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Foreword

Ofwat regulates a vital publicservice and customers are atthe heart of everything we do.We have set out our prioritiesfor the next regulatory pricecontrol, PR19, whichchallenges the sector toimprove customer experience,deliver a step change incustomer service, maintain

affordability and drive efficiency, as well asimproving information and transparency acrossthe sector. We expect companies to deliveraffordable bills and an inclusive service for all. The effective use of customer data will play a keyrole in helping the sector step up to thesechallenges.

In this report, we have set out a framework forunlocking the value in customer data, building ona message we have previously highlighted; thatthe better use of data can be used to drive greatercustomer service and satisfaction, improveefficiency and encourage smarter networkmanagement. Good customer data can also beused by companies to help identify and supportcustomers who are struggling to pay their bills, or find themselves in vulnerable circumstances.

Our research shows that customers expect to bekept informed about how their data will be used to drive better services that are tailored to theirneeds. Changes made by other sectors,innovation and the use of new technologydemonstrates that the water sector is behind. But we do not just want the sector to catch up with current good practice, we want to see thesector pushing boundaries, putting customers firstas it leads the way in how it uses customer data.

There is still work to be done to increase customerconfidence in the sharing and security of personaldata, and companies will need to ensure theyminimise risk and react quickly to any incidents.

One of our ongoing priorities is to modernise thesector. Companies can make better use ofcustomer data to help to achieve this. While weexpect to see evidence of how companies aremaking better use of customer data in their 2019price review business plans, we also expectcompanies to begin to make changes now. We will follow up on the expectations in this report inearly 2018.

John RussellSenior Director, Strategy and Planning

Unlocking the value in customer data

ContentsWhat is customer data? 3The role of customer data in the water sector 4Our approach 5Unlocking the value in customer data 6An opportunity to act 7

Data innovation 8Customer empowerment 10Collaborative working 12

Building from a good data management foundation 14

Data strategy 15Data knowledge 17Data quality 18Data security 19

Our expectations for the water sector 21Next steps 22

3

What is customer data?

Customer data is information that can be used to give companies insight and intelligenceabout their customers. It includes, but is much broader, than billing data. It is informationshared through correspondence or on social media, on how much water customers use andwhat behaviours drive that usage. Customer data can also be sourced from outside thesector to supplement information already held. Some customer data may be personaldata, which has specific meaning under data protection law.

Having a high-quality, rich data set allows companies to get to know their customersand networks better. Customer data can help drive the next step change in companyperformance to deliver greater customer benefit.

Unlocking the value in customer data

Customer data can help to drivebehaviour change

We have been looking at customerengagement for the next price review(PR19). Our Tapped In report explainsthat customers are not passiverecipients but active participants in thewater sector. Unlike in many sectors,in the water sector, customers drivethe demand for water as well as

being an integral part of what goes into the system.Encouraging customers to recognise themselves asactive users in the chain will help the sector tounderstand what customers want. The reporthighlights how encouraging behaviour change amongcustomers can help water companies achieve theirstrategic goals. For example, persuading morecustomers to adopt water saving behaviours improvesthe resilience of supply. Empowering customers not toput the wrong things down sinks and toilets directlyreduces sewer blockages. In order to changebehaviours, companies will need to be smarter inunderstanding their customers. Customer data will becentral to this.

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Unlocking the value in customer data

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Our approach

In recent years, substantial research has been carried out on the importance of data and customerattitudes toward it. We have used this research to inform our work.

In developing this report and framework, we asked water companies to provide information on theircurrent customer data practices. We also engaged with:

• the Information Commissioner’s Office (“ICO”);• other regulators;• credit reference agencies;• new retailers in the business market;• companies from outside the sector, including Transport for London; and• the Open Data Institute.

We also tested this framework at an early stage by holding a workshop with watercompany representatives, Water UK (the industry trade body) and the ConsumerCouncil for Water who represent the interests of water customers.

