US regulators greenlight Postal Service rate increases

Regulators in the US have approved increases for US Postal Service rates, now set to come into force on April 17, but face an appeal next month on proposals for higher rate rises. The Postal Regulatory Commission (PRC) said yesterday that the price rises proposed by USPS last month, of just over 1.74% for most of its market-dominant products, complied with its legal price cap based on the Consumer Price Index.

First Class Mail is set to go up by 1.738% on average, with one-ounce letters remaining at 44 cents, while Standard Mail is set to go up 1.739% on average.

For periodicals, prices are set to rise 1.741% on average.

Separately from the approved rate rise, an attempt by the USPS to raise its rates by as much as 5.62%, in order to counter its difficult financial situation, is set to reach the Federal Appeals Court next month.

Under US postal regulations, the USPS can raise its rates by more than its CPI-based legal price cap if there are extenuating or “exigent” circumstances.

The attempt by the USPS to do just that was rejected by the PRC last year, on the grounds that the PRC said Postal Service rates were not to blame for the organisation’s financial troubles.

The rejection is being appealed by the USPS, with the case scheduled for a hearing at the US Court of Appeals for the DC Circuit on March 15.

Work-sharing discounts

In approving the price increases yesterday, the PRC suggested that the Postal Service could have done more to make its Standard Mail Flats service cover its costs, and it also criticised the USPS for using “unapproved methodologies” to calculate costs it avoids through work-sharing.

The methodologies are being reviewed by the PRC, but had not been approved before the USPS made its proposals last month.

As a result, the PRC said yesterday that work-sharing discounts in the USPS proposals were now “subject to further review pending consideration of the worksharing methodology proposals now before the Commission”.

Ruth Goldway, chairman of the PRC, said she was “troubled” by the Postal Service’s approach to its work-sharing calculations.

“I believe the workshare discounts that the Postal Service has proposed continue to allow for inefficiencies in mail processing,” she said.

Within Standard Mail worksharing discounts, the PRC noted that worksharing discounts were being offered that were higher than the USPS avoided costs for certain categories, in order to incentivize mailers to apply barcodes to their items.

The move will help the USPS as it deploys new Flats Sequencing Sorting (FSS) technology, and for parcels will also help improve sorting efficiency.