September 28, 2020

Ten things you need to know about 2021 postage increases

Next year will be a tale of two rate increases.  One will happen as expected on schedule.  The other is very likely to happen, but its amount and timing are very uncertain.  The potential range for rate increases on Market Dominant Mail in 2021 is approximately 1.458 percent to 8 percent.

• The regularly scheduled USPS Market Dominant Mail 2021 rate increases likely will go into effect on January 31, 2021, which is the last Sunday in January.  There is a chance they would move it up to January 24, because there are five Sundays in January 2021.

• The U.S Postal Service should file at the Postal Regulatory Commission before October 13, which is the CPI release date for the September data.  They want the cap to be based on 12 months’ CPI increases, which happens with the August data.  The filing by USPS is when we will find out the specific rate increases by class and rate cell.

• The current 12-month CPI cap is 1.458 percent.  The 2020 cap was 1.900 percent.  Keep in mind that the cap applies to each class of mail, and increases in individual rate cells that apply to your type of mail we be higher or lower.

• USPS has unused price cap capacity they could add to the 1.458 percent in certain classes:  First-Class Mail: 0.385 percent; USPS Marketing Mail: 0.049 percent; Periodicals: 0.000 percent; Package Services: 0.008 percent; Special Services: 0.007 percent.

• There is a better than 50 percent probability that the PRC will order new surcharges for USPS to impose sometime in 2021, pursuant to the ten-year rate review we have been involved in for a few years now.  The amount and timing of surcharges are very uncertain, both what the PRC will order and what the USPS will chose to implement.

• Mailers budgeting for 2021 postage costs should consider a contingency of 3 percent to 5 percent above the regular CPI increase.  This is based on the latest set of surcharges proposed by the PRC.

• Our filing in February included calculations of the potential impact of the PRC surcharges: for “compensatory products” such as First-Class Mail and Marketing Mail letters, an average increase over inflation of 3.2 percent and a maximum of 4.8 percent.  For “noncompensatory products” like Marketing Mail flats and Periodicals an average increase over inflation of 5.2 percent and a maximum of 6.8 percent.  In July, we filed supplemental comments showing that based on May 2020 data, the density surcharge alone would allow a 6.68 percent rate increase.  That’s up from the 1.2 percent average and 2.7 percent maximum calculated in February.  The density surcharge is driven by declines in mail volume as delivery points increase, and takes no account of the massive increase in package volume, revenue, and contribution.

• The Alliance and other mailers filed a request that the PRC put the rate review into abeyance due to the hugely changed conditions during the pandemic.  We cited the huge potential increase in the density surcharge, as well as the impacts of the pandemic.  After hearing this request from the entire mailing community, the regulator sided with its sister agency, the USPS, in refusing to suspend the rule-making.

• The Alliance and others likely will file in the U.S. Court of Appeals for the D.C. Circuit a request for a temporary restraining order if the PRC does issue a “final order” allowing surcharges in the ten-year review. Our General Counsel Eric Berman and other lawyers have warned that the court is very unlikely to issue the TRO.  They normally defer to the “experts” at the regulator.

• If the PRC or the D.C Circuit don’t stop the madness, the Alliance and others will fight the PRC order in court. But USPS would likely be free to implement surcharges during the months to years of the court case.  We believe we have a very strong legal and substantive case against the proposed surcharges and will prevail in court, but we might have to endure large rate increases while the justice system proceeds.  The excess rate increases would compound the impacts of the great recession and the pandemic to drive substantial volume out of mail, and threaten the future of nonprofit fundraising, membership, and publications.