Water customers face having to pay an extra £40 a year to suppliers if the industry is hit by a fresh ratings downgrade, the head of the industry's main lobbying group has warned.
Sky News understands that David Henderson, chief executive of Water UK, made the remark in a speech to a conference organised by Moody's, the ratings agency, this week.
Any prospect of further bill increases would anger ministers at a time when tackling the cost of living has become the most pressing priority for Andy Burnham's new administration.
Moody's warned this week that a further ratings downgrade for the industry was on the cards amid continuing uncertainty about its future regulatory framework - with the new government yet to set out its plans well over a year after Sir Keir Starmer pledged to abolish Ofwat.
A downgrade by the ratings agency - which did not change its recommendation this week - would entail higher borrowing costs for companies.
Mr Henderson told Sky News: "Prolonged uncertainty risks another downgrade, which could add up to £40 a year to water bills.
"We urgently need the government to appoint the leadership of the new regulator and set out how the new system will work."
In his speech this week, he added: "Nobody in government, or anyone else for that matter, wants higher bills - but continuing to leave fundamental questions [about regulation] unanswered risks exactly that.
He urged Mr Burnham to appoint the leadership of the new water regulator before Christmas, with a chair-designate and a shadow board, as well as setting out new objectives for Ofwat in the intervening period.
Water bosses have been pleading with ministers for clarity over Mr Burnham's repeated references to wanting "greater public control" of the industry.
In recent weeks, South East Water has been forced to postpone a £200m bond issue, while Pennon launched a £550m rights issue to raise funds for infrastructure investment.
The sector's biggest player, Thames Water, remains at risk of being placed into a Special Administration Regime if a revised rescue proposal from the company's senior creditors is rejected by ministers.
(c) Sky News 2026: Water bills face £40 hike if sector is downgraded, industry chief warns
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