The feedback from engagement has been used to co-create this frameworkwith the sector.

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Unlocking the value in customer dataAn opportunity to act

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As citizens, we are creating new data all the time, through websites we visit, mobile apps and healthtracking devices we use and information we share on social media. This information reveals preferencesand lifestyle choices. It gives companies insight and intelligence to enable them to do more forcustomers. While the sector is making progress on customer engagement, radical change in innovationand technology-led advances in other competitive sectors now set the bar for excellent customer servicemuch higher than before. The water sector is lagging behind. There are lessons to learn from othersectors which are paving the way and delivering services to customers that perhaps they did not evenknow they wanted.

Through customer data, we see opportunities to deliver improved customer satisfaction and smarterworking while also securing the sector's resilience.

Collaborative working

Working collaboratively can give a richerand fuller insight on customers. It helps tobuild trust and confidence in the sector bysupporting those customers who need itmost and to tacklesector-wide issues.

Data innovation

Be brave and dynamic. Learn from othercompetitive retail markets where companiesare working hard to offer customers better ornew services and are available whencustomers demandthrough traditional and digital channels.

Customer empowerment

Be open with customers so that they knowhow their data is used. Give customers morecontrol and clarity about how their data isused. Tell customers how they are benefittingfrom the use of their dataso they understandhow they share in its value.

Unlocking the value in customer data

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Data innovation

We want to see the sector make a step changeand start driving innovation through better use ofdata. Customer data is more than just a billing tooland customers benefit if companies demonstrate a wider understanding and application of customerdata. Companies should consider how innovativeuse of data can achieve a wide range of objectivessuch as:

• demand reduction through targeted behaviourchange measures;

• increasing operational resilience through bettermonitoring of customer usage patterns; and

• reducing levels of bad debt through smartapproaches to different customer groups.

In the future, we hope to see examples of:

• the application of multiple sources of informationlayered with customer data to gain better insightand intelligence, for example, to target supportto customers who need it most;

• companies making data available publically sothat data innovators can help develop andexpand the market, for example, through opendata;

• how big data and data analytics can give bettercustomer insight, for example, giving customerstips on how to save water based on their actualusage.

By doing this, companies can become smarter inapproaching different customer groups to deliver a better, more personalised service. It will improveoverall efficiency by enabling smartermanagement of networks and more targeted andlower cost interventions. Beyond this, there is afuture where cutting-edge ideas like blockchain,edge analytics or machine learning could beimplemented in a water sector which proactivelypushes towards dynamism and intelligent insight.

Blockchain – Allows for records betweendifferent parties to be recorded andmanaged in an efficient, verifiable andpermanent way. Records are held in a database which is not stored in onelocation, but distributed across multiplecomputers, allowing information to beopen to many users who can view allupdates to records in real time. Watertrading across company boundaries isone example where this type oftechnology could be considered.

Edge Analytics – A method of optimisingcloud computing systems by performingdata processing near the source of thedata rather than at a central data centre.This reduces bandwidth and cost byperforming analytics and knowledgegeneration at or near the source.

Machine learning – Giving computers theability to learn without being explicitlyprogrammed, particularly within the fieldof data and predictive analytics.

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Unlocking the value in customer data

Advizzo has developed a software solutionlayering customer data, meter data (smart andnon-smart meters), open and social media data,and applies data science to offer customerengagement for utility companies.

This software platform is able to give end usersinformation such as usage comparison withneighbours or similar homes, personalised watersaving tips as well as bill information, all in oneinterface. It is also able to offer a loyalty/rewardscheme for customers to set goals on savingwater and tips on how to achieve these.

Advizzo is currently working with four watercompanies, including South East Water, where ithas been trialling the software with a subset of itscustomers. South East Water has seen positiveresults, including a reduction in demand for water,increase in digitalisation and very low complaintlevels about the trial. It is also closely monitoringthe overall effects on customer satisfaction. It isintending to roll this out to its entire customer baseover the summer.

