Sutton and East Surrey Water had applied for a 10.2% increase before inflation, starting in April, blaming soaring energy bills and a big drop in income (see related story).

Ofwat has released a “draft decision” denying the company’s request, which would have affected more than 250,000 consumers.

Chief executive Regina Finn said: “The onus was on the company to convince us that higher bills were necessary.

“That’s why, after carefully scrutinising the application, we have provisionally rejected the request to increase prices.

“We are confident that Sutton and East Surrey Water have the necessary finance in place to provide the quality of service customers expect.”

Sutton and East Surrey Water had argued that the 2006 drought and the heavy rain in 2007 had caused an unforeseen drop in its income.

But Ofwat chiefs said they were “not convinced that these circumstances threaten the ability of Sutton and East Surrey to finance its functions up until 2010” when Ofwat will set new prices.

However, the decision is not final and Ofwat has opened a consultation for customers and the company, which runs until November 26.

In a statement, the water supplier said: “Sutton and East Surrey Water has noted Ofwat’s provisional decision, which the company is considering.

“It looks forward to a further period of consultation with Ofwat.”

The Consumer Council for Water (CCWater) had urged the watchdog not to allow changes to the prices set for 2005-10 in its 2004 Periodic Review (PR04).

David Bland, chair of CCWater in London and the South East, told edie: “We welcome Ofwat holding the line on this matter.

“The PR04 award for Sutton and East Surrey Water was made on the basis of the best information available at that time.”

Kate Martin

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