Shop Talk: Understanding Postal: The USPS Price Increase Request

At press time, the USPS filed its request with the Postal Regulatory Commission (PRC) for an "exigent" price increase to take effect January 2, 2011. The USPS proposed an average price increase of 5.6 percent. Increases for catalogs range from 4 percent to 10 percent, depending on the characteristics of the mailing.

What's an Exigent Price Increase?
The Postal and Accountability Enhancement Act allows the USPS to file for a price increase above the annual rate of inflation in extraordinary and exceptional circumstances.

The USPS argues that it needs an exigent price increase because of a significant decline in mail volume caused by the recession and the diversion of First Class mail to electronic alternatives.

Business customers strongly oppose the price increase, arguing that the current conditions don't meet the intent of the law. They also point out that Congress itself played a key role in putting the USPS in its current dire financial state. One of the primary reasons for the USPS's financial crisis is legislation that requires it to pre-fund its employee retirement health benefits in a manner not required of any other federal agency. 
Several independent actuarial studies agree that the USPS's pre-funding amount has been miscalculated to the tune of $55 billion to $75 billion.

It's Not Just an 
Exigency Case …
Another problem is that the USPS included changes in the case that are muddying the waters, such as new incentive programs — including an expansion of the saturation incentive program, which could be good for some catalogers if it weren't coupled with significant price increases. There are also rule changes, including tightening up address quality requirements, changes in pricing structure for mail products, and others that would result in price/cost increases
for catalogers.

Business customers, including many catalogers, have formed the Affordable Mail Alliance to oppose the price increase filed by the USPS. They argue it would have a negative impact on a still-recovering economy and their businesses.

Possible Outcomes Abound
There are so many twists and turns this rate case could take that it's difficult at this point to predict. Here are just a few potential outcomes:

● The PRC could decide the request doesn't meet the requirements of the law for an "exigent case" and overturn it.

● The PRC could adjust the rates proposed by the USPS — up or down. Catalogers could be looking at much greater increases than what the USPS proposed, particularly if their mail falls into those categories that the PRC says aren't currently covering their costs.

● Congress could fix the retiree health benefits funding issues. If that happens quickly, the PRC could take that into account and likely find much less justification for such a significant price increase.

Catalogers need to keep a close watch as these events progress. The outcome will have a significant impact on your business, one way or another.

Get involved, stay informed and lend as much support as you can to the associations, coalitions and other groups opposing the exigent price increase and urging Congress to resolve the USPS retiree health benefits funding situation. 
— Kathy J. Siviter, president, Postal Consulting Services (kathys@
postalconsulting.com).