USPS Price Increase Still Likely ... Just Later and (Hopefully) Less

Higher Increase Likely for Products Not Covering Their Costs
With its exigent price increase request, the USPS is certain to include in the next request adjustments in prices within each class to help rectify situations where specific products have been identified by the PRC as not covering their costs.

A 2 percent to 3 percent increase would mean only a one cent increase on a First Class mail stamp, but products not covering their costs likely would see higher percent increases. Those products include catalogs and other Standard Mail flats, Standard Mail parcels, some Package Services categories, Periodicals (magazines) and others. The exact percent increase proposed by the USPS for these products remains to be seen until it files its case.

What Else May be Included?
The USPS also is likely to retain its May 2011 price increase request for the incentive programs laid out in its exigent request, such as expansion of the saturation incentive program, First Class mail Reply Rides Free and other incentives designed to grow volume and revenue.

The USPS may separate out the changes it proposed for Standard Mail parcels, moving ahead with its attempt to re-classify these pieces as competitive services, as well as dividing the remaining Standard Mail parcels into fulfillment and marketing categories with different rules, price structure and eligibility requirements.

Catalogers should also expect rule changes contained in the exigent case to be included in a CPI-based case, such as tightening up of address quality requirements, changes in pricing structures for some products and other changes that could result in either price or cost increases for catalogers. As in all USPS price increase requests, the devil is always in the details.

PAEA Round Two?
In the background of the Postal Service’s price increase requests, even bigger changes may be percolating. Unlike last year, Congress opted not to step in at the last minute and relieve the USPS of its $5.5 billion payment to pre-fund retiree health obligations. The USPS has paid the amount due for fiscal year 2010 to the Treasury, leaving it with a $6 billion loss.