UK regulator's price hike decision to fall short of Thames Water demand, Guardian report says

LONDON (Reuters) - Britain's Thames Water will be allowed by the water regulator to increase customer bills by around 33% over the next five years, the Guardian reported on Wednesday, a far smaller increase than the troubled company had said was needed.

The Guardian report, which cited unnamed sources, came ahead of a formal announcement from Ofwat due on Thursday morning.

Thames Water had previously requested a 53% rise in bills.

The company, which has 16 million customers, has become a poster child for Britain's broken water sector following accusations investors have for decades plundered companies for dividends while neglecting infrastructure and the environment.

Ofwat's decision is seen as key to determining whether Thames Water can attract new equity of 3.25 billion pounds ($4.10 billion), part of a rescue plan that also depends on a court approving a separate 3 billion pound debt lifeline.

($1 = 0.7936 pound)

(Reporting by William James; editing by Jonathan Oatis)