A demand to hike Londoners’ water bills by about £30 next year could be blocked by the regulator, as the political battle over the controversial super sewer continued this week.

Thames Water has warned the underwater tunnel - to be part built from Carnwath Road, Fulham - will result in a one-off surcharge of £29 on top of annual hikes of up to £100 between 2015-2020.

But Ofwat, the water regulator, accused the company of under-investing on sewer treatment and failed to adequately maintain its wastewater network and it says it is looking at ways to penalise the firm by stopping the rise or even lowering bills.

“We have been clear that we would challenge Thames’ proposed bill increase,” Sonia Brown, Ofwat’s chief regulation officer, said, “so we are looking to see if there are areas where we can claim money back for customers.”

The news came as The Planning Inspectorate began scrutinising Thames Water’s 50,000-page planning application for the 20-mile, £4.2million tunnel, with a plea from Hammersmith and Fulham Council leader Nick Botterill for it to reject the scheme.

He warned Fulham residents faced a ‘decade of sewer misery’ and said there were greener, cheaper and less disruptive ways of cleaning up the Thames. But the Government does not share Mr Botterill’s concerns, and in a letter to green group Thames Tunnel Now earlier this year, environment secretary Richard Benyon wrote that the project offered ‘the most timely, cost-effective and comprehensive’ solution to the river’s pollution problem.

Debbie Leach, chairman of Thames Tunnel Now, said a similar endorsement from mayor Boris Johnson proved the scheme was needed and urged planners to give it the green light.

She said: “The critics have consistently failed to come up with any viable alternative scheme that meets both the public health and the environmental objectives set down by the government and the EU. The time for arguments over the principle of the Tunnel is well and truly over. We must get on with planning and building it as soon as possible in order to bring to an end the national disgrace which is the condition of London’s river.”

Mr Botterill said: “It is good news that the water regulator is starting to wake up to Thames Water’s greed and mismanagement of London’s water supply. But we now need the government to realise that the super sewer is a costly, old fashioned concrete monster that is of more benefit to Thames Water shareholders than the river or Londoners.”

The case is set to be decided by the Government next year.