LONDON Nov 8 Britain's water regulator blocked an 8 percent price hike proposed by the country's biggest water company, Thames Water, taking action against soaring household utility bills which have risen up the political agenda.
Utility bills have become the subject of national debate since several energy firms unveiled sharp price increases and the opposition Labour Party promised a freeze on bills, fanning wider concerns among voters about the rising cost of living.
Regulator Ofwat confirmed in a statement on Friday that it rejected Thames Water's bid to raise charges by almost three times the rate of inflation for 2014-15, something it said in October that it planned to do so.
"We said we would challenge Thames' application, in the interests of customers. We did just that and on the evidence provided we are not convinced that an extra bill increase is justified," Ofwat chief regulation officer Sonia Brown said.
Thames Water, which provides water and waste services to 14 million households in and around London, can make an appeal to Britain's competition authorities, Ofwat said.
"We will review the decision carefully before deciding on our next steps," Thames Water said in an emailed statement.
Water pricing could face the same political scrutiny as energy bills after Prime Minister David Cameron said last week that he would take action to help households struggling to meet rising water bills.
Four of Britain's six biggest gas and electricity companies have over the last month raised their prices by between 8.2 percent and 10.4 percent.
Late last month lawmakers summoned the firms to justify the increases, which energy executives blamed on wholesale prices, other costs and levies linked to government programmes, brushing off allegations of market rigging.
The British government on Tuesday wrote to the country's biggest water companies, asking them to reconsider looming price hikes as households have been squeezed by a decline in real incomes.
Thames Water had said the price rises were necessary to help 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. The companies are due to submit their plans for the next five-year period from 2015 to 2020 in December.
Ofwat said in its statement that there was scope for water companies to cut bills from 2015 and should they not propose reductions, they would need to explain why.
Shares in Britain's main listed water companies Severn Trent and United Utilities, both members of the FTSE 100, and Pennon were all trading up between 0.2 percent and 0.9 percent on Friday morning.
Thames Water, which is owned by a group led by Australian investment bank Macquarie and including the China Investment Corporation, was permitted to raise prices by 1.4 percent above inflation for 2014/15.
However in August the unlisted utility said it wanted to add a further 8 percent, the equivalent of an extra 29 pounds ($46)on the average bill of 354 pounds a year.