David Norman, chairman of the Jersey New Waterworks Company, said bills are to rise by 4.5% this year.

The company says it needs cash to pay for �50m of new projects, to keep up its services and to extend its supply network.

It predicts a further increase in net debt of about �2m in the coming year.

Jersey's Val de la Mare reservoir is to be extended to cope with the island's need for more water storage.

A contingency fund is being set aside for the project, which the firm said could be 20 years away.

The firm is setting aside �1m a year from 2007.