Water companies will be looking for higher bills from 2025 to cover the cost of improving services, the boss of regulator Ofvat has said.
It comes after the biggest suppliers were heavily criticized for their records of sewage leaks and plugging leaks.
Thames Water is now at risk of being taken over by the government, leaving many in debt.
Ofwat boss David Black denied it had failed to regulate the industry well.
But he admitted there were “hard lessons to learn” and that he was “angry” about excessive chief executive pay in the industry.
Despite the criticism, Mr Black told BBC Radio 4’s Today program that customer rates could rise as companies try to improve.
“We expect companies to request increased bills in the next price review to fund major investment projects, and those projects will deliver improvements to the environment.”
Former environment secretary George Eustice said last Wednesday bills would rise to around £42 per household on average in the “longer term” by 2025.
Following a report that the Times newspaper would see a 40% increase, Mr Eustice dismissed it, saying it would be “too little”.
Water UK, which represents suppliers, told the BBC any rises would be a matter of regulation.
Campaign group Surfers Against Sewage said it would be a shame if water companies were to raise rates.
“Consumers should not bear the burden of mismanagement by the water company,” it said.
“For decades we have been paying water companies to provide ecosystem services, but they continue to funnel these funds into shareholders’ pockets.”
Thames water woes
Last week it emerged that Thames Water was struggling to raise the cash it needed to service its £14bn debt pile.
The company, which serves a quarter of the UK population, has faced heavy criticism over sewage discharges and leaks and is under pressure to improve services.
If Thames can’t raise the money, it could be put into a “special administration regime” – where it would be temporarily re-nationalised – with Mr Black saying this was a “backstop option” and “we’re a long way from that”. .
He said Thames had “until the early part of next year” to find the cash and currently had cash reserves of £4.2bn.
Asked whether customers should pick up the tab if the company goes out of business, he replied: “No.”
An Ofwat spokesman later told the BBC there was no resemblance to the collapse of Bulb – the energy company which cost taxpayers millions last year.
“This is not a lightbulb moment, no switch on, turn off here,” they said.
Last week Health Minister Neil O’Brien tried to allay concerns about the potential impact on customers, but the influential Business Select Committee warned that taxpayers could still suffer.
Labor MP Darren Jones told the BBC that if the government was forced to take over the running of Thames Water, “taxpayers would be exposed to the debt and running costs of a very large company”.
Ofwat says it is still waiting to see how Thames Water plans to fix its finances and whether the company will need to raise “significant” sums. Negotiations are ongoing to secure additional funding.
Commenting on claims the regulator failed to prevent big water companies from falling into debt, Mr Black said suppliers were responsible for their financial systems, not Ofwat, which was tasked with protecting customers.
Water companies across England and Wales must submit business plans for 2025-2030 to Ofwat by 2 October. This includes their planned development work for the period.
The regulator will publish guidance on how they should set the bills early next year.
Industry body Water UK announces planned price rises annually, usually in February, Ofwat said.