Case studies

Qantas has an active approach to data analytics. It uses big data to create personalisedexperiences for its customers by giving front linestaff customer information, such as food and seatpreferences and frequent flier status, in a formatthat allows them to pre-empt customers’ needs.Red Planet, previously the Qantas data analyticsdivision, has been launched as a separatecommercial entity, offering insight from the datacapabilities built up at Qantas with new externalclients.

Transport for London (TfL) has been transformedby its evolving approach to data. In 2007 it madethe decision to introduce its open data policy. Thisdata includes transport schedules, expectedarrivals, disruption, availability of bikes on thecycle hire scheme, and real time road trafficinformation. Now, more than 42% of Londonersuse a travel app powered by TfL data with over600 apps and 12,000 developers. This hasresulted in increased customer engagementthrough the customers' preferred method andmore innovation.

Unlocking the value in customer data

When customers are empowered, they have information at their fingertips which is relevant or personalised to them and is quick and easy to absorb. Thesecustomers trust who they do business with. They choose when they want to engage through their method of choice. Empowered customers have transparentand good quality information on how their data is managed and they recognise how they get a share in the transactional value of their data. Encouragingcustomers to be active users in the chain will help the sector to understand what customers want, and to act on their behaviours to deliver better service,greater efficiency, innovation and ultimately build trust.

The Citizens Advice Personal Data Empowerment report (2015) highlights an emerging trend which sees the value of data shared more evenly betweenconsumers who generate data and organisations that use it. It found that while consumers wished to have greater control of their data, they were willing toshare more information if the service was better tailored to their needs, or helped them make better decisions or save money – when there is a clear benefit tothem, and when companies are open about why they want this.

Customer empowerment

Aviva, an insurance firm, now uses a central data system calledCYCLOPS, to layer and analysetheir internal data alongside variousexternal sources to create newsolutions to customer issues. Bylayering weather data, flood risk andcustomer contact details, it cancontact customers in advance ofwhen there is a risk of flooding. Bygiving advice on how to mitigate theeffects of floods, it has successfullyreduced flooding claims andincreased customer satisfaction.

Case studies

Wales and West Utilities uses socialmedia to inform its customers of anyplanned disruptive roadworks, torespond to customer queries 24hours a day, seven days a week,and to provide information duringany unexpected incidents or repairswhich may cause disruption. It usesa sentiment monitoring tool to helptailor future messages to customersand has started to use Facebookadvertising to target messages tosmaller groups of customers.

Affinity Water is looking to ensurerobust decision making by exploringthe customer behaviours andattitude changes revealed bycustomer communication. It hasbeen encouraging engagement withits customers to improve waterefficiency, most recently throughincreased social media activity.Affinity Water uses this informationto consider how this data can beused to achieve greater efficienciesand better outcomes for customers.

CNH Industrial, a globalmanufacturer of agriculture andconstruction equipment, analysesdata on farmers’ activity collectedfrom sensors in its products. It usesthe data to advise them on how tomaximise crop yield.

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Unlocking the value in customer data

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Collaborating, sharing information and ideas andworking with a range of organisations allows forfresh and varied perspectives and new insight tobe gathered about how data can be used to drivebetter outcomes for customers. Not only can thislead to new or better services, through Open Datafor example (which is discussed later in thisreport), but working collaboratively can help totackle sector wide issues. Our 2016 vulnerabilityfocus report emphasised the importance ofcollaborative working with other organisations tohelp companies support customers whosecircumstances make them vulnerable.

We are pleased to see progress through examplesof the sector working with:

• organisations such as Citizens Advice, theMoney Advice Service, Age UK, and localorganisations with the aim of driving benefits forcustomers, such as improving and tailoringservices and identifying customers in situationsof vulnerability; and

• credit reference agencies to reduce bad debtand target financial support to customers byidentifying customers who can’t pay their billfrom those who won’t.

