In the wake of the Postal Regulatory Commission’s issuance of a final rule amending the rate-setting process, rumors began to circulate that the Postal Service would seek higher rates by mid-2021 and that the increases would be over 7%.

These stories may have some relationship to facts but are not entirely factual or accurate. Just the same, given that rumors travel faster than facts, it’s important that commercial mail producers have the necessary information to convey to their clients – who may already have heard the rumors.

Commercial mail producers and others whose businesses have regular contact with postal services may be aware of a price increase but not really understand why it happens or what it means.  As we did last year, in an attempt to offer answers, below are some of the questions that commercial mail producers and their clients may have.

Price changes generally

In comments filed February 3 with the Postal Regulatory Commission in response to the PRC’s proposed rule (System for Regulating Market Dominant Rates and Classifications, published in the December 11, 2019, Federal Register), Mailers Hub offered a view about “non-compensatory products,” (market-dominant products whose rates do not cover costs). The passage discussing such “underwater” rates was also excerpted in the February 3, 2020, issue of Mailers Hub News:

“Most non-compensatory classes and products did not become ‘underwater’ in a year or two or even ten; Periodicals, as a class, for example, hasn’t covered its costs since the PAEA was passed.

“… Aside from the resistance of ratepayers in those classes or for those products to accelerated rate increases to bring them to full cost coverage, the PAEA itself thwarted such efforts; the CPI cap is a two-edged sword that keeps rate increases to no more than CPI but also prevents larger rate increases to correct ‘underwater’ classes and products. …

“That cost coverage for non-compensatory classes and products needs to be brought to 100% is not debatable, but neither is the need for caution in how that’s to be done. … Though the price sensitivity of most non-compensatory mail will be challenged by an additional 2% per year rate increase above the CPI cap, requiring that seems the least than can be done.

People often ask about price changes – why they’re when and what they are, and why the USPS can’t simply reduce its costs. It’s really not that simple.

The Postal Service has filed new prices for market-dominant mail that, if approved by the Postal Regulatory Commission, will take effect on January 26, 2020.  The average increase for the market-dominant classes of mail is 1.9%, in line with the CPI-based cap; First-Class Mail will increase, on average, by 1.919%, and Marketing Mail prices will rise by an average of 1.891%.  Barring problems during the PRC’s review of the filing, a decision should be expected by mid-November.

New prices for competitive products, set by the Governor of the Postal Service, also were announced.  They will be reviewed for statutory compliance by the PRC and, barring problems, also will be effective January 26.

There is still time to make the 2019 Mailers Conference.

Commentary, by Leo Raymond

Any publication on any topic occasionally finds itself in the situation of knowing newsworthy events lie ahead but about which an article cannot be yet written; they just have to wait. Such is the situation in which we – and colleagues with their own newsletters – find ourselves.

Excerpted from the February 4, 2019 edition of Mailers Hub News 

The price of a stamp went from $0.50 to $0.55 last month but a challenge to that increase continues.