Huge 8% rise in Thames Water bills blocked by watchdog because hike was not 'justified' yet energy prices still soar Ofwat says firm did not provide prove that £29 hike was needed Signs of regulator flexing muscle ahead of talks for price rises for 2015-20 This week ministers wrote to water firms to ask them to reduce costs The water watchdog today blocked a huge eight per cent rise in Thames Water bills, telling the firm its demands for more money from customers was not justified. Ofwat flexed its regulatory muscle to block the increase, insisting an already-agreed rise of 1.4 per cent above inflation was sufficient. And as it urged companies to consider even freezing bills, comparisons were made with energy regulator Ofgem which is powerless to stop gas and electricity price hikes of up to 10 per cent. Vetoed: Thames Water wanted to impose an extra increase on bills of eight per cent, but regulator Ofwat said there was no evidence it was necessary Thames Water applied to Ofwat in August to impose the larger than expected increase, which would add £29 to bills in 2014-15. The regulator ordered the firm to prove why the extra money was needed at a time when families are feeling the pinch, but it failed to do so. Ofwat's chief regulation officer Sonia Brown said: 'We said we would challenge Thames' application, in the interests of customers. We did just that and on the evidence provided we are not convinced that an extra bill increase is justified. Thames Water could now launch an appeal against the decision. If unchallenged, Thames could still increase bills by 1.5 per cent above inflation from next April. Water regulator Ofwat sets price rises for water firms every five years. In 2009 it agreed annual rises with all firms for 2010-15. If a firm wants to go beyond those rises, as Thames Water wanted to, Ofwat has the power to block it. However, the energy industry is less tightly-regulated. Gas and electricity firms can hike bills by as much as they like, with Ofgem powerless to intervene. In part this is because customers are able to switch suppliers, which they cannot do with water. Ofgem said it 'does not control the prices customers pay - this is down to energy suppliers'. 'We regulate the prices energy companies charge for transporting energy to your home through pipes and wires,' a spokesman added. Ofgem is working to make retail market competition more effective by introducing a range of reforms to make it easier for consumers to engage in the energy market. As well as reforms to create a level playing field so small suppliers can compete more effectively in the market. It is a sign that Ofwat is preparing to go to battle with water firms ahead of the next round of negotiations over price rises for 2015-20 which start next month. The government has ordered Ofwat to "get under the skin" of suppliers to ensure bills are not increased simply to maximise profits. Thames had argued that since the planned rise was agreed in 2009 the company had 'experienced changes to certain specific costs that were not taken account of by Ofwat' at the time. Earlier this week water companies were urged by ministers to scrap planned hikes in bills to ease the pressure on family finances. The coalition has been under fire for their failure to prevent major rises in gas and electricity bills this winter by the Big Six firms who hiked prices by an average of 9.1 per cent. However, unlike the water industry Ofgem does not have the power to block big rises in energy bills. Environment Secretary Owen Paterson has asked the industry to try to reduce costs - and will promise bill payers a "fair deal" by writing to the companies to stress "the tough times that households are facing and the crucial role that the industry can play to bring costs down."