U.S. Postal Service Increases Postage Rates

U.S. Postal Service Increases Postage Rates

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INSIGHTi
U.S. Postal Service Increases Postage Rates
September 2, 2021
On August 29, 2021, the U.S. Postal Service (USPS) raised prices on many of its postal products and
services, including its First-Class “Forever” stamps. The increase in rates was approved by the Postal
Regulatory Commission (PRC) on July 19, 2021, following a request submitted by the USPS in May
2021. This is the second rate change implemented by the USPS in 2021. The USPS increased rates on
many of its postal products and services on January 24, 2021, though the price for First-Class “Forever”
stamps had remained the same at 55 cents.
Table 1 provides a select list of postal rates that took effect on August 29, 2021. The full list of adjusted
prices is available on the USPS’s “Postal Explorer” website as an Excel spreadsheet and as a PDF file.
Select USPS Postage Prices as of August 29, 2021
Table 1. Select USPS Postage Prices as of August 29, 2021
Price As of

Previous Price
August 29,
Change
2021
Stamped Mail

First-Class
Forever Stamp
$0.55
$0.58
+$0.03

First-Class
Postcard Stamp
$0.36
$0.40
+$0.04

First-Class 2-
Ounce Letter
$0.75
$0.78
+$0.03
Stamp

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Price As of

Previous Price
August 29,
Change
2021
International
Forever Stamp
$1.20
$1.30
+$0.10

Semipostal
$0.65
$0.75
+$0.10
Stamp

Metered Mail

First-Class 1-

Ounce Letter
$0.51
$0.53
+$0.02

First-Class 2-
$0.71
$0.73
+$0.02
Ounce Letter
Large Envelope

(flats) 1-Ounce
$1.00
$1.16
+$0.16
Source: USPS Price List (Notice 123) and USPS August 2021 Price Change, available at https://pe.usps.com.
Notes: Al stamp and postal stationery designs are copyrighted by the U.S. Postal Service. Images are provided here for
il ustrative purposes and for official use by Members of Congress, congressional committees, and congressional staff only.
How Does the USPS Establish Its Postal Rates?
Following the statutorily required 10-year review of its system for regulating rates and classes for market-
dominant products, the PRC ordered the adoption of a revised regulatory system. The revised rules were
published in the Federal Register in December 2020 and went into effect on January 14, 2021.
Under the Postal Accountability and Enhancement Act (PAEA), price increases for market dominant
products were limited to a formula based on annual, unadjusted changes in the Consumer Price Index for
Urban Customers (CPI-U).
Market Dominant and Competitive Products
Market dominant products are those in which the USPS is considered to have a monopoly over the service, such as first-
class and marketing mail. Competitive products, such as shipping and packages services, are those in which the USPS
competes with the other companies in the private market (e.g., FedEx, UPS).
Market Dominant Products Include:
Competitive Products Include:
First-Class Mail®
Priority Mail®
Marketing Mail (Formerly Standard Mail)
Priority Mail Express®
Periodicals
Parcel Select®
Post Office Box Services
International Priority Airmail®
Under the revised rules, the USPS maintains its existing CPI-based rate authority. Additional y, the new
system provides the USPS with two additional forms of rate authority. The first adjusts the price cap and
provides the USPS with additional rate authority according to a formula based on market dominant mail
volume declines. The second provides the USPS with additional rate authority according to a formula
based on USPS’s annual retiree health and retirement plan costs.

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When the USPS wants to change its rates, it must first receive authorization from the Postal Governors.
For most competitive products (excluding customized rates negotiated between the USPS and private
mailers), postal management must provide the Postal Governors with the proposed rates, analysis, and
other documentation. Before the rates may go into effect, any proposed changes to competitive products
must be filed with the PRC. For example, see United States Postal Service Notice of Changes in Rates of
General Applicability for Competitive International Products (October 9, 2020). For changes to market
dominant products, the USPS must receive authorization from the Postal Governors and provide them
with the proposed rates, analysis, and documentation. Additional y, the USPS must file public notice of its
planned rate changes and a request to review its proposed changes with the PRC no later than 90 days
before the new rates are scheduled to go into effect.
Does USPS Expect the Rate Change to Impact Mail Volume an d Revenue?
Neither the USPS Notice of Market-Dominant Price Change nor the USPS fact sheet on the price change
address this issue directly. In response to the question “Wil raising mail prices further decrease mail
volume?” the USPS fact sheet states that mail volume has been on the decline for the past decade and that
they expect total mail volume to drop another 36% by FY2030. In its order approving the rate change, the
PRC noted that several commenters to the USPS’s proposal stated that the increased prices wil reduce
mail volumes because large mailers wil reduce reliance on the mail in order to stay on budget. The PRC
acknowledged these concerns and, quoting their earlier order, stated that rates are set not by the PRC but
by the Postal Governors, who are “in the best position to determine how to best utilize the pricing
authority and make decisions about specific price increases.”
On the issue of potential revenue decline, the USPS Notice of Market-Dominant Price Change cites the
best ways to generate revenue for selected classes and types of mail. Additional y, the USPS faced a
similar situation between January 26, 2014, and April 10, 2016, when it had in place an exigent surcharge
(i.e., a price increase) of 4.3% on many of its market dominant products and services. Under the PAEA,
an exigent surcharge is a temporary price increase permitted under “extraordinary or exceptional”
circumstances. The USPS requested and was granted an exigent surcharge beginning January 2014 to
address mail volume declines and revenue losses it incurred as a result of the Great Recession (2008-
2009). Though temporary, the price increase had a positive impact on revenues. In FY2014 and FY2015,
the estimated revenue from the exigent surcharge was $1.4 bil ion and $2.1 bil ion, respectively.

Author Information

Michelle D. Christensen

Analyst in Government Organization and Management

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