USPS 2017 Postal Pricing Considerations

July 25, 2016

I want to applaud the USPS for being more open and candid with major mail owners than it’s been in the past.

At recent MTAC meetings, the USPS shared information on what’s being considered for price adjustments that would take effect in January. With that, it appears that postal price increases in 2017 should be minimal. The USPS also announced some structural changes and possible insight into greater discounted categories of mail. The primary areas affected would be:

  1. Flats/FSS – A possible return to the pricing structure that was in place prior to the 2015 change for Standard Mail, Periodicals and Bound Printed Matter flats. That would bring High Density, High Density+, Carrier Route and 5-digit presort pricing back into FSS, resulting in those presort categories being equal and available for all flats regardless of whether processing was on FSS.
  2. Flats/FSS – Consideration is being given to increase the discounts for 5-Digit Carrier Route pallets and FSS Scheme pallets, but no decision has been made on further incenting DDU entry. The USPS is not certain they want large volumes of flats entered at that level.
  3. First Class letters – Because 2nd ounce free was successful the last few years, the USPS is considering extending that to the 3rd ounce.
  4. Standard Mail flats – Consideration to initially increase the piece/pound breakpoint from 3.3 ounces to 4 ounces. If that proves to be beneficial in adding pages and/or moving to heavier basis weight paper, the shift to a higher breakpoint could continue in future price changes.
  5. Standard Mail letters – Costing data has shown that dropship letters may be getting too much dropship discount. As a result, the USPS would either increase letter prices above CPI and/or decrease the dropship discounts. This would be done over a number of years and not all at once to avoid “rate shock”.

At this time, these are only the intentions of the USPS Pricing group. They are not carved in stone since many layers of USPS approvals are needed before a price filing can take place. With the exception of the pricing implication for Standard Mail dropship letters, these should be positive changes. However, the devil is in the details. Until we see the actual mail pricing proposal and the mail class prices that go along with it, there is no way of knowing the impact.

The Postal Service has clearly indicated there will be a CPI price increase on January 22, 2017. Current CPI is about .6% and trending upward, so by the time the USPS files for their increase at the PRC (Postal Regulatory Commission) it may be anywhere between .6 – 1%. I would suggest budgeting for the 1% to be on the safe side. But remember that whatever the number, it is the average for a class of mail (First Class, Standard Mail, Periodicals & Bound Printed Matter). So there can be variance by a few percentage points higher or lower. We should have greater detail on mail classes when prices are filed at the PRC sometime in September or October.

There is one caveat on 2017 postal pricing, and that relates to what Congress may do in a Lame Duck Session in December as nothing will happen before that. In the current postal reform bill that passed through committee in the House, there is a provision for a 2.15% increase (half of the rolled back exigent) that would be added to base pricing and implemented in early 2017. However, the likelihood of legislation being passed by the House and Senate this year is still very minimal, but anything is possible. Mailers will have to determine whether they want to add this to the 1% as a safeguard.