£50 cut for highest water bills
South West Water's customers, mainly in Devon and Cornwall, currently pay more than consumers elsewhere in the UK because of the cost of keeping the area's extensive coastline clean.
The legislation, which peers could not amend because it was designated a money Bill, was passed by the Lords without votes.
But Labour environment spokesman Lord Knight of Weymouth complained it was "ridiculous" that debate on it did not begin until 11.52pm on Tuesday.
He described it as a "discourtesy" to the House and said the Bill was the "wrong Bill" as more comprehensive legislation was needed.
Environment minister Lord Taylor of Holbeach said the timing was "unsociable" but the quality of the debate had "not been affected by the lateness of the hour".
The Bill also means the Government will be able to limit the cost to London residents of building a new Thames Tunnel super sewer to carry the capital's waste water.
Household bills were tipped to rise steeply as customers funded the much-needed infrastructure project, but ministers can now give financial support to Thames Water to keep down costs to customers.