UPDATE 1-UK regulator says it plans to block Thames Water price hike
LONDON Oct 16 (Reuters) - Britain's water industry regulator Ofwat said on Wednesday that it planned to block an 8 percent hike in bills proposed by Thames Water because it was not justified, offering some respite to households facing higher charges for gas and electricity.
Thames Water, which provides services to 14 million households in London and the surrounding area, said in August it wanted to increase prices to cover the cost of bad debts, which had risen in the economic downturn, and higher costs than it had forecast.
Water companies need the permission of Ofwat to raise prices beyond limits set by the regulator for five-year periods.
Thames Water, owned by a consortium led by Australian investment bank Macquarie, was permitted to raise prices by 1.4 percent above inflation for 2014/15, Ofwat said.
However in August the unlisted utility said it wanted to add a further 8 percent, the equivalent of an extra 29 pounds ($46)on an average bill, which currently stands at 354 pounds a year.
"We said we would challenge Thames Water's request," said Ofwat's chief regulation officer, Sonia Brown. "We have looked at the details and do not believe the current evidence justifies an increase in bills."
Ofwat said it would take a final decision on the increase next month after a short period of technical consultation, which allows for the submission of new evidence.
A Thames Water spokesman said it would review Ofwat's preliminary decision and submit its response in due course.
Higher water charges would be a new blow to British consumers. Energy prices in Britain have risen 24 percent over the last four years, according to energy regulator Ofgem, ramping up the pressure on household finances at a time of wage stagnation.
Ed Miliband, leader of the opposition Labour Party, put increasing energy bills at the heart of his campaign for 2015 election when he said he would freeze prices for 20 months if his party wins power.
SSE, one of the "big six" energy suppliers said it would raise energy prices by 8.2 percent earlier this month.
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