The Effect of USPS Rate Increases on Cooperatives

On May 28, 2021, the United States Postal Service (USPS) filed notice with the Postal Regulatory Commission (PRC) for rate increases, which will be effective on August 29, 2021.  The rate increases range from 5% to 8% for various products (more detailed information regarding current pricing and proposed pricing can be found here).  Until recently, USPS was required to tie pricing increases to inflation, which typically has been 1.5% to 2% annually, but last year the PRC approved higher rate increases.  Mail volume has declined roughly 28% in the last decade and continues to decline.  The USPS cited this decline as one of the main reasons for the rate increases.  The new USPS rates will increase expenses for cooperatives, which use USPS services for billing, director election materials distribution, meeting notices, and other member materials.

First, although cooperatives should consider transitioning to electronic communications, some state laws require cooperatives to mail certain documents or communications.  Accordingly, before a cooperative shifts to electronic communications, it should review the relevant state laws or rules and regulations.

Second, many cooperatives serve rural areas where internet service may not be adequate or readily accessible, which means many members cannot simply opt to receive communications or documents electronically.  For instance, in 2019, the State of Georgia revealed a broadband plan, which included a map of every location in the state without high speed internet and identified areas eligible to receive future state funding for internet expansion.  In 2020, the State of Georgia passed the Georgia Broadband Opportunity Act, which authorized the Georgia Public Service Commission to set electric membership corporations’ (EMC) pole attachment rates for cable attachments related to broadband service.  Lowering such rates was intended to encourage telecommunications companies and cable companies to invest in delivering service to rural areas while protecting EMCs from excessively low rates that would impact electric rates for existing customers.

Thus, not all cooperatives will be in a position to quickly and easily transition to electronic communications or electronic delivery of documents.  These postal rate increases could mean an increase in rates to a cooperative’s members and customers.  In June, the National Rural Electric Cooperative Association (NRECA) urged the PRC to reconsider its inflation-rate ruling and address shortfalls in structural changes rather than rate increases because “[c]o-ops and statewide associations across the country are concerned about what this jump in postal costs will mean for their budgets and their members.”

Update: On June 28, 2021, the NRECA filed comments with the PRC to oppose the rate increases.  In its comments, the NRECA pointed “out that, if approved, the rate increases would have a negative impact on rural America, that rural consumers in many cases have no other options than the Postal Service to receive important information from their electric cooperative, and that the Postal Service is ignoring the statutory rate cap of increases to the Consumer Price Index.”  The NRECA also “pointed to several indicators of financial health at USPS (revenues ahead of the prior year by $10 billion, net positive income for the first half of 2021) to argue that the rate increase is not necessary at this time.”