is a lot of chatter right now about the possibility of the Postal Service
requesting an exigent price increase for 2014.
The Board of Governors (the organization at the head of the Federal
Reserve) recently gave a directive to the Postal Service to increase revenue.
In April, the BOG delayed the proposed cost-saving measure of moving to five-day
delivery and instructed the Postal Service to instead look at ways to increase
revenue — including evaluating a possible "exigent” (higher than inflation)
increase for products across the board and/or those not currently covering
Last month, when the USPS reported a net loss of $1.9
billion for the first quarter of 2013, Postmaster General and CEO Patrick
Donahoe again urged Congress to pass comprehensive postal legislation.
However, if no legislation passes and the USPS moves forward
with an exigent increase, one possibility being discussed is an exigent increase
in the 6-9 percent range. This worst-case scenario breaks down as such:
annual increase: < 2 percent
exigent increase: 4 percent. This
would constitute the estimated savings of $2.6B the USPS was not able to
realize due to delaying implementation of five-day delivery.
increase for unprofitable classes: 2-3 percent. "Underwater,” or unprofitable, products are defined as
market-dominant product categories that are not covering their attributable
costs. This includes Periodicals and Standard flats, excluding Saturation, High
Density Plus, High Density, or Enhanced Carrier Route.
In terms of brewing legislation, the House of
Representatives’ Committee on Oversight and Government Reform has released a
draft discussion document for a reform bill. In it, the CPI cap is kept in
place, but all market dominant products are required to cover their costs.
Prices would not rise above CPI for at least two years, during which a study
would be conducted on the impact of excess capacity. If after two years, any
market-dominant products are considered below 90 percent cost coverage, they
will be raised 2 percent above CPI annually until they achieve total cost
coverage. The Committee is currently soliciting stakeholder input.
Analysts believe that with this proposed exigent increase,
the Postal Service is putting pressure on the BOG and Congress to take action
on reform. It seems unlikely that all parties involved would approve a single
increase nearing, in some cases, 10 percent.
This report was provided by Association Media
& Publishing member Lane Press.