Rollback Savings at the USPS?

Reducing USPS Stamp Prices

In the midst of the United States Postal Service (usps.gov) making drastic changes to become profitable again, there will be a tiny step backwards come next spring. Stamp prices jumped three cents to 49¢ in January 2014 as an emergency step to cope with the Great Recession. However, the hike in stamp costs from 46¢ to 49¢ was only a temporary resolution. From the beginning the emergency price increase was to help stabilize USPS’ shaky finances and allow the Postal Service to raise $4 billion in additional revenue before USPS would need to lower stamp costs back down.

After a recent clarification from the U.S. Court of Appeals for the District of Columbia Circuit and postal regulators, it has been declared that USPS is still entitled to collect another $1.1 billion before they are forced to roll the price of a stamp back. Based on an analysis from Save the Post Office, it is estimated that the 49¢ stamp will remain on sale until sometime in April 2016.

The Postal Service requested the emergency rate in 2013, citing the effects of the recession on its business to justify a 4.3 percent increase. Due to a law passed in 2006, the United States Postal Service can only raise its prices by the rate of inflation except under extraordinary circumstances.

While the proposed price increase was highly controversial, USPS stood its ground and argued the recession constituted extraordinary circumstances, and its overseeing body, the Postal Regulatory Commission agreed, but with stipulations. Originally, the Postal Regulatory Commission set a cap on the amount of money USPS could bring in as a result of the higher prices and the mailing agency was set to hit that ceiling this August, but USPS argued the need for the stipulation in court.

The U.S. Court of Appeals for the District of Columbia Circuit mostly sided with the original ruling from the Postal Regulatory Commission and also struck down the notion that the emergency rates should become permanent. Instead, the court said, the aftereffects of the recession have become “the new normal,” and the Postal Service needs to make adjustments to become prosperous in that new reality.

However, the court also ruled, that the PRC had haphazardly decided USPS could only count one year of revenue from a customer lost due to the recession; this determined the cap for how much money the Postal Service would be able to collect from the emergency rates. The court ruled the Commission would need to implement a more evidence-based approach and sent the provision back to the Postal Regulatory Commission to determine the actual effects of a lost customer. An example of the modification, would be if a postal customer lost his job and cancelled his cable television subscription, USPS would lose the business of the cable company mailing his bill for as long as he went without his subscription; prior the PRC’s ruling only allowed for the Postal Service to receive 12 months of lost revenue.

In the new ruling, the Postal Service’s proposed methodology for counting mail volume losses was accepted. Utilizing the new methodology, the USPS is allowed to collect about 40 percent more pieces of mail with the elevated prices. Thus, granting the Postal Service the ability to collect another $1.1 billion and keep the higher stamp prices for about another eight months.

The emergency price boost to the stamp was the largest price increase in 11 years; 4.3 percent was in addition to the normal 1.7 percent increase to help combat inflation. But even with the ruling, the new lower price of the stamp has not been announced, but is estimated to go down about 4 percent, or 2¢. The Postal Service will have to give 45 days’ notice to alert customers when it plans to restore it prices back to their lower rate.

“The recent decision does not fully restore the Postal Service for the significant mail volume and revenue losses associated with the great recession,” said Darlene Casey, a postal spokeswoman. Postal officials have continuously stated that if the inflated prices were not made permanent the agency would most likely end up back in the red. This sentiment was reiterated following the ruling. The PRC decision “clearly demonstrates there are significant pricing constraints in the postal law that impact the long-term financial health of the Postal Service, and reinforces the need for legislative reform of the Postal Service business model,” Casey said.

With USPS already making huge changes trying to adjust and stay operational in the “new normal,” there is no telling what the setback will do to the USPS’ bottom line. Dealing with the millions of dollars of lost from lowering stamp prices back down could have the potential to shatter USPS’ already shaky finances.

However, many are optimistic that the ruling will send the Postal Services down a productive path. “We believe that ending the exigent chapter will be good not only for customers of the USPS, but it also will enable the Postal Service to retain more of those customers and to focus on more long term strategic issues,” said Stephen Kearney, executive director of the Alliance of Nonprofit Mailers. “We urge the Postal Service to use the PRC order as a positive turning point for its future.”