Being more collaborative with data can helpachieve much broader benefits for customers andwe expect to see:

Collaborative working

• greater participation of customers, communitiesand organisations to help to deliver a culturechange, reducing customer demand for water to ensure the resilience of networks;

• work with other regulated sectors to identify andsupport vulnerable customers. We know thatcompanies are already working across sectorsbut initiatives tend to be small scale andlocalised;

• greater collaboration with government in light of the provision in the Digital Economy Act 2017,allowing for water companies to share data with some government departments so thatcustomers entitled to financial support receive it;

• commercial opportunities, for example,wholesalers and retailers to find ways to sharedata with third-party intermediaries to improveprice transparency, encourage switching andenable customers to benefit from new services,such as innovative water managementtechnology; and

• joint work to tackle sector-wide issues, such asensuring the sector is ready for the new dataprotection regulations and minimising the risk ofdata breaches.

“If you don’t have data, you areblind. Ignorance is

bliss, but it isn’t a placethat you want to go”

– Horace Dediu, Senior Fellow,Clayton Christensen Institute for

Disruptive Innovation

DataKind was named one of the most innovativenot-for-profit organisations in 2017. It undertakesdata dives, a deep but quick interrogation of adata set to identify trends, provide insights orprototype solutions for the client. Through anetwork of volunteers, DataKind draws on thepower of data science to better serve communitiesthrough a range of different initiatives.

In December 2016, DataKind worked with MoultonNiguel Water District (which provides water,recycled water, and wastewater service to 170,000customers in Southern California), Bloomberg andData Ambassador Will High to develop a microlevel demand forecasting model with potential forfuture expansion. The company wanted to moreaccurately forecast water demand to improvepricing, expand conservation programs andimplement initiatives to increase the efficiency ofwater transportation throughout its network. Amodel was developed using past water usagedata, weather data and census data on householdcharacteristics.

Case studies

Policy in Practice is a company that hasdeveloped a software solution to help individualsand local authorities better understand the impactof welfare reform policies. The suite of softwaresolutions simplifies complex information intopersonalised advice. This enables localauthorities, housing associations and welfare-to-work providers to give advice to individuals tomake informed lifestyle choices.

Policy in Practice is also working with 50 localauthorities across the UK. Using local authoritydata sets, it analyses the impact of governmentwelfare reform policies at individual householdlevels to help local authorities target support.

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Unlocking the value in customer data

The Theft Risk Assessment Service (TRAS) is adata analytics service which can help energysuppliers assess the risk of energy theft atcustomer premises. TRAS uses data provided bysuppliers and from third parties, such as creditreferencing agencies, to identify instances ofunusually low energy consumption, which may bean indication of theft.

Unlocking the value in customer dataBuilding from a good data management foundation

As the regulator, our ongoing priority is to work with companies to modernise the sector and customerdata will help to achieve this. The sector has work to do to improve the way it manages its data. It isimportant that customers do not miss out because the sector has not got the basics right.

There are lessons to be learned from the work that was carried out in preparation for retail businessmarket opening, but this is only the tip of the iceberg. We want to see good quality, well understood,secure data as the basis of a strong foundation from which to build a data strategy. We want good datamanagement to be business as usual, so that the sector is able to move fast to adopt new technologies,be more innovative, respond to customer trends and drive efficiency.

Data strategy

Put in place a data strategywhich sets out a vision,approach, protections andsuccess measures. Assign dataleaders to own that strategy toembed this throughout theorganisation. Refresh thisregularly to reflect changingchallenges and opportunities.

Data knowledge

Know what type of data youhold, how it is held and whatbusiness processes create it.Keep the structure of the datayou hold simple. Identifydemographic or other externalsources that will create a richerdata set.

Data quality

Put in place a robust system ofgovernance around data quality.Build on existing work and goodpractice and apply it to allcustomer data you hold.

Data security

Keep your data secure,minimise the risk of that databeing breached and ensure no technical weaknesses thatmake systems vulnerable tocyber-attacks exist. Workcollaboratively to share bestpractice and learn lessons fromoutside the sector.

