Both companies reported good business, announcing strong profits in the first six months of the financial year, but warned that a sudden drop in prices would be "undesirable" and could hit profits.

Ofwat wants Anglian to cut prices by more than 17% and Thames Water by 10-12%.

Anglian's finance director, Elliott Mannis, said: "We do not disagree with price cuts, but we think it is better to hold bills stable for next year and then have a smaller cut in April 2000.

Thames Water said it would work privately with the regulator "to secure a balanced outcome."

Thames Water reported pre-tax profits for the first half-year of £214m ($318m) - £12m more than the year before.

Turnover, however, was down nearly £50m to £653.4m.

The turnover problems resulted mainly at Thames's international operations, while domestic business was doing well.

Anglian's results were less rosy, with profits down £30m to £112.8m ($189m) on turnover of £413.9m.

The poor result, however, was put down to exceptional costs, among them a whopping £11.5m spent to beat the millennium bug, and £15m to restructure the firm's engineering operation.