Customer data in the utilities sector

Following our previous article on Ofwat’s final methodology for the 2019 Price Review (“PR19”), this article focuses on one of the areas that Ofwat is expecting to see covered in undertakings’ 2020-2025 business plans: customer data. In June 2017, Ofwat published Unlocking the value in customer data: a report for water companies in England and Wales (the “Ofwat Paper”), encouraging undertakings to improve their management and use of the information available to them. One of the areas in which data innovation is considered to have significant potential is the identification and assistance of vulnerable customers; to this end, Ofwat and Ofgem, through the UK Regulators Network, published Making better use of data: identifying customers in vulnerable situations (the “Joint Paper”) in October 2017. We draw out some of the key points from these publications below.

The regulators’ expectations

The UK utilities regulators consider that businesses in the water and energy sectors are behind the curve in their use of data to improve their services. Water undertakings have access to a large amount of customer information in their business-as-usual operations: for example, operational data such as individuals’ smart-metered usage and information obtained from customer communications such as social media interactions and complaints. Regulators anticipate that utilities can build up a broader picture of customers’ habits, preferences and circumstances and use this information to achieve such goals as targeted improvements to products and services, more effective encouragement of demand reduction, increased operational resilience and greater affordability.

The Ofwat Paper endorses a range of measures in relation to data, drawing on case studies from a broad range of industry sectors. Undertakings are encouraged to pool information resources across a broad range of organisations (including charities and also government in accordance with the data-sharing provisions in the Digital Economy Act 2017), while being open and honest with customers and allowing them to retain control of their data. Ofwat suggests that undertakings should make more data publicly available to foster wider innovation, using the Discover Water platform (see last week’s article) as an example; to this end, Yorkshire Water recently announced that it is aiming to open the majority of its operational and service data to the public by 2020. It is contemplated that undertakings may soon be able to leverage machine learning to analyse their large datasets, e.g. to help customers make personalised predictions to save water. The paper also reminds undertakings to ensure that their data practices are secure and fully compliant with data protection law.

The Joint Paper focuses on data-sharing practices between water undertakings, gas and electricity suppliers and others to improve support for customers with non-financial vulnerabilities such as illness or mobility issues. Recommended sharing methods in respect of vulnerability data range from demographic analysis and cross-referrals to voluntary or even automatic registration of vulnerability data to a shared database. The paper recommends that water undertakings follow the example of electricity suppliers in standardising the classification of vulnerabilities for more effective data sharing. Emphasis is again given to the importance of transparency in relation to data collection and use and demonstration to customers of the benefits of data-sharing to engender trust.

Collection and use of customers’ personal data will need to be undertaken in a manner that complies with the EU General Data Protection Regulation (which will apply in the UK from 25 May this year), and the proposed UK Data Protection Bill when it becomes law.

Next steps

The Ofwat Paper is not simply guidance for the next asset management period: Ofwat intends to follow up with undertakings in “early 2018” on their progress against its recommendations. Similarly, Ofwat and Ofgem will require businesses to show improvements in cross-sectoral co-operation on vulnerability in accordance with the Joint Report in spring 2018.