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Unlocking the value in customer data

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Good customer data is a rich source ofintelligence about customer behaviour andpreferences. Having a strategy in place thatdemonstrates how this data will be used ensurescustomers’ needs remain at the heart of companyplans.

When we asked companies for information ontheir data practices, some were able to provide uswith examples of how customer data is being usedmore innovatively. However the majority were onlyable to provide us with information on how data isused to support customers who are in vulnerablecircumstances and no company was able toprovide us with a copy of its data strategy.

This is a concern to us. Many companies aretrying to improve their use of data but we found noevidence that any company had a clear strategy in

Data strategy

place running through all levels, from the Board tofront-line services.

We expect all companies to have a data strategyin place. The strategy should clearly set out howthe company will comply with all applicablelegislation in the management of its data.However, to unlock that data’s value, the strategymust set out:

• a longer term ambition and vision on how toobtain best value from the customer data held;

• the approach for achieving this, includingsuccess measures;

• how this approach will benefit customers;• how this will be embedded at all levels within the

organisation.

A data strategy is not static and should evolve anddevelop over time, responding to marketdevelopments and legislative changes or policydevelopments.

Dŵr Cymru has started developing its businesswide data strategy and customer data is animportant element of this. It is working withpartners to better understand customerbehaviour, using information within itscustomer billing and debt collection systems todevelop a better understanding of differentcustomer groups. It is also developing its in-house data and analytics capability which willenable the company to use customer insight toconsider the effectiveness of its decision-making. It has also developed data qualitymeasures and tracking tools which provideDŵr Cymru with real time insight into dataquality issues in the business. Dŵr Cymru hasput in place a new team with a responsibility toestablish a quality strategy and framework forcustomer data and to oversee theeffectiveness of that strategy.

While it is too early to measure the impact ofthis approach on customers, Dŵr Cymruanticipates that the initial outputs will help todrive innovation and change across thebusiness and help develop requirements forother changes.

Case study

The Discover Water dashboard

The UK is ranked second in the world in the OpenData Index 2015. We are seeing a continued trendin non-government sectors opening up their datato allow new and innovative solutions and servicesto be offered and tailored to specific customerneeds. For example, Sport England iscollaborating with the Open Data Institute to makeit easier for citizens to get information aboutphysical activity sessions and get more active.

Unlocking the value in customer data

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Open data

Definition of open data

“Open data is data that anyone canaccess, use or share. Simple as that.When big companies or governmentsrelease non-personal data, it enablessmall businesses, citizens and medicalresearchers to develop resources whichmake crucial improvements to theircommunities.”

Open Data Institute

The Competition and Markets Authority in itsreview of the retail banking sector has setrequirements for banks to implement OpenBanking by early 2018. Open Banking will allowpersonal customers and small businesses toshare their data securely with other banks andwith third parties. This will allow other banks andthird party providers to view securely a customer’stransaction information and offer products bettersuited to that customer’s requirements.

The water sector has made good progress toimprove transparency through its Discover Waterwebsite which provides comparable sector-widecustomer-facing information to its users. Now, thesector should consider how it might respond tothis trend towards greater openness towardscustomer data. When implementing their datastrategies, companies should assess the potentialbenefits of making more of their data ‘open’, to notonly improve customer service, but to enableinnovation from third-party services.

Every person in the country needs water andwastewater services every day. This means thewater sector has one of the most universal datasets in the UK. This valuable information can beused to energise customers to help tackle some ofthe challenges facing the water sector, such as theresilience of the networks.

We want the sector to be smarter with its data so itcan explore opportunities through:

• data analytics, ‘layering’ existing data sets withsocietal (personal information which individualsshare) and demographic (socio-economic data)information; and

• opening up data to stimulate innovation or crowdsourcing ideas.

This will allow companies to hold less data but stillhave a richer dataset overall.

