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Thames Water may have to abandon plans to stick customers with an extra £29 surcharge following rumblings from industry regulator Ofwat.
The watchdog said yesterday it would dispute Thames bosses' claim that they need the extra dosh to pay for sewer maintenance and subsidise defaulting customers - despite nabbing £1.8bn in revenue in the last year alone.
The company wants the regulator's permission to boost its household bills by up to 8 per cent in 2014, citing a "tough time financially."
But Thames Water already raised its bills by 6.7 per cent last year - and faced public anger in June when it emerged the company had manipulated inter-company loans and an HMRC raincheck to cut its corporation tax to zero and seize £5m in tax credits despite revenues of nearly £2bn.
The company has since posted pre-tax profits of £144.9m in the year to March.
Meanwhile chief executive Martin Baggs has seen his pay topped up to £450,000 a year - plus a £274,000 bonus.
Ofwat's chief regulation officer Sonia Brown said yesterday that the organisation had "been clear" that it would challenge the proposition.
"So we are looking to see if there are areas where we can claim money back for customers."
The counter-claims include systemic underspending on sewer flooding, reduced investment in its sewage treatment programme and inadequate maintenance of its wastewater network - allegations that Ms Brown said could amount to Thames failing to honour its contract with customers.
The regulator is expected to make a final decision in November following a technical consultation.
But public pressure groups remained sceptical.
The Campaign for Public Ownership's Neil Clark said he was not surprised to hear Ofwat talking tough.
He said the public mood over utility prices had never been more angry.
"These regulators certainly know they have to raise their game. They know this model [of privatisation] is coming under increasing threat," he said.
"But we shouldn't be duped by this - the model is fundamentally flawed.
"We're always going to pay more for water if it's privately owned, because companies want profits. It's as simple as that."
Thames Water's 13 million household customers currently pay an average of £321.20 a year unmetered and £266.45 metered, before the surcharge is calculated.
In April a study commissioned by fellow union Unison found water bills across the industry had risen by 64 per cent since its privatisation in 1989 - more than twice the average rise in household earnings.
A Thames Water spokesman said the company was declining to comment publicly until after the regulator's draft decision in October.