U.S. Postal Service Given Green Light to Speed Up Price Increases

By Paul Ziobro Features Dow Jones Newswires

The federal agency that oversees the U.S. Postal Service gave permission for the service to speed up its pricing increases over the next five years, an effort to shore up its finances as the amount of mail it delivers has plunged.

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The proposal by the Postal Regulatory Commission on Friday would allow the postal service to raise rates on "market-dominant" products, which includes first-class mail, by up to 2 percentage points above inflation each of those years. Some other categories like periodicals and catalogs would see rates increase by steeper amounts. The USPS could also raise rates by another percentage point annually based on meeting certain efficiency and service goals.

Federal law currently limits the USPS from raising rates by more than the rate of inflation on market-dominant products, which generated more than 70% of the service's $69.6 billion in revenue in the 2017 fiscal year ended Sept. 30. The minuscule increases -- the price of a first-class stamp is rising a penny to 50 cents next year -- haven't been able to offset steep declines in first-class mail volume as communications continue to shift online. The service delivered 58.75 billion pieces of first-class mail last fiscal year, down from 95.9 billion in 2007.

"While the Postal Service has generally achieved short-term financial stability, both medium-term and long-term financial stability measures have not been achieved," the commission's chairman, Robert Taub, said.

The commission's proposal enters a 90-day comment period before being finalized.

The law limiting rate increases passed in 2006 but allowed for a review of its effectiveness after 10 years. The commission found that over that period, while rate increases have been stable and predictable, the USPS's finances and services have deteriorated.

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The Coalition for a 21st Century Postal Service, a group representing corporate mail customers such as Amazon.com Inc. and Bank of America Corp., said it was disappointed with the decision. "While an increase in postage rates may bring some short-term relief to the Postal Service, it may create more harm than good by potentially forcing much more mail out of the system. And once mail leaves, it rarely come back," it said.

The decision falls short of Postmaster General Megan Brennan's call for eliminating price caps altogether. "We continue to believe that any price cap is unnecessary in the rapidly evolving postal marketplace, for which all of our customers have alternatives to using the mail," she said in a statement, adding they are reviewing the regulator's decision.

Ms. Brennan has said that the agency needs to do away with price caps and make other reforms to turn its finances around. Postal-reform legislation, which among other things would have shifted retired postal workers to Medicare and changed the funding schedule for some retirement benefits, has stalled in Congress. She said that is needed to address an astronomical deficit, which includes missing more than $40 billion in payments into its retirees' pension and health-care accounts since 2012.

Write to Paul Ziobro at Paul.Ziobro@wsj.com

(END) Dow Jones Newswires

December 01, 2017 15:47 ET (20:47 GMT)