U.S. Postal Service customers and businesses mailing letters and packages Monday (April 11) will see the first rollback in prices for mailing products and services in nearly a century.
Price reductions mandated by the Postal Regulatory Commission to recover for the massive volume and revenue losses of $4.6 billion resulting from the Great Recession went into effect on Sunday, April 10.
The historic rate reduction – the first since 1919 – is prompted by the removal of the 4.3% exigent surcharge and will apply to several mail classifications, including letters, large envelopes, flats, and postcards. The changes will bring the price of First-Class stamp mail to 47 cents from 49 cents; First-Class metered mail to 46.5 cents from 48.5 cents; and postcards to 34 cents from 35 cents. Commercial prices will also decrease, but the rate structure for shipping products, including Priority Mail and parcels/packages, will not be affected. (Link here for pricing on all USPS stamps and services.)
USPS officials on Friday were unhappy about the rate reduction, saying the nation’s Post Office will lose approximately $2 billion in annual revenue resulting from the PRC’s mandate from January 2014. The price rollback only partially offsets Postal Service revenue losses – which the Postal Service estimates exceeded $7 billion in 2009 alone.
“Given our precarious financial condition and ongoing business needs, the price reduction required by the PRC exacerbates our losses,” said Megan Brennan, Postmaster General and CEO. “This unfortunate decision heightens the importance of the review of our ratemaking system which our regulator is required to conduct later this year.”
The PRC is required to review the market-dominant regulatory system to determine whether it is achieving the statutory objectives mandated by Congress. The Commission is empowered to modify the system or create a new system as necessary to achieve the objectives. The obligation to conduct the review arises 10 years after enactment of the Postal Accountability and Enhancement Act, which occurs in December of this year.
“To provide clear guidance to all interested parties concerning the review process, we filed a petition (on April 7) with our regulator to clarify the scope of the review and which provisions of the current regulatory structure are subject to potential modification or replacement,” said Brennan. “By addressing preliminary issues now, the PRC can ensure an expeditious and efficient review.”
To offset long-term declines in the use of First-Class Mail in particular, the Postal Service said it continues to improve efficiency and has reduced the money-losing mail service’s annual cost base by $15 billion since 2008. Nevertheless, and despite strong multi-year growth in package deliveries, the Postal Service continues to record unsustainable financial losses due to changing market conditions and legislative and regulatory mandates which prevent the Postal Service from fully adjusting to the new market realities, Brennan said.
“To properly compete for customers and continue to meet America’s evolving mailing and shipping needs, the Postal Service needs the financial capability to invest in the future,” said the USPS chief executive. “We continue to seek legislative reforms to put the Postal Service back on a sustainable financial path, and pricing is an important component.”
Among other proposals, the Postal Service continues to seek congressional action to reinstate and make the exigent surcharge permanent, Brennan said. The independent postal arm of the federal government was founded in 1775 with Benjamin Franklin as the first postmaster, and is one of the few governmental agencies authorized by the U.S. Constitution.
Pitney Bowes, which offers postal meters, software and online postal stamps to USPS customers, applauded Sunday’s cost reduction. The technology giant said the mandated price reduction will have a positive impact on businesses of all sizes as organizations leverage the power of mail to drive commerce.
“In this omni-channel world, mail remains a critical channel for businesses to reach existing customers and to engage prospects,” said Patrick Brand, senior vice president and general manager of Pitney Bowes’ global technology products and strategy. “New technology is helping to reinvent mail, making it more interactive, more compelling, and more effective. Businesses can now enhance physical mail pieces with digital experiences, create more interactive and targeted direct mail, and sequence communications across multiple channels to boost impact.”