Water regulator Ofwat has prevented Thames Water from increasing its prices by eight per cent, or £29, for 2014-15.
Regulation officer, Sonia Brown said:
We said we would challenge Thames' application, in the interests of customers.
We did just that and on the evidence provided we are not convinced that an extra bill increase is justified.
The highest price increase Thames Water can levy on customers in 2014-15 is 1.4 per cent above inflation. Thames Water maintains the right to appeal to the competition commission. Ofwat's chairman Jonson Cox wrote to water companies last week, instructing them to consider if they needed to raise prices for 2014-15 by the total amount set in the previous price review.
Thames Water's reasons for the for the proposed price hike included the £273m spent on land needed for construction of the Thames Tideway Tunnel, as well as bad debt due to poor economic conditions.
Water companies will need submit their business plans for the next price review on 2 December, covering the period 2015 to 2020. Ofwat's decision on these prices will be made by January 2015.