Bristol's average water bills will rise by £11 during the next five years to £168 by 2015, according to industry regulator Ofwat.

This represents a rise of about seven per cent and 22 per cent (£35) less than Bristol Water had asked for.

But sewerage fees to Bristol homes – provided separately by Wessex Water – will drop from an average of £203 to £200.

Ofwat announced yesterday by how much water companies could increase they bills.

Ofwat chief executive Regina Finn said: "We have listened to Bristol's customers. They have told us that their priority is safe, reliable water supplies at a reasonable cost.

"We've challenged the company and kept bills £35 lower than they asked for. This is not just about keeping bill increases down, but about what customers get for their money.

"By linking up networks and protecting key treatment works from flooding, our decision will increase the security of water supplies for customers. This will benefit more than a quarter of a million people in the Bristol area."

Bristol Water had asked for much more, arguing it needed the extra revenue for investment to maintain and increase supplies to meet increasing demands.

While the Consumer Council for Water welcomed the news it felt Ofwat could have gone further.

Chairman Dame Yve Buckland said: "The overall deal for Bristol Water will be acceptable to many customers who told us that they wanted bills to remain flat, and over England and Wales, average bills are actually going down by one per cent. However, we would give the deal a seven out of 10 because Ofwat has eased off on the companies, meaning that some customers will face higher bills.

"There is also a risk that bills may creep up over this five years with further work to be done for the environment, and other costs.

"We were surprised that Ofwat has allowed water companies to come back for higher prices if customer debt increases. If water companies fail to collect customer debt, they can ask for more money from Ofwat, and pass that cost on to all of their customers."

Bristol Water responded yesterday by saying it needed time to examine Ofwat's report before making a judgment.

Ofwat said it was allowing Bristol Water to invest more than £244m during the next five years to benefit 185,000 customers in the Bristol area during the next five years.

The bulk of this money – £140m – will be used to replace 335km (209 miles) of water mains to help maintain a reliable supply of water and repair 39km (24 miles) of trunk mains to reduce problems with discoloured water. Funding will be used to safeguard a key water treatment works and pumping station from flooding which will help to protect supply for more than 90,000 consumers; reduce leakage levels by nearly 10 per cent to help meet the demand from 26,000 new properties; and invest more than £8m on preparatory work for a new reservoir at Cheddar to meet future demand.

Bristol Water had asked for permission to increase average bills to £202 by 2015, which would have allowed £319m for new investment.

Bristol Water spokesman Jeremy Williams said: "Bristol Water is carefully studying Ofwat's final determination of its price limits and service obligations for the next five years.

"The implications are so important for customers that the company will not make any snap judgements. Instead, it will take all the time necessary to analyse the regulator's decisions before making any response."

Bristol Water has until January 26 to accept the regulator's decision or to ask Ofwat to refer it to the Competition Commission for review.

The new price limits become effective in April next year. If there is a referral to the Competition Commission, prices could be adjusted from 2011 onwards.