Household water bills will rise by up to 10 per cent this year, outpacing inflation and pushing prices to their highest levels in recent history.

The average bill will rise by 7 per cent to £312, with customers in the South West of England worst hit.

Ofwat, the water regulator, argued the rises were necessary to enable water companies to invest in fixing leaking pipes, protecting rivers and coastal waters and connecting new homes. Regina Finn, the watchdog’s chief executive, said: “We recognise any bill increases are going to be unwelcome. But these increases are essential to ensure that customers continue to receive high quality, secure water and sewerage services both now and in the future.”

The 7 per cent rise, which covers water and sewerage costs, will add an extra £20 on the typical customer’s bill when the rise comes into force on April 1.

Ofwat said the rise represented an extra 3.1 per cent on top of the general increase in the cost of living, which it put at 3.9 per cent according to the retail prices index measure of inflation.

Stripping out inflation, the 2007-08 average bill compares with £263 five years ago and £219 in 1989. Water companies have already started sending out bills for the coming year.

Customers of South West Water will see their bills rise by an average of £44, or 10 per cent, to £483. Severn Trent, which operates in the Midlands, is increasing the average bill price by £15, or 5.7 per cent, to £279. The lowest average bill will be in London, where the average Thames Water customer will pay £275.

The disparity in bills depends in part on the age of the company’s infrastructure, its historic record of investment and the extent of its duties under EU environmental legislation. South West Water is being allowed to increase prices to help to pay for improving its water mains, in a move designed to reduce discolouring of water.

Ms Finn said that bills would have been higher in Ofwat’s absence.

The rises come after several of the water groups were last year forced to impose hose pipe bans amid fears of a drought.

Southern Water, Sutton and East Surrey, Thames Water and Three Valleys Water were among the water companies that banned customers from sprinkling lawns and washing their cars last year.

Several water companies, including South West Water, are allowing customers to switch to water meters at no cost. Metered customers typically have lower bills and the service appeals to customers who use relatively low volumes of water.

Households are also facing high energy bills. Although many of the utilities groups are starting to lower prices, bills still remain at historically high levels, after a surge in the price of gas in recent years.

The news came as a BBC survey showed council tax bills would rise by 4.2 per cent this year, ahead of inflation.

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