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06/18/2013

USPS Evaluates The Possibility Of An Exigent Price Increase

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The Postal Service is evaluating the possibility of filing an exigent price increase, which if approved, would go into effect in 2014. This is in response to a Board Of Governors’ (BOG) request in April that instructed the Postal Service to delay implementing 5-day mail delivery and also to –

“Evaluate further options to increase revenue, including the possibility of an exigent rate increase to raise revenues across product categories and/or products that are not currently covering their costs.”

The BOG had requested these actions as a result of “extreme circumstances and the worsening financial condition of the Postal Service” and urged Congress to “quickly pass comprehensive postal legislation.”

If no legislation passes and the USPS moves forward with an exigent request, one possible scenario that has been discussed would involve a total price increase of 6 to 9%, calculated as … USPS Pict

  • CPI  <= 2% - estimated annual increase scheduled for late January 2014 implementation
  • An across-the-board 4% increase above the CPI increase – the $2.6B estimated savings the USPS was not able to realize due to delaying implementation of 5-day mail delivery.
  • Another 2 – 3% increase for the “underwater” products. Underwater products are defined as market dominant product categories that are not covering their attributable costs. This includes Standard Flats, excluding Saturation, High Density Plus, High Density or Enhanced Carrier Route and all of Periodicals.

On the legislative front, the House of Representatives Committee on Oversight and Government Reform has released a draft discussion document to solicit broad stakeholder input on proposed elements of a reform bill. In the draft, the CPI cap is kept in place, but all market dominant products are required to cover their attributable costs. If after two years, any market dominant products are below 90% cost coverage they will be raised 2% above CPI annually until they achieve total cost coverage. During the two year period, a study would be conducted relative to the impact of excess capacity. Therefore, prices would not rise above CPI for at least two years. 

RR Donnelley understands the impact that such an increase would have on mailers and continues to advocate for sensible reforms that will enable a sustainable future for the USPS. To that end, RR Donnelley has joined the reestablished Affordable Mail Alliance to work toward averting a potential damaging postage increase.

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For additional information, or to discuss postal mailing strategies, please contact your

RR Donnelley account representative or find us on the web at www.rrdonnelley.com

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