mahikarnam

Thames Water Utilities, supplier to 8 million people in London and the Thames Valley, said average customer bills may need to rise about 3 percent above inflation to fund the biggest investment program by a U.K. water company.

The utility told industry regulator Ofwat it wants to spend 6.5 billion pounds ($12.5 billion) in the five years from 2010 to pay for customer-service and network improvements as the region's population grows by a projected 380,000 by 2013, according to an e-mailed statement today. United Utilities Group Plc today said it plans to invest 4 billion pounds in the period.

Thames Water said customer bills will climb because Ofwat needs to set price limits high enough to enable companies to pay for the improvements. About half of London's water mains are more than 100 years old and Thames Water predicts the effects of climate change will cut its available supplies by 45 million liters (11.9 million gallons) a day by 2015.

``There will be an inevitable impact on bills, but even so, we will be able to keep them below the industry average,'' Thames Water's Chief Executive Officer David Owens said in the statement. The planned investment will help the company meet tighter environmental and legislative requirements, he said.

Business Plans

U.K. water utilities will today submit their draft business plans to the regulator setting out their views on how customer price limits and investment targets for the five-year period should be determined. Ofwat will make a decision next year.

United Utilities, the U.K.'s largest publicly traded water company, said bills need to increase by 2.7 percent a year in the period. Northumbrian Water Group Plc last month said it plans to raise charges annually by 1.3 percent above inflation to carry out its intended 1.3 billion-pound investment.

Bill increases may add to pressure on consumers already struggling with rising food costs and falling house prices. Electricite de France SA's U.K. unit last month raised gas charges 22 percent and electricity rates by 17 percent. A week later, Centrica Plc's British Gas division increased gas tariffs by 35 percent and power prices by 9 percent.

``Everyone's feeling the pinch at the moment,'' Thames Water's Owens said today in a separate statement on the company's Web site. ``Energy prices are going through the roof, petrol and food bills are skyrocketing,'' he said, adding that Thames Water conducted consultations to see what improvements customers wanted and how much they were prepared to pay.

Funding Target

The utility will need to raise between 500 million pounds and 1 billion pounds a year on top of the revenue from customers to meet its investment needs, Owens said.

Thames Water is proposing a new reservoir near Abingdon, in Oxfordshire, which would supply as much as 10 percent of the region's water by completion in 2021. The company will also try to cut the number of homes at risk from sewage flooding by almost a quarter, it said.

Ofwat can impose fines of as much as 10 percent of a utility's regulated revenue for missing targets in areas such as leakage. By 2015, Thames Water wants to reduce leakage by 18 percent, enough to supply more than 750,000 people a day. It said it will install a million more water meters, doubling the amount of metered properties to 54 percent.

The company, which was sold by RWE AG in December 2006 to a group led by Macquarie Bank Ltd. for 4.8 billion pounds, also plans to cut carbon-dioxide emissions by 20 percent.