NORTHUMBRIAN Water said it had achieved significant progress after higher prices in its regulated business pushed half-year profits up by 57 per cent.

The group, which has more than four million customers in the region, increased bills in April after telling watchdog Ofwat it faced higher levels of customer bad debt, as well as greater than expected costs from water quality monitoring.

The earlier price rise helped turnover to £286.5m, against £261.1m last time. Profits were £49.4m in the six months to September 30.

Further price rises proposed by Ofwat for the next five years will leave the average water and sewerage bill in the North-East at £260 in 2010, which represents a £28 rise - still among the lowest in the country.

Managing director John Cuthbert said: "We have made significant progress in our operating performance, in securing our financial position and in improving our services to customers and our protection of the environment."

Mr Cuthbert said the recent Ofwat review on price limits for the next five years appeared more acceptable than earlier proposals from the regulator.

He said the price rises represented a return to a more realistic pricing level following a 22 per cent rates cut imposed by Ofwat four years ago.

He said: "The fact that prices have risen and will continue to go up probably suggests those original cuts were too drastic."

The price rises will enable the company to put more investment into tackling complaints and alleviating flooding from sewers.

The extra revenue will also be spent on meeting demand from new housing in Essex and Suffolk.

Northumbrian Water still has debts of £1.87bn, although Ofwat said in July it was happy the company was able to raise finance and to fund investment programmes.

During the first half, the group said it continued to provide customers with excellent levels of service, with water quality among the best in the UK. It serves 2.6 million people in the North with water and sewerage services and 1.7 million people in the South with water services.

Shareholders will receive an interim dividend of 2.87p a share, an increase of just over three per cent.