Bypass mail rate to increase soon

By Anna Lionas 

    In less than two weeks the price for the Alaska Bypass Mail Service will increase by 9.4 percent, with grocery bills expected to increase because of it. 
This price change is occurring because bypass revenue didn’t cover the cost it takes the United States Postal Service to operate it. “The price for Alaska Bypass will increase by 9.4 percent to fully comply with PRC regulations since this product’s revenue did not cover its attributed costs in FY2024,” USPS Spokesperson James Boxrud wrote in an email to the Nugget.
The Postal Regulatory Commission, an independent agency that holds the USPS accountable to the law, released the order on May 30, announcing the upcoming price increase. According to Boxrud, the bypass mail service made $38.2 million for the USPS last year but cost $118.9 million to subsidize.
Residents of rural Alaska will notice a price hike in many goods they buy, but not everything, said Mike Jones, an economist at University of Alaska Anchorage.
“It’s mostly used for dry goods; a bag of rice doesn’t need the same level of expediency as a bag of oranges,” Jones said. 
Until the July 13 rate change, it remains unknown how much prices could increase.
In the past two years, the bypass mail rate has increased about 5 percent. 

How it works
The bypass mail service is unique to Alaska and was implemented in 1972. It subsidizes large shipments of food and goods to communities in rural Alaska. Currently 14 carriers are contracted with the service. 
Airline carriers deliver goods to Anchorage or Fairbanks and from there companies “bypass” the USPS network by utilizing smaller carriers who deliver it to places like Nome and from there to villages like Golovin. The USPS pays for the cost to ship from cities to locations off the road system.
Because of this system, companies that are shipping the goods –i.e. grocery stores like Hanson’s and Alaska Commercial Company– spend less on freight costs, passing on the savings to customers.
Bypass mail uses a weight system to determine the cost to ship each pallet evaluated. Weight will likely be a big factor in determining the price increase of a good.
“Say you have a really heavy, low value product, for example: flour, with a very low cost per pound. Transportation would just be a higher percentage of cost per pound for that good,” Jones said.

Price hike
While prices may go up, communities like Nome are in a better position because of the town’s multiple grocery stores.
“When you have more options in the market, that’s when you get competition. That kind of pushes companies to have to eat a little more of the cost,” Jones said.
Jones works at the Institute for Social and Economic Research where one of his points of research is Agricultural and Resource Economics. With recent tariffs on goods coming from the federal government, Jones said he has not observed any major price changes in his research.
As far as regional villages with one AC store or only a local store, price changes are unknown, but customers should brace themselves as bypass rate increases go into effect July 13.