The report also contains information on companies' performance in safeguarding the environment and providing good quality water.

Ofwat's Head of Consumer Affairs Sue Cox said:

"I am pleased to see that companies are generally delivering on the promises that they made to their consumers to maintain good service levels and provide improvements where necessary. Nearly £1 billion was included in our price limits for 2005-10 to allow a significant reduction in flooding from sewers which consumers are already beginning to benefit from."

For the first time in seven years four water companies in the south of England introduced water restrictions in 2005-06. Following a second dry winter a further three companies imposed restrictions in 2006-07.

While the restrictions have been unwelcome, they have enabled companies to carry on providing consumers with a continued supply of water. Upgrading systems to avoid hosepipe bans in all circumstances would be extremely costly and add significantly to customers' bills.

Ofwat is investigating three companies for their poor consumer performance. It has published its intention to fine Southern Water, Severn Trent Water and Thames Water. Ofwat cannot say what future regulatory action will be required, including the scale of the penalties, until the investigations are complete.

Ms Cox said:

"I recognise that the performance problems in three companies have raised concerns among consumers. Our aim is to make sure that consumers' interests are protected and we will take whatever action is necessary when a company's performance falls below the level we consider is acceptable."