Restructuring Today
April 27, 2006

What should you tell the press when they ask about price spikes?

Experts say marketers need to get answers ready right now

A NEMA panel stressed the need to get ready in advance and to expect not to get called if you're a marketer.

          Marketers aren't talking, said Michael Meath, president of Strategic Communications.

          Marketers are losing the public relations battle and need to step up their efforts to combat foes of choice, spin experts told NEMA's restructuring conference yesterday.

          Meath's firm has seen a 10-fold boost in the amount of newspaper clips it collects for clients dealing with high power and natural gas prices.

          News stories typically come from investigative reporters, utilities, regulators and customers but no one is telling the marketers' story.

          They're absent from the discussion.

          RT's George Spencer who was in the audience urged marketers to prepare a presentation and arrange to go to local newspapers to meet with editors and answer questions.

          It's important to think through fully what questions editors want answered and be certain to be interesting.  Whoever is writing up what you say will be looking for good quotes.

          Have some ready. 

          Points to cover?  Regulators can put off price hikes but eventually the public will have to pay with or without competition.

          Without competition the cost will be higher.

          In fact it's price caps that caused the problems in Maryland and Delaware -- caps enacted long ago while wholesale prices were inching up then later spiking in Katrinaland. 

          If marketers don't spread the word, someone else is going to spread it for them, Meath noted, (and may twist the message along the way).

          Marketers are facing a slow-brewing hurricane, added Jim Cabot, senior vice president at Rasky Baerlein Strategic Communications.

          Post-Enron perceptions, hurricane-related price spikes and customer confusion over price caps and deregulation pose a big problem.

          Attacking competition is a popular and easy issue for attorneys general to generate political capital.

          Customers don't understand who marketers are, reminded Bill Norton, Opinion Dynamics' energy director.

          Customers in most states aren't educated about choice or know the role marketers play, he added -- except in Texas and Georgia.

          Business customers, of course, have a better understanding of retail choice, added Norton.

          But even there, it's only because of marketing campaigns.  That's not a deep understanding. 

          C&Is mostly know about shopping for the best price but don't know about the added services, value and efficiency that competition brings.

          Residential customers may link competition to higher prices without getting better service, Norton said.

          It leaves a vacuum that customers and politicians can fill by blaming competition.

          Marketers' message now is that competition gives customers lower prices, Norton said.

          But customers favor reliable service too, his research has found, and worry what choice could mean for reliability.

          NEMA members agreed that too much emphasis has been put on savings instead of the right to choose and value-added services.

          Norton urged building strategic communications based on customer research getting the message out before a crisis happens.

          Cabot emphasized a pro-active approach too -- time is of the essence.

          Every competitive retailer needs to have a crisis communication plan ready, including a team to handle media, political and customer questions and two to three clear messages.

          They need to have built up in advance good will with politicians and the public and be engaged -- not defensive -- when answering criticisms.

          Marketers have to educate the press without defensive over-spinning -- the press can smell that, Cabot observed.

          He urged regular briefings with the media to help them understand the marketers' business and to get treated as a source the newsperson learns to rely on, knowing how to check with the marketer if prices spike.

          Norton boils down competition's message to this:

          The US is going to need to make huge changes in its energy industry in the next two decades. 

          Do we want the innovative, technological solutions that competition can bring, or do we want to go forward with the old, regulated model and do things like we did in the 1930s?

          The answer to that question is clear, Norton said. 

          You can't get new solutions from old sources -- and customers can understand that.

          Marketers should tout individual customer benefits but need to share as well the big community and economic impacts that competition brings, Cabot added.

          Legislators and regulators need to be updated regularly too. 

          Personal meetings go a long way, he argued.

          Cabot used to work at EPA.

          The agency would separate violators into white-hats and black-hats based on how well EPA knew the firms. 

          Companies that had engaged EPA and made clear their positive green policies were treated as good guys who just made a mistake.

          But firms that the EPA didn't know -- companies that didn't share with EPA all their green programs -- were cast as bad guys who didn't get it.

          EPA would tend to drop the hammer on those firms.

          Regulators want to know marketers' stories, Norton added. 

          They're looking for successes to validate opening markets. 

          He urged marketers to call them up and share their stories.

          Going negative isn't an option for marketers, argued Norton. 

          Trying to shift the blame for high prices just doesn't work, he advised.

          Marketers will need to work harder than critics in the battle, Cabot conceded.

          It's easy for ambitious AGs to win coverage with their attacks since they're widely known and are considered newsworthy by the press. 

          Most of them seem to be candidates for a governorship.

          Marketers' stories may not seem to be headline grabbers but they can build relationships with the press and many may want to hire firms like the panelists to help out with that.  

          One area where marketers are making headway is in generation, Cabot noted.

          A few customers and politicians are starting to understand the difference between ratepayers and shareholders getting stuck with bad investments.

          Marketers need to tell their story about risk taking.

          The idea that customers shouldn't be stuck paying for bad utility decisions in a competitive environment is gaining traction, said Cabot.

          Money is one of the biggest challenges preventing marketers from getting their message out, Meath admitted.

          Spending so much on education does change the bottom line.  But big spending is what it's going to take to really win the battle, he added.

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