THE cost of sending local letters may rise to 33p next year – and again to 39p in 2009. Guernsey Post has submitted new tariff proposals to the Office of Utility Regulation for its three-year price control.

Under those, the rate for local letters up to 100g would increase from 1 April 2007, then to 36p the year after. Rates for a standard letter to the UK would increase from 34p to 39p on the same date, then to 44p and to 49p in 2009.

Prices for heavy packets such as flower boxes are also to increase, but at a lesser rate. There are also proposed increases for bulk mail customers, but these would vary depending on the weight of mail sent and the service used, seeing the cost of sending a typical customer-sorted 150g packet rise by 6p next year.

Guernsey Post interim chief executive Steve Hannon said the increases were necessary because the utility faced continuing cost increases from Royal Mail for the delivery of mail to the UK.

‘I don’t think it’s going to go unnoticed because nobody likes a price increase, but I’m hoping people will understand why we are doing it,’ he said.

‘To put it in context, even when we put our prices up next year, we are still among the cheapest in Europe. In that context, it is what people in Europe have come to expect in the last few years.’

Prices paid by Guernsey Post to Royal Mail will increase by 26% next year and 10% the year after that.

‘That is the reason for the steep price increase. Our own costs are going up no more than the price of inflation, but those other costs are quite significant.’

The OUR has opened a period of public consultation lasting until 6 October.

Director-general John Curran said: ‘These proposals represent significant tariff changes across most services, particularly for local and UK letters.’

The regulator has begun a detailed efficiency review of Guernsey Post and is looking closely at the proposed price changes to ensure they are justified.

‘While clearly the impact of increased Royal Mail charges is a contributing factor, we will want to be assured that GPL is taking all reasonable steps to reduce its own costs and improve efficiency.’

Mr Hannon said loss-making areas of the regulated business – letters and parcels, retail and logistics – were contributing factors to the price increases and would need addressing.

‘That is what the tariff proposals are designed to do.

‘We will still make a loss on them next year, but hopefully we will be in profit in the next two years, a small profit.’

Mr Hannon was hopeful that the OUR would sanction the proposals.

‘We’ve put in a lot of time and effort into them and they include some significant efficiency measures as well. They also mean we are going to meet our profitability targets even with those price increases.’

The States earlier this year approved the postal universal service obligation. Mr Hannon said the tariff proposals were based on maintaining agreed levels while achieving controllable cost savings.

Guernsey Post needs to make £1.2m. economies across the business.

Mr Hannon said it had consulted staff representatives and all staff at Guernsey Post were aware of its efficiency programme. He added that the company would carefully manage administration, project work, conveyancing and staff costs.

‘Economies must therefore be achieved through managed reduction of overheads and not a drop in service.’