UK competition watchdog rejects most water firms' price hike requests

LONDON (Reuters) -Britain's competition watchdog will allow five water companies to raise their bills by an extra 3%, far below what they wanted, calling their requests "largely unjustified", in the latest challenge for the country's failing water industry.

Ministers have called Britain's water industry "broken" after repeated sewage spills and amid public anger that water companies have paid dividends and bonuses instead of investing in infrastructure.

The government announced plans for a regulatory reset in July, but it is not clear when the new set-up, which will prioritise the environment, will be established.

THAMES WATER BATTLING TO AVOID COLLAPSE

Meanwhile, the country's biggest water company, Thames Water, is battling to avoid financial collapse, hoping to secure rescue financing from lenders, before then also asking the competition regulator to allow it to lift bills.

In March, five other water firms said the bill increases permitted for the next five years were not enough for them to improve infrastructure to stop pollution, and had taken their cases to the competition regulator.

In its ruling on Thursday, the Competition and Markets Authority said it was rejecting nearly 80% of the increases sought by the companies, Anglian Water, Northumbrian Water, South East Water, Southern Water, and Wessex Water.

"We've found that water companies' requests for significant bill increases, on top of those allowed by Ofwat, are largely unjustified," Kirstin Baker, chair of the Independent Group at the CMA, said in a statement.

The companies had asked the CMA to allow bill rises of between 8% and 18% on top of the average bill increases of 36% already permitted by the water regulator over the next five years. They got 3% more.

Thames Water has until October 22 to decide if it wants to take its case for higher bills to the CMA. Its financial problems date back to last year, when its shareholders called the regulatory conditions "uninvestible".

(Reporting by Sarah Young in London and Yadarisa Shabong in Bengaluru. Editing by Janane Venkatraman and Mark Potter)