Alliance Alert: New CPI Cap on Postage Increase=1.965%

December 17, 2014

Based on the November CPI figure (-0.3% released this morning, the biggest decline since December 2008), the Postal Service’s rate adjustment authority (now reflecting 15 months of CPI) is 1.965%. That’s up from 1.857% last month.

You might ask why the postal cap increased in a month that the CPI decreased. While the November 2014 CPI figure (236.151) is less than the October 2014 CPI figure (237.433), it is still about 1.3 percent higher than the November 2013 figure (233.069) that it replaced in the calculation of the 12-month moving average CPI. The 12-month moving average is the method the PRC designed for the cap after the 2006 law imposed a CPI cap but left the details up to the regulator.

Our financial consultant, Sandy Glick, provides these calculations for us and says that it seems unlikely that the cap would start going down (at least by much) until the March 2015 CPI comes out in mid-April 2015.  The March 2014 CPI was 236.293.

Recall that the Postal Service says it is holding off on its next CPI-capped increase filing until it hears from the U.S. Court of Appeals on the exigent surcharge, specifically whether and when it will be rescinded.

Having declared that they can operate without a quorum, the Postal Service Governors will be able to file a rate case when they want to. We expect that they will file for an increase before their cap starts to decline.

Here is a story about the CPI release today.

Stay tuned!

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