Millions of people may face a rise of up to 26 per cent in their water bills — an average £40 a year — as a result of new spending plans drawn up by water companies.

The increases, designed to pay for £27 billion of new water and sewerage projects, would mean more misery for households already trying to cope with higher costs of gas, electricity, mortgages, food and insurance.

Worst hit would be the one million households served by Bristol Water, which has proposed a total increase of 26 per cent over the rate of inflation between 2009 and 2015. That could push an average bill up from £149 next year to £187. Bristol Water blamed part of the price increase on rising energy costs, as well as work needed to bolster flood defences.

Proposals have been submitted to Ofwat, the industry regulator, by ten water companies in the first stage of a five-yearly investment review to determine standards, spending and customer bills during that period.

While Bristol Water sought the steepest rises, it was almost as bad for the four million customers of Southern Water, who could face a 23 per cent increase over the same period.

Southern Water, which was bought last year by a consortium led by the US investment bank JP Morgan, said that it needed to spend £2.6 billion to meet tough new EU environmental rules. Its price rise will push water bills for its customers in southeast England to £426 a year by 2015.

The increases, which still need to be approved by Ofwat, triggered immediate criticism from consumer groups.Charles Howeson, who chairs the Consumer Council for Water in the Western region, including the area covered by Bristol Water, said that customers would not be happy with the proposed price rises, especially in view of other household bill increases.

British Gas raised gas prices for customers in some regions this month by as much as 44 per cent.

Mr Howeson said: “We are concerned that investment proposals do not match consumer priorities and believe that the work they are proposing will push prices up beyond what customers are willing to pay.”

He said it was of “paramount importance” that consumers were not forced to overpay for unnecessary work.

Not all the water companies proposed such dramatic rises. The council said it was encouraged by decisions by Welsh Water and Severn Trent, which serves eight million customers in the Midlands, to keep increases broadly in line with inflation.

Thames Water, Britain's largest water company, is seeking to raise bills for its 13 million customers by 3 per cent above the rate of inflation per year, amounting to a total increase of 16 per cent by 2015. The proposals indicated its average bills could rise from £280 next year to £329 by 2015, excluding inflation.

David Owens, its chief executive, said: “Thames customers have enjoyed the lowest bills in the industry for many years, but we now need to make essential investment to secure their services for the future.” He added that London's largely Victorian sewage network required urgent attention.

The water companies are blaming rising bills on the cost of complying with new rules on water conservation, as well as a drive to cut leaks and install domestic water meters.

A final decision on water company price rises will be announced by UK Ofwat in November next year.

Richard Laikin, director in the water team at accountants Ernst & Young, said that water companies' investment represented an increase of 20 per cent on their last spending round.

He said that talks with Ofwat were likely to induce some companies to modify their plans: “There is always quite a bit of diversity between what the companies have asked for and what Ofwat decides.”

Money Central: 10 easy ways to cut your water bills

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