Submitted by Darin Marks, Resource Director, Production Solutions
This year, the mailing industry had to bare an outrageous postage increase of close to 6%; which consisted of a 1.7% CPI increase and a 4.3% exigent surcharge. Fortunately for the industry, the USPS must follow strict regulations when filing for rate increases. Unless congress passes new legislation, we will not see that type of increase in 2015.
In fact, the Postal Regulatory Commission (PRC) passed the 2014 exigent increase as a surcharge. The PRC requires the surcharge to be removed after 2 years or until the USPS recoups their losses of $2.8 billion due to the 2008-2011 “Great Recession.” The USPS has filed an appeal regarding the expiration, requesting it become permanent. Assuming their appeal is denied and based on the current USPS financials, the exigent increase will likely expire several months early, in August/September of 2015. At that time, the USPS will be required to reduce rates by the same amount they increased (approximately 4.3%).
The USPS has the option to file for another CPI rate increase which historically becomes effective in January. Based on the recent CPI trends and assuming CPI stays fairly steady, (based on the formula requirements), the CPI increase will be between 1.3 – 1.7%; which is likely to take place in January 2015.
However, the USPS does not have to increase postage in January. They could wait until later in 2015 which will allow the CPI aggregate to increase and thus file for higher rates later in the year. Some even speculate that if the USPS loses their exigent surcharge appeal, they might wait on the CPI filing, allowing for a higher CPI increase and apply for the increase at the same time as the exigent surcharge removal; which again is currently forecasted to be around August/September 2015.
In summary, with current CPI trends, the USPS could increase rates between 1.3 – 1.7% in January 2015. On the bright side, by the 3rd quarter the USPS may be forced to remove the 4.3% exigent surcharge causing rates to ultimately be less than those of 2014 and the better part of 2015. Alternately, should Congress decide to pass new legislation or the USPS win their exigent appeal, future rate increases are unpredictable.