Bundesnetzagentur sets scope for postage rate increases
Year of issue 2024
Date of issue 2024.11.11
With its benchmark decision the Bundesnetzagentur has today created the basis for new postage rates as from 2025.
"We are making it possible for Deutsche Post to significantly increase its postage rates. The reason for this is the considerable declines in letter volumes and the burdens to be borne by regulated products,"
said Klaus Müller, President of the Bundesnetzagentur. "I cannot understand Deutsche Post's call for an even greater rate increase. The costs they presented to us do not reflect the need for such an increase. If we were to agree to Deutsche Post's demands, consumers and businesses alike would bear twice the burden."
Breakdown of the scope for the rate increases
In a benchmarking procedure the Bundesnetzagentur determines the scope for adjustments to Deutsche Post AG's postage rates. The scope for rate increases results from an overall price increase (inflation rate) and growth in productivity. An appropriate profit mark-up is taken into account.
For a duration of two years an overall price increase in the economy of currently 3.37% is assumed. Productivity deteriorates as a result of falling volumes and burdens that can no longer be offset by efficiency gains. It amounts to minus 7.11% for the personal customer letter, minus 7.11% for business mail and minus 3.84% for personal customer parcels.
For each sector (or "basket") the following average rate increases are possible:
- personal customer letter: 10.48%;
- access services (business mail) 10.48%;
- personal customer parcels: 7.21%.
It is Deutsche Post's business decision as to how it will use the leeway in setting prices for the specific products in each of the three baskets. It is possible to increase the prices of certain products more and others less. The specific postage rates will be approved in a subsequent rate procedure.
The new postage rates will apply for a period of two years from 1 January 2025 to 31 December 2026, taking into account forecast uncertainties that arise from the new Postal Act (PostG) being applied for the first time. This shortened period is in line with Deutsche Post's expectations.
Developments in volume of postal items sent
The Bundesnetzagentur accepts nearly all of Deutsche Post's volume forecasts. Moderate adjustments were made only to forecasts for business mail/access services, where Deutsche Post had based its forecasts on excessively high volumes delivered by competitors.
Taking inflation into account
Taking into account the inflation rate in the decision serves to reflect future cost trends. For the approval period 2025-2026 the inflation rate is determined using data for the years 2024 and 2025. It is based on the published forecasts of various research institutes. Any additional consideration of particularly high inflation rates from 2023, as requested by Deutsche Post, would unjustifiably distort Deutsche Post’s scope for rate increases.
Costs that have risen as a result of inflation in the past are part of the cost basis that has been fully recognised by the Bundesnetzagentur. Adding further inflation figures from 2023 would result in an inadmissible double compensation leading to an increase of rates.
Taking burdens into account
Having nationwide service obligations and being the legal succession to Deutsche Bundespost places certain burdens on Deutsche Post. The burdens are excess costs, which are "additional costs" the competitors do not have. Under certain conditions Deutsche Post may distribute such costs among the various product groups.
The Bundesnetzagentur accepts nearly all of the personnel and pension payments documented by Deutsche Post (eg social costs for civil servants, payments to the Deutsche Post retirement fund, interest paid for the employees' pension scheme). Only the forecast of the number of employees with claims from the Deutsche Bundespost era required minor adjustments. The Bundesnetzagentur fully accepts the costs claimed by Deutsche Post for providing universal service (eg costs for the sixth delivery day).
Profit rate
The profit rate for all price cap products is around 9% and consists of a corrected average of the return on sales plus a statutory additional profit.
The average return on sales is calculated from the return on sales of EuroStoxx50 companies (excluding financial services institutions) over the past 10 years. As a result the present profit rate of 6.56% will be updated.
For price cap products an additional profit is to be granted in line with the PostG arrangements if the average profit rate is otherwise not obtainable. It amounts to up to 2.5% and helps ensure that the letter and universal services sector remains profitable. The goal is for Deutsche Post to be able to make necessary investments in sustainable postal logistics.
It is not legally permissible for losses from other business segments not attributable to letter or universal services to be offset by the regulated segment of price cap products.
Postage rate procedure under the new PostG
For the first time the postage rate procedure is being conducted under the provisions of the new PostG. Its primary purpose is to ensure the financing of universal service throughout Germany.
Unlike up until now, the scope for setting rates is now determined for three baskets instead of just one. This is the result of the universal service clearly defined by the new PostG. The baskets are formed for the personal customer letter, the access services (business mail) and personal customer parcels. A uniform rate of price change is determined for personal customer letters and access services to ensure consistent development of letter rates for private and business customers.
Next steps
On the basis of the benchmark decision Deutsche Post AG can apply for approval of rates for individual products, eg for standard letters and private customer parcels. If the rates proposal complies with the benchmarks, the Bundesnetzagentur normally issues an approval within four weeks.
The decision is available for download on the Bundesnetzagentur website at www.bundesnetzagentur.de/BK5-24-003. Deutsche Post may appeal the decision, in which case the Cologne Administrative Court would be the court of first instance. An appeal would have no suspensory effect.