Earlier this year the USPS announced that postal prices would increase effective April 26, 2015. Whether that will still happen is now a question since the PRC has again remanded back to the USPS the pricing for Standard Mail, Periodicals and Package Services. Only First-Class Mail and USPS Competitive Products have been approved and could possibly still move forward on April 26. Based on the latest news from the PRC on March 18, there will now be a 7-day comment period after the Post Office refiles. This will be followed by a PRC review period of undetermined length which would then be followed by the mandatory 45-day notice whenever the PRC grants approval. This would suggest a mid-May implementation of new prices is more likely. Whether the USPS will plan to implement rates separately or wait and implement them all at once remains unclear.
On February 24 the Postal Regulatory Commission (PRC) approved proposed price adjustments for First-Class Mail. On February 25 the PRC affirmed proposed price adjustments for USPS Competitive products which include Priority and Express Mail so the proposed rates are now considered final.
The price of a retail First-Class stamp, including the Forever stamp, remains unchanged at $0.49. Commercial First-Class Letters and Flats will see an overall change averaging 2.4%. Increases for 3- and 5-digit sorts are increasing by roughly 4.3% but increases for ADC and MADC are minimal. Retail postcards will increase from $0.34 to $0.35.
Shippers who use Priority Mail Express and Priority Mail will be pleased to see that no price changes were proposed but they will see some classification changes such as introduction of minimum piece or pound requirements when a permit imprint is used.
On March 6 the PRC remanded proposed price adjustments for Standard Mail, Periodicals and Package Services back to the USPS because they identified inequities in commercial and nonprofit discounts that “do not comply with applicable legal requirements” for Standard Mail and because they were “unable to make statutorily required findings to determine price cap compliance” for Periodicals and Package Services.
The USPS is required to make pricing changes consistent with the Consumer Price Index based price cap but they also struggle with making sure pricing covers costs to process various categories of mail. Based on the original February filing, we have an idea of what they are seeking to implement for Standard Mail and Periodicals Mail but until they receive approval those changes are merely proposed changes.
Originally proposed price changes for Standard Mail ranged from a 2% average increase on 5-digit automation letters to a lesser increase of 1.5% on 5-digit automation flats. High density and saturation letters included an increase of 3.2% while the same sortation level for flats only had an increase of 0.5%. EDDM-Retail proposed rates reflected an increase of 4.8%. Proposed price changes for Nonprofit Mail were substantially different from Standard Mail. For Nonprofit Mail, the proposed change for 5-digit automation letters was only 1.5% while the 5-digit automation flats will potentially increased by 5.5%. High density and saturation Nonprofit letters reflected an increase of 1.7%, significantly less than the proposed jump for regular Standard Mail. The USPS was sending a very confusing message to the mailing industry with these prices and seemed in some cases to be discouraging a more efficient 5-digit sort level. It appears that the PRC saw the same inconsistencies.
Originally proposed price changes for Periodicals averaged 2% with the steepest increase proposed for barcoded machinable flats carrier route basic sort at 2.5%. Originally proposed price changes for non-competitive Package Service mail averaged 2% overall. Here the PRC identified errors in USPS price calculations and asked that these be corrected.
The other unknown pricing variable which won’t have an impact until later this year is exigency. When exigent pricing was approved it was intended to be implemented as a surcharge and was only to be in place until such time as the USPS could recoup losses due to extraordinary circumstances such as the recession. It is expected that these losses should be recovered by August of 2015. Unless the USPS wins a court ruling permitting them to either extend exigency or make it permanent, prices should drop possibly in September of this year to remove the exigency surcharge. On the average this would be expected to be a pricing decrease of roughly 4.3%. More information on this can be expected in the coming months.
New Postmaster General – Megan Brennan
On February 1, 2015 Megan J. Brennan became the 74th Postmaster General and CEO of the United States Postal Service. Prior to this appointment Brennan was Chief Operating Office and Executive Vice President of the USPS where she was instrumental in implementing continuous improvements to service performance. She began her 29-year career with the Post Office as a mail carrier in Lancaster PA. In a recent letter to postal employees, Brennan indicates her focus will include “making long-overdue improvements to our infrastructure, including upgrading our vehicle fleet and deploying advanced package sortation equipment”. She also cites a desire to “speed the pace of innovation” and reinforces “commitment to strategic product and service innovation” to help drive future growth for both the USPS and the industry.
