The U.S. Postal Service on February 25 filed a notice with the Postal Regulatory Commission (PRC) that it will reduce prices for market-dominant products, which includes Standard Mail and Periodicals. The reduced rates are due to the removal of the exigent surcharge, which USPS has been collecting since 2014. Postal rates for Total Market Coverage (TMC) products going at High Density Plus and dropped off at local post offices will decline by 4.3 percent. Newspapers delivered at Within-County Periodical rates will experience a 3.75 percent decrease. Here is a link to the new rates for typical Standard Mail and Periodical categories used by newspapers.
Current rates for market dominant products are capped by law at the rate of inflation as measured by the Consumer Price Index for all urban consumers (CPI-U) (Note: The unadjusted CPI-U was 1.4 percent in 2015.) The law, however, allows for exigent pricing due to extraordinary or exceptional circumstances. In 2013, the Postal Service sought and received approval to assess a temporary surcharge of approximately 4.3 percent to recover revenues lost as a result of the Great Recession. While it approved this request to raise mail rates because of exigent circumstances, the PRC ruled that the surcharge must sunset after the Postal Service recovers $4.6 billion.
In its filing with the PRC, the Postal Service said that it will reach the $4.6 billion mark by April 10, and it was putting mailers (and software vendors) on notice that their rates will be reduced on that date (a Sunday). This roll-back of the rates will reduce the USPS’s revenues by approximately $2 billion a year, and will likely make the agency’s financial condition more precarious. In a press release announcing the filing, Postmaster General Megan Brennan said “Our current pricing regime is unworkable and should be replaced with a system that provides greater pricing flexibility and better reflects the economic challenges facing the Postal Service.”
The PRC is required by law to review the rate-setting system for market-dominant products, and can make adjustments it finds necessary to better achieve the goals set by Congress. This review will begin in December 2016, and will likely be completed no later than early autumn of 2017. Mailers fully expect that USPS will argue that its hands should not be tied by a price cap, and that it should be given flexibility to raise its prices by far more than the rate of inflation to assure adequate revenues.
The News Media Alliance will play an active role in this major regulatory proceeding to fight for a rate-setting system that recognizes the Postal Service’s financial challenges, but assures that rates are stable and predictable for mailers.