By Will Roberts
The UK's biggest water company wants to raise bills by more than 10 per cent above the cost of inflation over a five-year period.
Thames Water, which serves 14 million customers in and around London, has informed Ofwat (the Water Services Regulation Authority) of the planned change.
Ofwat said the company had submitted by far the highest proposed bill increase of any of the major water supply and sewerage firms that have put forward their plans for 2015-20.
Thames Water profits have risen
Thames, which pays no corporation tax, last week announced half-year pre-tax profits were up by nearly a fifth to £134.2 million.
The company is already at loggerheads with the regulator over customer charges.
Nine firms said they would cut bills or leave them flat in real terms over 2015-20, after Ofwat asked them to consider scaling back increases.
But Thames Water said its plans to invest £2.8 billion in the Thames Tideway Tunnel, a major new sewer.
This means it must add £8 above inflation for each of the five years from 2015 - and that without this, bill rises would be below inflation.
Ofwat figures show the supplier plans a 6.8 per cent real terms cut in average water supply bills but a 34.8 per cent increase for sewerage.
This gives an average real term rise of 10.4 per cent.
Typical Thames bill will increase
Thames said its current typical £358 bill is £50 below the average for England and Wales but would increase to £398, plus inflation, for 2020.
Chief executive Martin Baggs claimed seven out of 10 customers found the plan "acceptable".
He said: "It is clear that bill increases are only acceptable if they are absolutely essential, but customers have told us to avoid storing up problems for the future.
"Our plan will deliver value for money on the things our customers have told us matter most."
Last week, Thames Water said it did not expect to pay any more corporation tax for up to a decade.
This is because it planned to continue £1 billion annual infrastructure investments, meaning it can defer £20 million a year in tax liabilities.
Last month it was slapped down by Ofwat over plans for a one-off £29 bill hike for next year.
The plans were due to unforeseen costs including customers failing to pay their bills, as well as the Thames super sewer.
Thames Water is owned by Kemble Water Holdings, whose investors include Australian investment firm Macquarie Group.
Proposals by Thames and its rivals set out plans for their charges for 2015-20, to which will be added the retail prices index inflation figure, which was 2.6 per cent in October.
Ofwat chairman Jonson Cox said: "Ofwat challenged companies to listen carefully to their customers in preparing their plans.
"Our board made clear that current economic circumstances gave companies an opportunity to deliver falling bills in real terms over the coming five years."
Ofwat to challenge water companies' plans
Ofwat chief executive Cathryn Ross said it would carry out an independent and rigorous process to analyse and challenge companies' plans.
The regulator said that in April it would give its judgment on the firms' plans, including "how well they have taken account of their customers' priorities."