Five water companies will be provisionally allowed to increase their bills by between 1% and 5% more than regulator Ofwat had previously granted, the competition watchdog has said.
Five companies – Anglia Water, Northumbrian Water, South East Water, Southern Water and Wessex Water – argued that Ofwat's original decision prevented them from meeting the regulatory requirements set out for them.
An independent group of experts appointed by the Competition and Markets Authority (CMA) said Anglian and Northumbrian should be allowed to increase their bills by a further 1%, Southern by 3%, South East by 4% and Wessex by 5%.
The CMA said a provisional decision allowed 21%, or £556 million extra in revenue, of the total £2.7 billion claimed by the five companies.
Kirstin Baker, who chaired the independent group of experts appointed by the CMA to consider price controls, said: “We have found that water companies' requests for significant increases in bills, over and above those permitted by Ofwat, are largely unjustified.
“We understand the real pressure on household budgets and have worked to keep increases to a minimum, whilst ensuring there is funding to make essential improvements at a reasonable cost.”
The CMA said the extra money would fund more resilient supply, reduce pollution and reflect higher funding costs.
In December, Ofwat said it would allow water companies to increase bills by an average of £157, or 36%, over the next five years to help fund investment in crumbling infrastructure.
But in March, Ofwat formally referred the five companies' applications for a redetermination of their bill escalation allocation after they argued the decision prevented them from meeting the regulatory requirements set out for them.
This began a six-month period for the CMA to consider his appeals.
Water Minister Emma Hardy said: “I understand the public's anger over rising bills, which is why I hope all water companies offer appropriate support to anyone struggling to pay.
“We have made sure investment money goes towards infrastructure improvements, not bonuses, and we are creating a strong new regulator to clean up our waterways and restore confidence in the system.
“We are very focused on helping to ease cost of living pressure on households – we have frozen fuel taxes, increased the minimum wage and pensions and lowered mortgage rates, putting more money in people's pockets.”
