As promised, we’re back for Part 2 of our postal issues update. Yesterday we dove into postal legislation and finances. Today we’ll cover the latest on a possible exigent postage rate increase, the proposed “Tech Credit” and changes to the USPS network. Let’s get to it.
Postage Rates Expected to Change
When the Postal Service withdrew its 6-day packages/5-day mail proposal in the face of strong Congressional opposition earlier this year, the Board of Governors directed USPS management to investigate the possibility of an exigent postage rate increase to compensate for the loss of savings from the delivery change. (An exigent increase would be a price increase in excess of the inflation-based cap that currently limits postage changes.) USPS management has said that they understand that an above inflation price increase will reduce mail volume, but they have also said that “everything is on the table” in terms of solving the financial challenges facing the Postal Service.
While we are still waiting to see if a proposal for an exigent price increase will be put forward by the Postal Service, the mailing industry has re-launched the Affordable Mail Alliance, a coalition of postal customers that successfully blocked an attempt to impose an exigent price increase in 2010.
Whether or not the Postal Service moves ahead with an exigent price increase, the annual inflation-based increase is still expected to take place in January. The CPI cap through the end of May would allow an increase of just less than 1.7%.
Uncertainty Surrounds Tech Credit
Earlier this year, the Postal Service proposed offering a “Tech Credit” to encourage more mailers to move to Full-Service Intelligent Mail before it becomes required to claim automation discounts in January. The mailing industry initially supported the credit as a way to offset some of the costs involved in setting up the data management systems needed to support Full-Service Intelligent Mail. However, when the Postal Service asked the Postal Regulatory Commission (PRC) to approve the program, it also requested to use the revenue foregone through the credit to increase its rate cap for the following years. Mailers objected to using the one-time credit to add to on-going rate authority.
The PRC approved the credit in early June, but denied the Postal Service’s request to augment the rate cap. We are currently waiting for the Postal Service to announce whether it will move forward with the tech credit absent the authority to recoup the discount in higher rates. The PRC said the Postal Service must provide 10-days’ notice if they move ahead with the credit.
Network Changes Going Smoothly
The USPS network operations team is continuing with its consolidation of processing facilities. Forty-six consolidations were completed in 2012. An additional 100 consolidations were originally planned for 2013, and an additional 55 sites have been accelerated from 2014. 55% of the 2013 consolidations were completed by early May, and the remainder should be complete by the end of September. To date, the consolidations have gone smoothly and caused no disruptions in postal processing. We expect a second phase of consolidations to begin in February 2014.
The Postal Service is also continuing with its POStPlan to optimize delivery of retail services in smaller communities. The plan is focused on reducing staffing and window hours in smaller retail facilities while maintaining community identity and lobby and P.O. Box access for customers.
It promises to be a busy summer for postal wonks, and SpeakingDIRECT will keep you up to date on all the changes in the postal world. Feel free to sign up for our weekly email so you don’t miss a beat.
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