An increase of this size would on average add an additional £29 to every household bill.

Ofwat, which decides the limit on how much water companies can charge customers, published its draft decision saying it disagreed with Thames Water’s estimated cost increases in relation to bad debt costs, the impact of the transfer of private sewers, land purchase costs, and increases in Environment Agency charges.

The regulator said that it provisionally concluded that there was “no case to adjust the bill increase set at the 2009 price determination at this stage”, but added further evidence could have a possible impact on its final decision following a period of consultation.

Thames Water responded by saying it would “review Ofwat’s draft proposals and submit our response in due course”.

If a price increase is ultimately given the go-ahead, it would begin in April next year.