The water company, which applied this month for the first drought order for London since the summer of 1976, could be penalised £140 million for losing 894 million litres a day — enough to fill 344 Olympic swimming pools.

News that Thames’s performance is getting worse comes as the company announced a 31 per cent increase in profits to £346.5 million this year. RWE, its German parent company, took £276 million out of the company in dividends.

Ofwat, the water regulator, said yesterday it was extremely concerned that Thames may not meet leakage targets or supply commitments. It is investigating the causes of the company’s worsening performance and will disclose in the next few weeks what action it will take against Thames for missing last year’s target by 34 million litres a day.

Ofwat has already imposed multimillion-pound fines on two water companies, Severn Trent and Southern, this year but could choose to place an enforcement order on Thames, demanding it replace water pipes more quickly.

Customers in London and the Thames Valley face hosepipe bans and further potential restrictions, at the same time as 24 per cent bill increases.

“Customers are paying the higher prices that Thames Water has been allowed to charge without getting all the benefits the company has promised to deliver. This is unacceptable,” Ofwat said. Thames must “spend as much as is necessary to remedy its leakage failure and ensure value for money and security of supply”.

Jeremy Pelczer, chief executive of Thames, admitted that the company would find it hard to hit its leakage targets for at least two years. He said he was hopeful that by Year 4 and 5 of the five-year regulatory period the company would have got on top of the problem.

DRIP, DRIP, DRIP

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