Mixed news on water bills

Thames Water customers face a £34 rise in their bills - but have been spared the far steeper increase that was feared.

The company has been told it can increase bills by 16 per cent over the next five years, leaving its £4billion plan for an overhaul of London's ageing sewerage and water networks in tatters.

The decision from regulatory body Ofwat means that average bills in London will rise from £211 this year to about £245 by 2010.

Thames Water had asked for an increase of nearly 40 per cent. The surprise decision comes only two days after the worst pollution disaster in the Thames for almost two decades. Up to one million tonnes of raw sewage had to be pumped into the river because sewers could not cope with the rain from Tuesday's freak storms.

However, Ofwat is said to have taken a particularly dim view of plans for a £1 billion "super-sewer" under the Thames that would prevent repeats of the sewage discharge.

Industry sources said: "The Environment Agency are for it but Ofwat say it cannot be justified by their cost benefit analysis."

The Government may now overrule the regulator. Thames Water said it needed to study Ofwat's decision before responding.

Bills in London are the lowest in the country.