase in first class postage would be 1.949 percent while Standard mail would see a 1.886 percent average increase and periodicals a 1.965 percent hike.

Within First Class, the average increases would be:

  • Parcels, 10.18 percent
  • FCM International, 2.762 percent
  • Business Reply Mail, 2.6 percent
  • Flats, 2.438 percent
  • Presort Letters/Postcards, 2.417 percent
  • Periodicals Mailing Applications, 1.6 percent
  • Single-piece Letters/Postcards, 0.623 percent

Within Standard, the average increases would be:

  • Parcels, 9.794 percent
  • Every Door Direct Mail – Retail, 4.761 percent
  • Flats, 2.466 percent
  • High Density / Saturation Letters, 2.027 percent
  • Letters, 1.835 percent
  • High Density / Saturation Flats and Parcels, 1.557 percent
  • Carrier, 1.415 percent

USPS last increased postal rates a year ago, with an average 1.7 percent hike based on the Consumer Price Index (CPI) but also another temporary increase of 4.3 percent to make up for losses during the Great Recession. The so-called exigent surcharge is expected to run through this fiscal year, which ends in September, until it makes up $3.2 billion. USPS will provide bi-weekly updates in the final quarter of the surcharge, according to a court order issued on Monday.

The Direct Marketing Association immediately came out against the proposal. “Today’s announcement is yet another attempt by the U.S. Postal Service to squeeze the direct-mail industry,” said Peggy Hudson, DMA’s senior vice president of government affairs. “For the Postal Service to request this mid-year price increase, after companies have set their annual budgets, is short-sighted and irresponsible,” she said, encouraging the PRC to “remain vigilant” and deny the requested increase.

The Alliance of Nonprofit Mailers noted other key elements of the proposal:
Special Services simplification to reduce redundancy and improve customer ease and use;
Introduction of separate Flats Sequencing System (FSS) pricing structure for Standard Mail and Periodicals.
Introduction of Carrier Route bundle and container pricing for non-FSS flats for Standard Mail and Periodicals;
Include four promotions (Earned Value Reply Mail, Color Transpromo, Emerging Technologies, Mail Drives Mobiles).

See the complete proposal at www.prc.gov/Docs/91/91164/Notice.pdf