By Daniel Hunter

Ofwat has decided to turn down Thames Water's application for an additional price increase for 2014-15.

It was for Thames to justify that this increase was in customers’ interests. Within the three month timescale for assessing the application, Ofwat found that the evidence the company submitted did not justify its proposed £29, or 8%, additional increase in customers' bills.

Ofwat's chief regulation officer Sonia Brown said: "We said we would challenge Thames' application, in the interests of customers. We did just that and on the evidence provided we are not convinced that an extra bill increase is justified.”

This is Ofwat's final decision on this application. Thames Water now has the right to trigger an appeal to the Competition Commission.

Ofwat’s decision means the maximum that Thames can add to customers’ bills for 2014-15 is still 1.4% above inflation, as set in the 2009 price review. Last week Ofwat’s chairman Jonson Cox wrote to all water companies asking them to consider whether they needed to increase their bills for 2014-15 by the full amounts set in the last price review, given the hard time their customers are facing.

On 2 December, companies will submit their business plans for the next price review, which will cover the period from 2015 to 2020. Ofwat has called on these plans to reflect their customers’ priorities, and believes there is scope for reductions in bills from 2015. If companies do not propose reductions, they will need to fully explain to their customers why. Jonson Cox last week repeated that Ofwat will set 2015-20 prices using an independent, rigorous process. Its final decision is due on these prices by January 2015.

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