Water bills 'could rise by 17%'

Thames Water said the hike in bills is needed to fund planned works

Water bills for Thames Water customers could rise by 17% over the next five years to ensure funding to replace ageing water pipes in London.

The proposed rise came as the firm announced a pre-tax profit of £435.1m.

Thames Water described the potential rise as an "essential investment" without which it would not be able to replace 1,300 miles of pipes by 2010.

If regulator Ofwat approves the hike, bills for 8.5 million customers would go up from 81p to just under £1 a day.

If the company does not get approval to make this essential investment, the delay will only keep bills artificially low in the short term

Thames Water

Thames Water supplies 13.6 million customers in the London and the Thames Valley area, including Berkshire and Oxfordshire.

The firm said replacing the network of pipes in London - about 20% of which is more than 150 years old - would cut leakage by a third.

The firm also plans to build two tunnels which will reduce overflows from London's sewerage system to cut pollution in the Thames and the River Lee.

The firm said the recession led to its bad debts rising to £45.1m and its bill for power jumping to £78.5m in 2008.

In a statement the firm said: "If the company does not get approval to make this essential investment, the delay will only keep bills artificially low in the short term, as customers will pay more in the long term to maintain deteriorating assets.

'Tough financial pressures'

"The increased cost of borrowing, combined with rising levels of customer bad debt and a sharp decline in commercial and metered demand for water is having a direct impact on the business," it said.

Lower metered demand reduced its revenue by £10m and the company said it expected the business to weaken further this year.

Thames Water said its running costs have fallen slightly to £614.5m and it made savings by cutting 150 jobs following a restructuring.

But dividends paid to its owners fell to £60m from £131m paid out for 2007, which it attributed to the recession.

"This reduction reflects the tough financial pressures Thames Water faces in the current economic climate," the statement said.