Poor regulation has seen water companies in England and Wales pocket an £800 million windfall, according to the National Audit Office (NAO).
The NAO said that water companies have benefited from tax cuts and lower financing costs over the past five years, but these reductions haven't been passed onto the customer because industry regulator Ofwat had not properly "balanced the risks" between the companies and the customers.
The report estimates that water companies benefited from an extra £410m in lower corporation tax and £840m in lower interest payments. The firms absorbed some costs and provided discounts on bills worth £435m, leaving them with a net gain of £800m.
Ofwat rejected the National Audit Office's criticism. Ofwat chief executive Cathryn Ross said its pricing cap structure gave customers "certainty about the cost of their water bills". The NAO accused Ofwat's system of being too heavily in favour of water companies and was not achieving value for money.
"What that would have meant was that had interest rates gone up between 2009 and 2014, that amount of money would have gone straight on customers' bills. I don't think that was the right thing to do," Ms Ross told the BBC.