WATER bills across Dorset and parts of the New Forest are being increased to fund vital maintenance work, companies warn today.

Draft business plans submitted by the local utilities to regulator Ofwat warn of price hikes well above inflation. The UK industry average is inflation plus 33 per cent.

Price rises will be capped by Ofwat. The limits will be set in November 2004. They will run from April 1 2005 to 2010.

Bournemouth & West Hampshire Water - which supplies up 482,000 people - warns that its average bill will rise by £102 per year to £125.

MD Tony Cooke said: "New cost pressures and obligations and decreasing scope for savings mean that prices will have to rise above inflation."

But he added: "We will have invested over £96 million (in today's prices) since 1995. This is 160 per cent of our after-tax profits over the same period.

"Despite this the average bill has reduced in real terms - ie against inflation - by 6.3 per cent."

Bournemouth & West Hampshire Water is part of Cascal, a joint venture between UK multinational Biwater and Dutch multiutility Nuon.

Wessex Water says its bills will need to go up by just over 12 per cent above inflation.

Wessex proposes to invest £750 million between 2005 and 2010, which is equivalent to £650 per household in its region.

The money will be spent on schemes to maintain and further improve drinking water quality, reduce flooding from sewers and improve discharges from storm overflows.

Wessex, which is owned by Malaysian group YTL, provides water to more than one million people and treats sewage from more than 2.5 million people across an area bounded by Christchurch, Weymouth, Minehead, Bristol and Salisbury.