A new reservoir is being planned for Oxfordshire, as part of Thames Water's £3.1bn programme to improve water and sewerage in the South East.
Victorian water mains and sewers across the company's supply area will be modernised under the five-year plan.
Thames Water says the work is essential to help maintain services to customers in the face of rapid population growth.
The firm's average water bill will rise by £51 to £261 over the five years to pay for improvements.
'Biggest ever' investment
Work will get under way from 1 April.
Werner Boettcher, managing director of Thames Water Utilities, said: "The programme we have agreed with Ofwat centres on the need to make sure our ageing Victorian water and sewerage networks are able to cope with the demands of the 21st Century.
"This includes emerging factors, such as climate change and the dramatic population growth forecast for London and the South East over the next decade.
"Ofwat has limited our planned investment to £3.1bn, which is less than the £4bon we originally requested.
"As a result of this shortfall, some schemes we wanted to take forward will have to be deferred, but the investment programme ahead of us is still the biggest we have ever had to deliver."