Water bills will fall by an average of 5 per cent – around £20 – over the next five years the regulator Ofwat has ruled.
The drop will see average bills come down from £396 to £376 by the end of the decade. But several water companies expect the ruling to hit their profits.
Jonson Cox, chairman of Ofwat, tells the Daily Telegraph that the regulator aimed to deliver a "challenging but fair outcome". He added: "We are bringing down bills so customers can expect value for money, while investors can earn a fair return."
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Ofwat has considered the plans submitted last year by the 18 water and sewerage companies outlining proposed costs and prices. Firms will invest more than £44bn in the next five years to improve services, it said.
The regulator has ordered utility firms to improve services by tackling water leakage, supply interruptions and sewerage water flooding of properties.
Chief executive Cathryn Ross said: "With bills held down by 5 per cent and service driven up over the next five years, customers will get more and pay less.”
The lower water bills are expected to hit profits at the three listed water utilities: Severn Trent, United Utilities and Pennon, which are worth a combined £14bn.
The water firms have two months to accept Ofwat's decision, or seek a referral to the Competition and Markets Authority.