When working with clients within or outside thewater sector, data experts told us that a first stepis to assess existing databases to understand thedata the company holds. This is crucial.Understanding what information, and the type ofdata held, will lead to better analysis of and valueobtained from existing data. Good data knowledgealso facilitates the different levels of legalrequirements associated with different types of

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Unlocking the value in customer data

customer data (in particular, personal data withinthe meaning of data protection law). Becausemany water companies outsource part of theirservice provision and make extensive use ofothers through the supply chain, they need toconsider carefully the data they collect. Thisconsideration should also be given to supplier andcontractor activities.

The sector has been slow to make the most of thisvaluable asset. We want this to change so thatcustomers can benefit from a better service from asmarter company. A well-performing companywould be able to clearly articulate:

• the business processes that generate data, thetype of data generated, and where data isstored;

• whether there are interdependencies betweenthe different data sets (for example, if datacollected from meters is separate to the billinginformation);

• the process it has in place toidentify any data gaps orduplications in recordsand how this isaddressed; and

• how data is deleted orarchived.

Data knowledge

Aiimi, an independent information managementspecialist, has worked with organisations withinboth the UK water sector and across otherindustries to verify, understand and utilise thenature of customer data that they receive andhold. For example, Aiimi has enabled a client inthe water sector to understand better theircustomer data, enabling it to plan and prioritisefuture investment throughout its asset estate.This was done by combining internally heldcustomer information and external data such associal media activity to inform decision making.This involved interpreting both actualinformation received from customers and ananalysis of unspoken customer thoughts andfeelings deduced from available data.

Southern Water demonstrated that by havinggood information about blockages in itswastewater networks and postcode data, it wasable to target its fat, oil and grease, andflushables’ programme. Southern Water willtarget 2,000 postcode hotspots (areas with morethan four sewer blockages in three years) andwill visit an estimated 75,000 customers. Therollout of universal metering has also providedmuch improved data about water use which isused to target its water efficiency programme.

Case studies

High-quality data is the foundation for betterservice for customers, and enables the effectivedevelopment of markets. Good quality data allowscompanies to move fast to trial and adopt newtechnologies, be braver and more dynamic withthe innovations it explores and open opportunitiesto work with partners or to collaborate. Goodquality data is an enabler to unlocking the value incustomer data. It also helps to build trust andconfidence, which will continue to become moreimportant as the sector improves its datapractices.

Quality is an issue the sector has to work hard toaddress, as identified during the preparation forthe opening of the business retail water market tocompetition in April 2017. Companies invested inbringing their business customer data up to thestandards expected by the Market OperatorServices Ltd. (MOSL) and the market codes which

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Unlocking the value in customer data

set out the rules and processes for the businessmarket. MOSL set out the minimum standards of data integrity for the competitive market. Theminimum standard is a Market ArrangementsCode requirement, which sets up arrangementsfor how the business market will operate, and is a licence obligation. It requires that data held inthe central systems should accurately reflect thecircumstances at each supply point. Theserepresent a useful starting point for companies toconsider in relation to residential customers. Butthe sector can do much more to improve thequality standards of all data sets it holds.

Some water companies told us about the differentways good quality data is maintained. Weencourage others to explore what lessons theycan learn from these examples. However, wewould expect companies to:

• have a structure of standardised data collectionto make quality checking a more efficientprocess;

• have a framework to ensure data is regularlycleansed; and

• encourage customers, through customercontacts and other channels, to keep personaldata up to date.

Data quality

Affinity Water complies with the ISO 270012013 standard for information security, whichincludes regular data cleansing andindependent audits. This enables it to gain abetter understanding of the valuable data itholds.

Yorkshire Water shares its data with CreditReference Agencies (CRAs). This has allowedit to improve its identification of customers whomay be financially vulnerable. By utilising CRAdata to make fairer debt collection decisions,25,000 fewer customers per year are takenthrough the litigation process avoiding £3.5million court fees per annum that otherwisewould have been added to customer accounts.Yorkshire Water is now able to signpost thesecustomers to its customer support schemes.CRA data is also used to sign customers up toits social tariff using real time credit data. 97%of customers who sign up to its social tariffsaid they found it easy to sign up.

