Thames Water has reported a slide in half-year profits as more recession-hit customers struggled to pay their bills.
The London and Thames Valley supplier said customer bad debts grew £8 million on a year earlier to £33.4 million in the six months to September 30 and were expected to reach £70 million by its year end.
It was also hit by declining consumption during the wet summer and earlier hosepipe ban, but revenues still improved 6% to £902.7 million after it was allowed by the regulator to increase prices by 6.7% in April.
Underlying profits declined by 6.5% to £311.8 million and bottom-line profit fell by 13% to £127.6 million.
Thames Water, which has 14 million customers, attracted criticism earlier this year for paying a £74.5 million dividend to its shareholders but no tax. The business, which is controlled by a private consortium of investors, said it continued to benefit from allowances on investment, meaning it can delay its tax bill to a later period. Thames Water now has nearly £1 billion of deferred tax liabilities on its balance sheet.
Chief executive Martin Baggs said the company had now spent £17 billion on improvements to its infrastructure since privatisation in 1989.
He added: "As a direct result of this investment, the quality of our customers' tap water and the environmental compliance of our 350 sewage works are better than they've ever been, and leakage from our 20,000 mile network of water mains remains close to its lowest-ever level. This transformation would never have been possible under public ownership."
The group said it had spent £69.7 million in the period on developing the Thames Tideway Tunnel. The cost of the £4.1 billion sewer aimed at preventing pollution of the River Thames is expected to put further pressure on household water bills.
Thames Water customers were warned in October that bills are likely to rise by as much as £80 a year to help pay for the so-called "supersewer". It also said costs had escalated over the six months period because of higher energy prices and inflation.
The company said it was on track to hit its targets to reduce leaks for the seventh year, despite the challenge of the Olympics, which limited the amount of work it could do on the street.