By Sarah Young
LONDON (Reuters) -Britain's Thames Water said on Monday it would spend an extra 1.1 billion pounds ($1.4 billion) on tackling sewage spills and fixing leaks to try to persuade the regulator to allow it to hike bills by 40%.
The company wants to raise bills to stabilise its finances as it struggles under the weight of 16 billion pounds of debt, but Ofwat, the regulator, wants to minimise the bill increases.
Thames Water said it would increase investment in environmental projects if allowed to impose a 40% jump in prices it had already proposed for the 2025-2030 period.
It added it could spend another 1.9 billion pounds on environmental projects, but that would result in a 44% rise in bills.
Thames Water, which supplies about a quarter of the British population, was thrown into crisis last month when its owners said they would not provide a 500-million pound equity lifeline.
Britain's privatised water industry has come under scrutiny after sewage spills have jumped, after some owners had been paid big dividends and had loaded companies with debt.
Public outrage over pollution and the prospect of higher bills has put the regulator under pressure to ensure consumers get value for money, but investors say they still need to make returns, resulting in a stand-off over Thames Water.
"We will continue to discuss this with our regulators and stakeholders," Chief Executive Chris Weston said.
Ofwat said on Monday the industry's statutory commitments had been clarified, and therefore companies had needed to revise their plans.
"We note that Thames Water has now published an update to its business plan. We will publish our draft view on companies' plans on 12 June," Ofwat said.
Thames Water hopes its plan will be a basis to secure equity investment from existing or new shareholders.
Its parent company, Kemble, said earlier in April it had defaulted on its debt after missing an interest payment, raising the prospect of collapse.
Finance Minister Jeremy Hunt said last week that Thames Water must sort out its own issues, warning that Britain would never insure investors against bad decisions.
The 40% bill rise proposed by Thames Water compares to the 31% increase proposed on average by the other water companies in Britain for the five-year period.
Thames Water's nine shareholders include Ontario Municipal Employees Retirement System, the UK's Universities Superannuation Scheme, a unit of the Abu Dhabi Investment Authority and the China Investment Corporation.
($1 = 0.8077 pounds)