Water bills in British households are set to fall by an average of 4% over the next five years, under new proposals announced today by regulator Ofwat.

The average bills will be cut by £14 to £330, and the plans were announced as part of the regulator's "draft determination" on price limits for water and sewerage costs in England and Wales for the 2010-15 period.

According to Ofwat, the proposals will allow water companies to invest £21bn in improving services over the period.

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However, the decision is likely to spark fury from water companies - who wanted to increase bills by £28 above inflation by 2015.

A consultation period will take place, until the final decision by the regulator will be revealed in November.

Meanwhile, water companies will get the chance to renegotiate in September and they can also appeal to the Competition Commission.

Ofwat chief executive Regina Finn said: "We understand times are hard and we have listened to what customers have told us.

"They want a safe, reliable water supply at a reasonable cost. People can shop around for the best deal on many things, but not water."

The new bills will then come into effect in April 2010.

(JM/BMcC)