THAMES Water bills could rise by 17 per cent over the next five years to fund the replacement of aging water pipes in London.

The capital's water supplier claims it needs the extra cash to replace 1,300 miles of pipes by 2010, despite announcing a pre-tax profit of £435.1m.

If the price hike is approved by regulator Ofwat, bills for 8.5 million customers would shoot up from 81p to just under £1 per day.

Thames Water said replacing the network of pipes in London, about 20 per cent of which are more than 150 years old, would cut leakage by a third.

The company also plans to build two tunnels which will reduce overflows from London's sewerage system to cut pollution in the Thames and River Lea.

A Thames Water statement said: "If the company does not get approval to make this essential investment, the delay will only keep bills artificially low in the short term, as customers will pay more in the long term to maintain deteriorating assets.

"The increased cost of borrowing, combined with rising levels of customer bad debt and a sharp decline in commercial and metered demand for water is having a direct impact on the business.

"This reduction reflects the tough financial pressures Thames Water faces in the current economic climate."

Thames Water supplies 13.6 million customers in London and the Thames Valley.