Breaking bad news early: Setting the narrative

There is a fine art to breaking bad news and it is something that we have seen a lot of during the past 15 months or so, with the government warning of major changes to Covid restrictions in the days and weeks before any official announcements are made.

Such early warnings tend to ultimately soften the blow when the news becomes official, resulting in more gradual coverage rather than a media pile on after the announcement.

A similar tactic was seen in the energy sector recently in regard to the default tariff and pre-payment (PPM) price caps, with Ofgem taking a leaf out of the government’s playbook.

News of the biggest increase yet to the cap was no shock whatsoever to the sector when it was finally unveiled last week because we had already been told about it a full 10 days previously.

In the week before the official announcement the regulator’s chief executive Jonathan Brearley wrote a lengthy blog which pre-warned customers about the likely increases to the cap thanks to a huge spike in global wholesale gas costs.

“Regrettably, the increase in wholesale costs will feed through to this price cap and, although final analysis is not complete and other costs will also determine the overall level, it could add around £150 per household to the next level of the price cap,” he said.

Brearley’s prediction was a conservative estimate for the default cap, which rose instead by the slightly smaller amount of £139, while the prepayment meter cap increased by £153 to £1,1309.

It was not just the regulator issuing warnings. Around a month before the official announcement industry analysts at Cornwall Insight were predicting an increase to around £1,250 per year for a typical dual fuel customer – a figure just short of the final £1,277 confirmed by Ofgem.

Yet the move by Ofgem made it clear the regulator wanted to set the narrative and get ahead of the news coverage. The intervention was likely born out of the need to firefight the almost certain negative press, with millions of consumers already having faced severe financial hardship throughout the pandemic.

Of course, a rise in wholesale costs leaves the regulator with little choice but to introduce a rise. Yet a significant increase to the cap will only rub salt into the wounds of many.

Whether Brearley’s pre-emptive blog had any meaningful effect is difficult to gauge. Immediately after the announcement there was a strong backlash from consumer groups, yet over the following weekend there was much more press coverage of the upcoming report (since published) from the UN’s Intergovernmental Panel on Climate Change (IPCC) as well as the costs of the government’s plans to reach net zero emissions.

Regardless of Ofgem’s efforts to control the narrative, the actual increase to the cap is yet to hit and when it does later this year, the regulator is likely to face even more criticism.