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USPS proposes price increase

Jul 7, 2010 12:00 AM


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The U.S. Postal Service Governors have recommended increasing the price of a First-Class stamp by 2 cents, to 46 cents, and authorized the production of a pane of four evergreen tree branches as the newest image for Forever Stamps. The price of a postcard would increase 2 cents to 30 cents.

The Postal Regulatory Commission must approve the recommended price changes. The increases would not go into effect until January 2, 2011. It would be the first stamp price increase in almost two years. The PRC has 90 days to review and make a final ruling on the filing (on or about Oct. 4). The PRC can accept or reject all price requests.

Volume discounts and free additional weight are included in the proposed price changes. Price changes for the majority of products and services fall between 4% and 6%. These products and services account for about 90 percent of Market Dominant revenue. The Postal Service Governors approved the recommendation for prices for all 18 Market Dominant products.

Products outside the range include Periodicals (8%), Standard Mail Parcels (23%) and Media/Library Mail (7%). The increases above the average are intended to improve the financial performance of products that currently do not cover costs while limiting the impact on customers. (The recommended increase for catalogs is 5.1%.)

The filing includes two incentives designed to retain and grow profitable mail volume: “Reply Rides Free” and “Saturation Mail/High Density Incentive Program.” Reply Rides Free encourages the use of bill and statement mailings for marketing messages. For qualifying customers, a 1.2-ounce piece is charged the 1-ounce price if a reply envelope or card is included in the mailing. The Saturation Mail/High Density Incentive Program provides rebates for volume growth for Standard Mail and Nonprofit Mail letters and flats. A minimum of six Saturation/High Density mailings in a Fiscal Year is required.

Postmaster General John E. Potter identified in March a number of actions the Postal Service will pursue, including a change to delivery frequency, expanded access to products and services more convenient to customers and restructuring prepayment of retiree health benefits. Potter was clear at the time that customers would not be asked to close the entire budget gap.

These proposed price changes would generate $2.3 billion for the last three quarters of the 2011 Fiscal Year (January to September) and an estimated $3 billion for the full 12 months of Fiscal Year 2012. Despite eliminating millions of work hours and reducing expenses by more than $1 billion every year since 2001, a budget gap remains. The proposed price increases will help close a $7 billion projected shortfall in FY 2011. The Postal Service would have needed to raise rates an average of 20% across all product lines to completely close that expected gap.

More detailed information on the price filing is available at http://usps.com.