Postage Rates Could Jump 7.6% During 2021

Postal rates are set to rise by an average of almost 2 percent next month as part of annual increases by the United States Postal Service (USPS). Rates might jump even more – maybe 7.6% — as early as next summer after a once-in-a-decade review of postal operations.

The Alliance of Nonprofit Mailers (ANM) estimates that the Postal Rate Commission (PRC) could raise postal rates beyond inflation by as much as 5.6 percent to 7.6 percent. Executive Director Stephen Kearney said USPS will do its own calculations that might be a little different but not by much. 

Total authority above the Consumer Price Index (CPI) would be 5.6 percent for compensatory products, which includes First-Class Mail and Marketing Mail Letters, and 7.6 percent for non-compensatory, such as periodicals and Marketing Mail Flats.

USPS could file notice with the PRC by the end of December for each of those rate authorities and how much of the authority would be used. Kearney said the PRC could approve that by the end of March, which then would require 90 days for implementation, bringing it to summer. “Of course, things could happen slower,” Kearney said, but the beginning of July would be the earliest it could happen.

USPS must submit its calculations by Dec. 31 and the PRC estimates that it would approve them in March, Kearney said. The new rule also extends the required notice by USPS of a planned rate increase from 45 days to 90 days.

Two classes as a whole are non-compensatory, meaning they do not cover their costs: periodicals and package services. Marketing mail is mostly letters that cover their costs but within that there are three categories that do not: carrier routes, flats and parcels, Kearney said.

USPS also has the option when doing density and non-compensatory for each class of mail to bank some of the rate authority, and not include it in any 2021 increase but a future year. “Our assumption is, they’re mostly likely to use it all because they’ve used every bit of rate authority they have,” Kearney said.

The alliance estimates the above-inflation rate authority breaks down as:

  • 4.6 percent for density;
  • 1 percent for retirement costs; and,
  • 2 percent for non-compensatory mail.

The PRC deferred performance-based authority but Kearney doubts that proceeding will be done in time to be implemented.

As overall mail volume declines, density drops because of less mail per delivery address, Kearney said, and if the number of addresses keeps going up, that reduces density. This year, mail volume fell by an estimated 9.4 percent while the number of addresses grew by about 1 percent, he said, making for a change in density of about 10 percent.

The PRC originally estimated 1 percent for density because mail had been dropping 2 to 2.5 percent per year but then pandemic impacted mail volume by some 10 percent.

The surcharges would be available annually according to the PRC formulas each year, so the amounts will change every year, he said. The most problematic is the density formula because it would allow larger increases the more postal volume declines, Kearney said, setting off a “death spiral.” The PRC would do another review in five years but the surcharges could continue until the review is done.

The above-CPI rate authority is a process that started in 2016 as part of the PRC’s 10-year review to determine if the postal system is achieving factors and objectives outlined in the 2006 Postal Accountability and Enhancement Act (PAEA). Since then, the PRC has proposed changes and received comments, issued a ruling in 2017 that the system was not meeting the factors and objectives, mainly long-term financial stability.

The PRC issued final rules on Nov. 30, a 484-page document that’s part of its 10-year review. Kearney said it’s likely that the alliance and several mail associations will file a notice that it intends to appeal or file a stay. “We think mailers would be irreparably harmed because of the size of the increase,” he said.

The alliance would have to file notice of appeal within 30 days of the PRC’s order, Kearney said, adding that a stay request would probably be shortly thereafter.