National Postal Forum
The National Postal Forum will be held May 16 through May 20 in Anaheim CA this year. The theme is “Growing Together. Highlights will include an opportunity for interested participants to complete a comprehensive course in Executive Mail Center Management (EMCM) which covers topics related to running a mail center efficiently. At the end of the course participants can take the EMCM final exam to obtain certification. A $170 exam fee applies. The Mailpiece Design Professional course will also be offered. This course educates participants on the key elements of mailpiece design requirements. Upon completion of the course participants can opt to take the final exam after paying the exam fee. National Postal Forum includes over 135 educational workshops, multiple focus group and networking opportunities for attendees and an NPF Solutions Theater that previews how some of the key marketing technology topics and solutions being considered by industry and postal experts. Register now at www.NPF.org.
Past Legislative Updates
Postmaster General Pat Donahue told MTAC members in August that he still hopes to see legislation passed in Congress in 2013 addressing the financial concerns of the USPS. Congress is due back in Washington on September 9. When they return there will be 2 bills for them to consider addressing issues with the postal service. In the House there is a postal reform bill introduced by House Oversight Committee Chairman Darrell Issa. The bill is sponsored by Rep. Blake Farenthold (R-TX) and Rep. Dennis Ross (R-FL). Some of the key points in this bill include:
- Provides USPS with new tools to cut costs and restructure their finances to avoid “taxpayer bailouts”
- Allows USPS to maintain Saturday delivery of packages including medications while phasing out Saturday delivery of mail including bills and advertising. Projected postal savings: $2 billion annually.
- Restructures payments for future Retiree Health Care Benefits forgoing past due payments, eliminating payments for 2013 and 2014 and restructuring future payments to achieve full funding for the plan by 2056.
- Replaces current part-time Board of Governors with a temporary panel of 5 executives who will work full-time during a restricting period until the Postal Service is again on a path of earning profits and able to successfully make Retiree Health Care Benefits plan payments. At that point the panel will dissolve and return the leadership role to the Board of Governors.
- Currently new developments are receiving curbside or cluster box delivery. Conversion of existing deliveries to curbside or cluster box is strictly voluntary. The proposed legislation will phase out door-to-door delivery in favor of these more efficient alternatives with a projected annual savings of roughly $4 billion.
- The legislation proposes to phase out special rates for certain customers – including elimination of nonprofit pricing for national and state political committees – while maintaining options for nonprofit organizations to continue to fundraise and communicate through the mail in an economical manner.
- Please refer to the Postal Reform Act of 2013 for more details about this proposed legislation.
In the Senate a bill was introduced immediately prior to the August break by Senators Tom Carper (D-DE) and Tom Coburn (R-OK). Here are a few key points from this proposed legislation:
- This bill also proposes to restructure payments for future Retiree Health Care Benefits. Under this proposal, outstanding past due payments would be canceled and payments would be suspended until 2016. The remaining payment schedule would be amortized over the next 40 years.
- Delivery standards for First Class Mail and Periodicals would be maintained at today’s standards for a period of 2 years. The legislation does allow for a gradual move to a 5-day delivery schedule beginning no earlier than one year after date of enactment (if passed).
- The USPS would be prohibited from closing or consolidating any mail processing facilities still open on the date of enactment (if passed) for at least 2 years and would require the USPS to seek input from communities regarding any operational changes to local Post Offices requiring officials to consider alternatives to reducing costs other than closing local Post Offices.
- The legislation requires the Postal Service to modernize delivery by using centralized delivery (cluster boxes) where practical; curbside delivery where cluster boxes would not work. It would also require the Post Office to convert existing deliveries to cluster boxes or curbside delivery with an option to continue “to the door” delivery where evidence indicates it is impractical or inappropriate to have curbside or cluster boxes or where a physical hardship would prevent the customer from retrieving mail that is not delivered to the door.
- Price caps currently in place (percentage change in Consumer Price Index) would be amended to make them applicable across all market-dominant products rather than applying the price caps separately by class.
- The Post Office would be authorized to ship wine, beer and distilled spirits and would be permitted to offer services on behalf of federal, state, local or tribal governmental agencies.