Bristol Water must reduce its average household water bills by 16% by 2020.
It was previously told by regulator Ofwat to cut its bills by 19% but the water company challenged the order and it was referred to the Competition and Markets Authority (CMA).
Bristol Water argued Ofwat’s determination would not leave it with sufficient funds to run the business and invest and that higher prices were needed.
However the CMA said the company must cut bills by 16% following further assessment.
Ofwat expects the decision to reduce average bills to £160 per year compared to £187 had Bristol Water’s 6% reduction been accepted.
Cathryn Ross, Ofwat’s Chief Executive said: “While the CMA has slightly reduced the level of bill reductions we set, this is still an excellent result for Bristol Water’s customers. It is critical that Bristol Water continues to deliver a safe and secure water service to its customers.
“We hope that Bristol Water will now review its approach to our five-yearly price reviews and take forward these lessons at future reviews.”
Bristol Water said it will be unable to build some of its proposed schemes, including the Cheddar Two Reservoir before 2020 but has “more appropriate funding to deliver other key improvements”.
CEO Luis Garcia added: “It has been worthwhile going to the CMA as this is an improved outcome that we are confident will better serve Bristol Water’s customers by allowing us to maintain our network and invest in essential improvements.”