Ian Byatt, director-general of Ofwat, the regulator, said consumers could expect reduced bills when new prices were set next year.
"This is excellent news for consumers - I will pass on the benefits to them at the price review next year ... At the same time, service to customers is also generally improving." Mr Byatt will unveil his initial proposals on water bills next month. Final price limits for each water company will not be set until November 1999 and the new prices will take effect from April 2000.
Figures released by Ofwat showed a total of pounds 3.6bn of capital investment by water companies for 1997-98, whichrepresented more than a 10 per cent increase on the previous year.
Mr Byatt added: "Through efficiency, bills could come down in April 2000, and still allow companies to finance a substantial environmental programme."
But Pamela Taylor, chief executive of Water UK, the body representing Britain's water companies and operators, said: "In our view, efficiencies already achieved, coupled with future efficiency improvements, should be sufficient to finance environmental improvements within a stable price regime during the period 2000 to 2005. And that is what customers are telling us they would prefer to price cuts.
"We are currently investing at the rate of nearly pounds 10m a day but if a price-cut hit our ability to invest, then we could face difficulties."
Shares in water companies fell sharply last month after the Government warned that it expected them to invest pounds 8.5bn on environmental programmes while making "substantial" cuts in water bills.Reuse content