Ofwat said scope for lower costs came from the ability of the less efficient firms to catch up with those which had already tried to trim excess fat.
However, Mr Byatt caused an outcry by singling out some companies as laggards in his report on price control.
Northumbrian Water fared worst, among the least efficient in both water and sewerage, with South West Water also at the bottom of the list of efficiency in its sewerage business.
Mike Taylor, finance director of Northumbrian Water, said: 'We are annoyed and astounded by the report on our efficiency.' He claimed the company had done much to cut costs while improving service and was perplexed at its place in the league table.
Among the 10 large water and sewerage companies the most efficient are North West Water and Yorkshire Water and many of the smaller, statutory or water only, companies also win approval.
Mr Byatt said companies should welcome the challenge to improve. 'Efficient water companies will be held in high regard by both their shareholders and their customers,' he added.Reuse content