Ofwat said water companies were now requesting permission to spend £19bn more than it had allowed in its draft determinations earlier this year.
The regulator added that at least half the increases being sought by water companies were a result of new legal requirements from the Environment Agency and the Drinking Water Inspectorate, with the rest blamed on “net cost increases”.
On its website, Ofwat said: “This increased expenditure request will, if approved, increase customer bills compared to our draft determinations.”
The regulator has been resisting big bill increases from water companies, amid complaints that households are being asked to bail out the embattled sector for poor business decisions made by industry executives.
However, water companies insist they were prevented from investing as much as they would have liked in the past and that significant bill rises are now inevitable if consumers want to end sewage dumping in rivers.
They also argue that for private investors to be attracted to the UK water industry, they must be able to make decent returns.
David Henderson, the chief executive of industry body Water UK, said in August: “Ofwat has a difficult job, but investors are telling us that they need Ofwat to change its approach.
“Unless the right conditions to invest are put in place, our environment and our economy will pay the price.”
Against this backdrop, ministers have been urging Ofwat to find a solution with water companies that avoids embarrassing headlines.
For example, Thames Water has warned that on its current trajectory it will run out of cash next year unless it can convince investors to put more money into the business.
The company’s existing backers declared it “uninvestable” earlier this year amid a major row with Ofwat over the level of investment returns they could make.