The regulator confirmed that companies can charge customers above previously agreed levels to fund projects including new housing infrastructure, data‑centre provision, increased capacity and improvements to drinking‑water safety.
The decision comes as more than two‑thirds of Britain is classified as being in drought, with around half of households currently affected by hosepipe restrictions.
The five companies collectively serve around 20 million customers, meaning the additional charges will affect households across large parts of the country.
Severn Trent, Southern Water, Thames Water, Wessex Water and South East Water have all been given permission to increase bills.
Southern Water, Thames Water and South East Water currently have partial or full hosepipe bans in place.
Southern Water customers will face the largest increase, with annual bills rising by an additional £43 from 2027, falling slightly to £37 by 2029.
Thames Water and Severn Trent customers will see an extra £3 added in 2027, rising to £5 by 2029.
Wessex Water customers will face an additional £4 in 2027, increasing to £7 by 2029. South East Water customers will see an extra £1 added in 2029.
Environment Secretary Angela Eagle acknowledged the pressure on households as water companies receive permission to raise charges.
Water bills UK: Ofwat approves £3.4billion spending and bill increases
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She said years of underinvestment and weak regulation had contributed to the current situation, adding that infrastructure funding had been ring‑fenced to ensure it is used only to address existing problems.
Ms Eagle said planned reforms would deliver “higher standards, better performance and cleaner waterways”.