Case studies

Unlocking the value in customer data

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Data is a valuable resource and it is important toensure it is well protected. Companies shouldhave appropriate governance procedures to dealwith any breaches of data security and robusttechnology to prevent unauthorised access todata. There should be clear processes andtraining in place to minimise the risk of humanerror in relation to data security.

The case studies presented in this report highlightthat protecting data does not prevent companiesmaking better use of and being innovative withdata. Companies with a clear strategy in place,and which have both a high-quality data set andknow the data they hold, will be in a better positionto put in place practices to ensure data security.

Data security

Working collaboratively, the sector can share bestpractice about good security cultures, both interms of technology updates and effectiveapproaches and responses to customer databreaches. Through Water UK, companies arealready working together to prepare for the movefrom the Data Protection Act to the General DataProtection Regulations. We are encouraged thatcompanies are working closely on this. Goingforward, we expect that:

• the sector maintains and works with othersectors and experts in this field to minimise therisk of a data breach;

• companies ensure good practice on security andtransparency is an integral part of their datastrategies and their Board takes ownership ofthis; and

• companies identify and adhere to relevant datasecurity standards, for example, those set out bythe International Organisation forStandardization. The ISO is a global network ofstandards bodies, including the BritishStandards Institution (BSI).

“It’s not privacy or innovation

– it’s privacy andinnovation”

– Elizabeth Denham, UKInformation Commissioner,

26 September 2016

Building trust and confidence is our vision for thesector and we are challenging companies toimprove their data practices to unlock the value of data for the benefit of consumers.Consequently, the focus of this report is ondeveloping a framework which helps companiesunlock this value. Everything in this report is setwithin the context of the paramount importance of compliance with data protection law. Thisremains the sole responsibility of each individualcompany. It is not Ofwat’s role, nor the purpose of this document, to give guidance.

The Information Commissioner’s Office (ICO) isthe UK’s independent authority set up to upholdinformation rights in the public interest, promotingopenness by public bodies and data privacy forindividuals. The Data Protection Act 1998 (DPA)sets out the boundaries within which anindividual’s personal information may be used. In May 2018, the new General Data ProtectionRegulation (GDPR) will come into effect. Thesenew regulations update the protections to fit withthe modern, connected world we live in. The moveto these new regulations provides companies witha window of opportunity to review their datapractices, while ensuring they are meetingprotection requirements.

Data protection

The Water Industry Act 1991 section 206restricts the disclosure of information which:

• anyone has obtained by virtue of provisionsset out in the Act; and

• relates to any particular individual person orbusiness.

This applies to us, and to companies andlicensees, among others. Section 206 alsosets out certain gateways under which thisinformation can be disclosed and the criminalsanctions for breach of the section.

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Unlocking the value in customer data

Cyber Security is something that many companiesacross different sectors are working hard tomaintain, and lots of lessons have been learntfollowing cyber attacks on companies wherecustomers’ personal information was breached.

In its 2016 House of Commons Report on cybersecurity in light of the Talk Talk breach, the Houseof Commons Culture, Media and Sport Committeemade a number of recommendations. Theseinclude that oversight of cyber security should sitwith the Board and consumer awareness of scamsshould be improved. In its response to this report,the Government highlighted a number of cybersecurity initiatives. This includes a consumerguide for staying safe when shopping or bankingonline, the Cyber Essential Scheme and theestablishment of the National Cyber SecurityCentre.

Defra’s Water Sector Cyber Security Strategy for2017-2021 refers to the need for a collaborativeapproach to cyber security between governmentand the water sector. It notes that understandingthreats, managing risks and incidents, anddeveloping capabilities will help achieve a secure,effective, and confident water sector, resilient tothe ever-evolving cyber threat.

