Essex and Suffolk Water bills will drop by an average of 13 per cent - or £20 - next year and they will stay at that level in real terms until 2005.
The company is said to be examining the implications of the cut - ordered by OFWAT, the water regulator - with a ''fine toothcomb".
It says it is too early to measure any threat to the 750 jobs in the operation which are spread over Essex, Suffolk and parts of Norfolk.
Regulator, Ian Byatt, suggests that average water bills in the area, for supply only, will reduce by £20 to £108 a year.
Anglian Water, which supplies water in some parts of mid-Essex, will also have to cut their bills by £30 over the same period to £247, but that cost includes waste water disposal as well.
John Cuthbert, managing director of Chelmsford-based Essex and Suffolk Water, said customers will be pleased.
But he added: ''We serve one of the driest regions of the country with a growing population.
Delivering top quality service and standards within the price framework the regulator demands will be a difficult challenge.''
Mr Byatt says water companies are now more efficient than ever and he is passing on half the benefits to customers by lowering the prices.
Mr Cuthbert says: ''We need to look at the small print of the regulator's announcement to determine what this means."
He thinks there is a chance the move could be referred to the Competition Commission.
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