THE water regulator has told Thames Water that it must drop its prices by five per cent over the next five years.

Ofwat made the announcement yesterday as it made its decision for water pricing up until 2020.

But the amount customers pay is likely to rise because water companies will be allowed to add inflation to the figures given by Ofwat.

The average annual bill for a Thames Water customer is £373 and it has been told that over the next five years this needs to drop down to £353.

Because of inflation adjustments, which is running at 2.3 per cent, the actual figure being paid by the 2019/20 financial year is likely to be slightly higher than the £373 average.

Thames Water had requested to be allowed to increase bills by three per cent but this was rejected by the regulator.

A spokesman said: “Thames Water has received the final determination on its business plan to deliver best value and improved service for customers for the next five years. We will now be reviewing the report in detail.”

One of the reasons given for the rise is the sustained low interest rates, meaning water companies have been paying less for loans needed for infrastructure projects.

Thames Water had wanted to raise bills for its customers in part to build the Thames Tideway Tunnel in London, leading to criticism that Swindon residents were being asked to pay for a scheme that benefitted the capital.

But the firm said Swindon has seen millions invested on projects such as improving sewage works and flood defences in Haydon End and Rodbourne Cheney.

Ofwat said the new pricing strategy will allow continued investment in the country’s water system while providing value for customers.

Ofwat chairman Jonson Cox said: “This is an important step in maintaining customers’ trust and confidence in the water sector. We set out to deliver a challenging but fair outcome. We are requiring companies to meet higher service standards and deliver on their promises to customers. We are bringing down bills so customers can expect value for money, while investors can earn a fair return.

“Companies will need to stretch themselves to deliver much more with the same level of funding as in previous years. We will achieve more resilient infrastructure and better service as a result.”