Bristol Water may be able to raise its prices over the next two years after a draft decision by regulator Ofwat.
The company will now launch a public consultation on the possible rises, and hold further discussions with the regulator.
A spokesman said: "Ofwat's decision provides for a real increase in average prices from April 2008 of 4.6% followed by a real decrease of 2.0% in 2009/10."
Ofwat will issue its final determination by 14 December.
If confirmed, the new price limits will take effect from 1st April 2008 and April 2009.
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