• on Sep 26th, 2013 in Pricing & Rates | 9 comments

    The U.S. Postal Service’s governing body, the Board of Governors, voted this week to request permission to raise postage prices above the inflation-based price cap to generate $2 billion in revenue in 2014. It is asking the regulator, the Postal Regulatory Commission (PRC), to allow the Postal Service to raise the price of a stamp by 3 cents (to 49 cents), which is 2 cents more than the annual inflationary increase. Prices on other single-piece and commercial mail products would also increase. This request is known as an “exigent” price increase because it will exceed the statutorily mandated price cap that is tied to growth in the Consumer Price Index (CPI).

    By law, the Postal Service can only raise prices on its market-dominant products, such as First-Class Mail, advertising mail, and magazines, by the annual growth in inflation. The law allows it to ask the regulator for a price increase above inflation for “exceptional or extraordinary” circumstances. In a public letter to customers, Board Chairman Mickey Barnett described the “precarious financial condition” of the Postal Service and the “uncertain path toward enactment of postal reform legislation” as primary reasons for seeking price changes above inflation. Barnett said if comprehensive postal reform legislation were to pass, the Postal Service would reconsider its pricing strategy.

    The Postal Service filed for an exigent price increase in July 2010, saying the economic recession was an exceptional circumstance that threatened its viability. The PRC rejected the proposal and the Postal Service challenged the rejection in federal appeals court. The court remanded the original case back to the PRC, but at that time, the Postal Service did not pursue it.

    If the PRC were to approve this current request, the Postal Service would raise prices on January 14, 2014. On average, postage rates would increase 5.9 percent – or 4.3 percent above CPI. Mailer groups are expected to oppose the exigent price increase. The PRC has 90 days to issue an opinion on the Postal Service’s exigent price increase proposal.

    What do you think? Share your thoughts on the proposed exigent price increase.

  • on Aug 13th, 2012 in Products & Services | 29 comments
    More than 40 million Americans change their address each year, which means the U.S. Postal Service forwards an awful lot of mail. In fiscal year 2010, it forwarded 1.2 billion pieces. Under the Postal Service’s regulations, customers who fill out a change of address form have their mail forwarded to their new address for 12 months after the move. Mail forwarding costs the Postal Service almost $300 million a year. The cost to return mail to sender is another $800 million. The cost of mail forwarding – and returning to sender and treating as waste -- is baked into the overall First Class Mail rates, so all customers effectively pay for this service whether they use it or not. Canada Post has taken a different approach to mail forwarding, charging recipients either an annual or semi-annual fee when they move. Residential customers pay $75 for 12 months of forwarding and business customers pay $235. These prices increase slightly if the person or business moves to another province. The Canada Post model extricates the costs from the overall First Class Mail rate and is structured so recipients pay for the service, but only if they use it. Some U.S. business customers have requested that the Postal Service explore new pricing and product options to reduce the costs of forwarding and returning mail to sender. Would a model similar to the Canada Post one work in the U.S. or would residential recipients, in particular, feel like they were being charged for a service they thought was free? Should the sender pay for forwarding instead of the recipients? What would happen if recipients or senders decided against paying for forwarding? Would total costs merely go up since return to sender mail costs more than twice as much as forwarding per piece? Are there other alternatives? Share your thoughts below.
  • on Apr 23rd, 2012 in Post Offices & Retail Network, Pricing & Rates | 9 comments
    Generally, most consumers know the rates for mailing a 1-ounce First-Class® letter. However, many don’t know the prices of other postal service offerings, such as certification, insurance, or return receipt. In some instances, some of these services must be bundled with the mailing type. Posting the rates for the more commonly used services in a convenient spot in the Post Offices would let customers know approximately how much services cost, allowing them to make informed decisions. For example, displaying rates for the first several ounce increments of First-Class mail, as well as the most commonly used rates for Express Mail and Priority Mail along with the rates for certification, insurance, and return receipt, would help mailers calculate the total purchase price. Easy access to this information would allow mailers to effortlessly make price comparisons with other providers and clearly reveal the true value the Postal Service provides to consumers. What do you think? How can the Postal Service present prices in the most effective way?

    This blog is hosted by the Financial Reporting directorate.

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