PRC Chairman Predicts 5% Rate Hike for 2009

Although the 2006 Postal Reform law restored a semblance of normalcy to annual postal rate increases, many catalogers are wondering what they can expect in terms of a rate hike in May 2009.

Dan G. Blair, chairman of the Postal Regulatory Commission, offers his educated prognostication: “It appears that the average increase for each class of mail will be approximately 5%. The actual rate cap will depend upon the behavior of the monthly CPI (Consumer Price Index) between now and December.

The cap is based on an average over two consecutive 12-month periods, Blair says. “The current value (as of Oct. 21) is 4.4%, and we’ve witnessed an upward trend over the past year.”

USPS officials have said they will end the current fiscal year with a volume decline of 9 billion pieces. “Given the current rate at which the Service is losing money, “ Blair says, “”it is likely that the rate change in all classes will be close to the cap.

Also, he notes, “there are small amounts of banked, or unused, rate authority available. The mailers should use their projection of the cap as a guide in developing their postage budgets.”

As for the massive USPS volume decline, Blair believes ways to stem this tide include improving service performance and keeping price increases to a minimum. “Faster, more reliable service will attract and keep volume,” he says. And there will be a need to control cost growth to less than CPI “to ensure price (rate) changes will be less than the CPI-based cap.”

Catalogers are ever fearful when they hear significant mail volume decline numbers, bracing for possible rate increases in the future. Postmaster General Jack Potter keeps saying the USPS is not considering an exigent rate case–the “escape valve” mechanism baked into Postal Reform to allow the USPS to increase rates over and above the CPI.

Does Blair think an exigent rate case is possible, given the current circumstances? “Anything is possible,” he says, “however, the Postmaster General has repeatedly said he does not intend to seek an exigent rate increase, and I believe him.”

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