The company said improved efficiency meant customers could see £10 ($16) knocked off their annual bills in April 2000: "The £10 price cut would apply to all Thames Water customers who receive both water and wastewater services from the company."

However, prices for Thames Water's 12m customers in London and the Thames Valley could go up from April 2001 by an average £5 a year to pay for an environmental and sevices programme costing more than £2.5bn ($4bn).

This improvement will be on top of the £4bn already spent since privatisation in the early 1990s.

Ofwat talks

The company said it hoped the pricing structure would be agreed by industry regulator Ofwat in upcoming talks.

Thames has become the first major utility to say exactly how much it is willing to reduce its bills after Ofwat told the industry last October that it would have to cut charges by up to 20% between 2000 and 2005.

The company is only reducing its average bill of £207 by 4.8%. The regulator wants to see a cut of between 10% to 15%.

A spokeswoman for the company said it was offering a flat rate cut rather than a percentage reduction in the bills as this would benefit low users of water.