The Postal Service has signaled for months that it will be filing for a general price increase later this year (calendar below). Publication of revised mailing standards (some below) that would also take effect in January. Much of this follows a pattern the Postal Service sought to establish years ago: regular price changes announced in the fall and effective in January. The question of consequence for Customers, is less whether there will be a price change as how much an increase will be. The amount that prices for market-dominant mail can increase is tied to the CPI-based price cap, including how much “rate authority” from previous rate filings remains unused. As of the July CPI (based on the June CPI), was at an annualized cap of 0.676%. However, under the rules for calculating the CPI cap, because it’s been more than a year since the last general price increase (filed in January 2015 based on the November 2014 CPI), the applicable formula yields a higher cap (0.713%). To this would be added any unused authority (0.308% for First-Class Mail, 0.403% for Standard Mail, and 1.430% for Special Services) to determine the limit on any rate increase at the class level. OK NOW, In English, take the CPI plus unused CPI would come to around 1.5 to 2 percent as I noted last night. Two big issues that I can NOT get my hands around would be, Flats are not covering their cost and drop ship discounts are not covering the cost so I anticipate a slightly greater increase in flats and a decrease in the drop ship discount by .5 to 1 cent. If I “mail geeked” you and want help translating just give me a buzz. Below is the expected time frame and a list of structural changes that I am anticipating.
Time Frame expected to be used by USPS
August: share technical changes and draft postage statements (without pricing) with developers
August: share draft mailing standards
September/October: Final PRC Market Dominant
November: Competitive filings
November/December: Publish final prices, mailing standards
1/8/17: target implement pre-release
1/22/17: targeting price effective date
Structural changes under consideration are as follows:
o Combine AADC and 3D auto letters for First-Class Presort (currently the same price)
o 3rd Ounce free for First-Class commercial letters
o First-Class Mail Promotions
o Combine AADC and 3D auto letters for Standard Mail presort
o Simply Standard Auto letters by eliminating the per-pound rate between 3.3 and 3.5 ounces. Letters would be the same price from 0 up to 3.5 ounces.
o Increase Standard Mail flats piece price weight break from 3.3 to 4.0 ounces
o Standard Mail promotions (sent you the proposed changes about two weeks ago)
o FSS Standard Mail revert to previous structure
Also noted at the MTAC meeting was the issue with DSCF letter Mail. There was a change in DSCF pass-through calculation from FY14 to FY15. DSCF letter pass-through went from 57.4% in the FY14 ACD to 225% in FY15 ADC. FY15 discount $.043. The FY15 Cost avoidance – $.02 per piece. Meaning the USPS is giving us a 4.3 cent discount for drop ship where it should have been 2 cents
The plan instead is to have modest increases over a number of price changes.