Postage rates to return to inflation cap on April 10

March 2, 2016

As we expected, on February 25, the Postal Service gave notice to the Postal Regulatory Commission that it would remove the temporary exigent surcharge of 4.3 percent on April 10. The 45 days’ notice was required by the PRC to presage when the USPS will reach its allowed $4.9 billion above-inflation revenue from market dominant customers.

The USPS also issued a news release with the headline: “Forced Price Reduction to Worsen USPS Financial Condition by $2 Billion per Year.” The $2 billion figure refers to the annual amount of surcharge above the rate of inflation that USPS customers have been forced to pay for almost two and a half years. Apparently, the Postal Service assumes a general price reduction will attract little to no new volume.

The release is clearly aimed at Capitol Hill where postal leaders continue to hope that an eleventh-hour law will be passed to legislate a permanent above-inflation surcharge. It would be the first time that Congress set postage rates since 1968. In an effort to de-politicize the process, Congress transferred rate-setting to the USPS and the PRC with the Postal Reorganization Act of 1970.

The USPS also filed another request that the U.S. Court of Appeals review the PRC order to end the surcharge. It likely will not be resolved before April 10, and as we have said before has little substance. On February 24, the United States Department of Justice on behalf of PRC urged US Court of Appeals-DC Circuit to not grant the USPS petition for review of removal of exigent surcharge in the Alliance of Nonprofit Mailers case. Today, the Alliance of Nonprofit Mailers and its allies also filed a brief urging the court to not grant the review.

Both the trade and the general media have picked up the story that the temporary surcharge is ending April 10, and postage rates are going to come down for the first time since 1919. Many nonprofits plan to increase their mailings as a result of the price drop.