Water Industry ActCyber security

Data quality

Put in place a robust system ofgovernance around data quality.

Build on existing work and goodpractice and apply it to all customer data you hold.

Data security

Keep your data secure, minimisethe risk of that data being

breached and ensure no technicalweaknesses that make systems vulnerable tocyber-attacks exist. Work collaboratively to sharebest practice and learn lessons from outside thesector.

Unlocking the value in customer data

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Data strategy

Put in place a data strategy whichsets out a vision, approach, protec-

tions and success measures. Assigndata leaders to own that strategy to embed thisthroughout the organisation. Refresh this regularlyto reflect changing challenges and opportunities.

Data knowledge

Know what data you hold, how it is held and what business

processes create it. Keep thestructure of the data you hold simple. Identifydemographic or other external sources that willcreate a richer data set.

Data innovation

Be brave and dynamic. Learnfrom other competitive retail

markets where companies are workinghard to offer customers better or new services andare available when customers demand throughtraditional and digital channels.

Customer empowerment

Be open with customers so thatthey know how their data is used.

Give customers more control andclarity about how their data is used. Tell customershow they are benefitting from the use of their data so they understand how they share in its value.

Collaborative working

Working collaboratively can give a richer and fuller insight on

customers. It helps to build trust andconfidence in the sector by supporting thosecustomers who need it most and to tackle sectorwide issues.

Our expectations for the water sector

Throughout this report, we have set out where weexpect to see improvement in how companies usecustomer data. This is not something new, wehave talked about the power and importance ofcustomer data as tool to provide better outcomesfor customers in a number of recent key reports.

• In our vulnerability focus report, we identified theeffective use of data as one of the threeprinciples of good service that companies shouldconsider when developing their approach tocustomer vulnerability.

• In our review of extending competition toresidential retail customers in England, wehighlighted that in other competitive retailmarkets, we have seen radical change,innovation and improvements in service drivenby better use of customer data.

• In our Water 2020 customer engagement policystatement we highlighted the range of sources ofcustomer data that companies have available tothem. Insights can be drawn from these,including operational data, customer contactsand social media.

Unlocking the value in customer data

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In preparation for the business market opening inApril 2017, all companies had to make significantimprovements to data quality and management tooperate in the open market. The lessons learntfrom this process should be applied to residentialcustomers’ data.

Our priorities for the next price review is to seebetter customer service and innovation, alongsideimproving resilience and affordability. We havehighlighted in this report that customer data has a role to play in all four of these areas. Whencompanies submit business plans in September2018, we expect to see evidence of howcompanies are making better use of customerdata over the next price control period, and thelonger term.

But we do not want companies to wait. There is plenty of scope to improve the use of customer data now. So we expect to follow up on our recommendations in early 2018, to seewhat improvements companies have made in this time.

Next steps

Ofwat (The Water Services Regulation Authority) is a non-ministerialgovernment department. We regulate the water sector in England andWales. Our vision is to be a trusted and respected regulator, working atthe leading edge, challenging ourselves and others to build trust andconfidence in water.

OfwatCentre City Tower7 Hill StreetBirmingham B5 4UA

Phone: 0121 644 7500Fax: 0121 644 7533Website: www.ofwat.gov.ukEmail: mailbox@ofwat.gsi.gov.uk

Printed on 75% minimum de-inked post-consumer waste paper.June 2017

ISBN 978-1-911588-06-1

© Crown copyright 2017

This publication is licensed under the terms of the Open Government Licence v3.0 except where otherwise stated. To view this licence,visit nationalarchives.gov.uk/doc/open-government-licence/version/3 or write to the Information Policy Team, The National Archives, Kew,London TW9 4DU, or email psi@nationalarchives.gsi.gov.uk.

Where we have identified any third party copyright information, you will need to obtain permission from the copyright holders concerned.

This document is also available from our website at www.ofwat.gov.uk.

Any enquiries regarding this publication should be sent to us at mailbox@ofwat.gsi.gov.uk.