Thames Water was ordered to cut customer bills by £38 over the next five years in a review by the water regulator Ofwat.
The capital’s biggest supplier was told the average household bill will have to come down by 9.8 per cent, from £382 this year to £344 by 2024/25.
At the same time, the company will be required to reduce leaks from its pipe network by 25 per cent.
The draft proposals published today will put the watchdog on a collision course with Thames Water, which fears that bill cuts will not leave it enough revenue to pay for investment.
The company’s bosses say they have already squeezed costs and earlier this month unveiled plans to reduce staff numbers by 650. Ofwat CEO Rachel Fletcher said: “The package signals a brighter future for customers, with better services, a healthier environment and lower bills.”
A spokesman for Thames Water said: “We will study Ofwat’s response to understand more about its approach.”
The review comes as the industry faces scrutiny, with Environment Secretary Michael Gove this week calling water bosses for a meeting after their efforts to protect the environment were branded “simply unacceptable”.
The Environment Agency’s annual report into the environmental performance of water companies found pollution incidents in England increased last year, and most firms are set to fail to meet 2020 pollution targets.