USPS Price Increase Still Likely ... Just Later and (Hopefully) Less
In early October, the Postal Regulatory Commission (PRC) was applauded by the mailing industry when it denied the USPS its exigent price increase, which would have taken effect in January 2011 for an average increase of 5.6 percent, with specific products receiving higher or lower increases (catalogs were expected to see increases ranging from 4 percent to 10 percent).
In a landmark decision, the PRC ruled that while the unprecedented volume decline resulting from the recession would meet the tests of an exigent price increase request, the USPS failed to show that the requested revenue from higher postal rates would solve its financial problems.
Technically, the USPS has three options now that the PRC has denied its request:
- it could re-file the request with different/enhanced arguments;
- it could take the PRC to court and fight its decision; or
- it could file for a consumer price index (CPI)-based increase of around 2 percent to 3 percent. The exact amount for the CPI cap will not be known until the end of 2010 and the USPS also has a small percentage available in unused rate authority from previous price increases.
May 2011 Price Increase Likely
It's unlikely that the USPS will challenge the PRC’s decision in court or re-file its exigent request, which leaves it with the third option as the most viable to improve its financial condition. The USPS is expected to prepare a request to file to the PRC for a CPI-based increase that would take effect in May 2011.
Although the overall average increase proposed by the USPS would be 2 percent to 3 percent, as limited by the CPI, catalogers and other mailers need to remember that the average increase seldom applies to every product category. It's likely that catalogs would still see a higher than average increase.