Water bills are to rise by an average of almost £100 a year across Britain, as the regulator approved smaller increases than requested by the crisis-hit industry.
Thames Water, the country’s biggest supplier, will only be allowed to increase prices by 22pc under the draft ruling from Ofwat, just half the 44pc increase it had requested as it battles to shore up its finances.
The watchdog also announced that it would place Thames into a “turnaround oversight regime”, giving it more power to scrutinise the business. An independent monitor could also be appointed to ensure the company remains financially stable.
Thames had requested a bill rise of £191 from £436 to £627 but the regulator said the company should be only allowed a £99 rise.
The company is facing a funding crisis after warning on Tuesday that it will run out of cash by May 2025, risking a collapse into special administration under the new Labour government.
It is struggling under £15bn of debts and has £1.85bn of cash to see it through to next spring.
Customer bills are set to rise by £94 over the next five years on average, which is a third less than the bill increase requested by Britain’s 16 water companies. This works out at an increase of £19 per year.
On average, companies had requested a £144 increase for ratepayers but Ofwat rejected the plan and has provisionally granted the smaller increase.
Southern Water has suffered one of the steepest cuts to its request, with its plea for a £306 hike cut to £183 by the regulator.
On investment, which is funded by bill increases, Ofwat said water groups can spend £88bn, which is £16bn lower than they requested.
Ofwat chief executive David Black said: “Customers want to see radical change in the way water companies care for the environment.
“Our draft decisions on company plans approve a tripling of investment to make sustained improvement to customer service and the environment at a fair price for customers.”
“Let me be very clear to water companies. We will be closely scrutinising the delivery of their plans and will hold them to account to deliver real improvements to the environment and for customers and on their investment programmes.”
Ofwat has opened a consultation into its proposed bill rates, which closes on Aug 28. A final decision is expected in December.
Thames proposed plans in April to Ofwat to boost spending to £19.8bn as it seeks to upgrade its infrastructure and cut spills of sewage, but that would be funded by a large hike in bills.
The company has said bills must rise to make the company “investable” and an attractive proposition for any investors.
Its current shareholders have so far refused to put any more money into the group until its finances and Ofwat’s decision become clear. They refused to inject £500m of capital into the company earlier this year due to the uncertainty.
Ofwat’s decision is a draft determination meaning water companies and the regulator will continue negotiations until the final decision in December.
Thames Water chief executive Chris Weston said on Tuesday the draft determination was not the “end of the road”.
“We would expect continued engagement with Ofwat between the draft determination and final determination to work out what that means for our revenue and what it means for customers in the period up to 2030,” he said.
“There will be a huge amount of detail. It is going to take us a while to unpack that and understand exactly what it means for us.”
This is a breaking story and will be updated as more information becomes available.
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