Household water bills in England and Wales will increase by an average £31 a year over the next five years, regulator Ofwat has announced.
The average Southern Water customer will pay £642 between 2029-30. This is a hike of 53%.
All water firms are hiking their prices by at least 21%.
David Black, Ofwat Chief Executive, said: “Today marks a significant moment. It provides water companies with an opportunity to regain customers’ trust by using this £104bn upgrade to turn around their environmental record and improve services to customers.
“Water companies now need to rise to this challenge, customers will rightly expect them to show they can deliver significant improvement over time to justify the increase in bills. Alongside the step up in investment, we need to see a transformation in companies’ culture and performance. We will monitor and hold companies to account on their investment programmes and improvements.
“We recognise it is a difficult time for many, and we are acutely aware of the impact that bill increases will have for some customers. That is why it is vital that companies are stepping up their support for customers who struggle to pay.
“We have robustly examined all funding requests to make sure they provide value for money and deliver real improvements, while ensuring the sector can attract the levels of investment it needs to meet environmental requirements. This has seen us remove £8bn of unjustified costs compared with companies most recent requests. In addition, our approach to setting a rate of return has saved customers £2.8bn.”
Ofwat’s draft decisions released in July suggested water companies would be allowed to increase bills by an average of 21%, before inflation is added, over the next five years to help fund £88billion of investment in improving services and the environment.
The proposed bill rises would begin to take effect from April next year.
But figures released by Ofwat in October revealed water companies had subsequently asked to increase bills by even more than they originally requested.
The latest requests by firms would see the average consumer bill in England and Wales rise by 40% between now and 2030, costing £615 per year.
Consumer groups have expressed concern that many households will not be able to afford a sharp rise in water bills, and urged water companies to provide more support.
Mike Keil, chief executive of the Consumer Council for Water (CCW), said: “Our research shows at least two in five households will find these future bill rises difficult to afford, which is why we need greater ambition from some water companies in providing help to those who are going to struggle.
“Companies’ existing plans fall short of meeting the commitment they previously made to end water poverty in England by 2030 and Ofwat should push them harder to deliver on this.”
Industry body Water UK had estimated that water bills would be £110 or 25% higher today had they kept pace with inflation.
A spokeswoman said: “Water companies want to invest a record £108 billion to support economic growth, build more homes, secure our water supplies and end sewage entering our rivers and seas. We await Ofwat’s decision tomorrow and hope they give us the green light so we can get on with it.
“However, we understand increasing bills is never welcome. To protect vulnerable customers, companies have proposed increasing the number of households receiving support with their bills to three million over the next five years.”