Under-performing water companies could face seven-figure fines while their customers could pay less on their bills under new rules set to be introduced next year.

Under a new scheme by industry watchdog Ofwat, the worst-performing water companies could be forced to hand over a proportion of their multi-million pound turnovers.

The new incentive scheme could be good news for Sussex residents but bad news for Southern Water and South East Water after they were named as two of the worst-performing firms in a national report this week.

However, consumer groups say the new rules don't go far enough and penalties for the worst performers should be tripled.

Under Ofwat's service incentive mechanism for the industry's latest price review next year, the ability of water firms to raise their water rates will be performance-related.

Firms with the poorest performance could face penalties the equivalent of 1% of their turnover.

In 2012/13, Southern Water had a turnover of £778 million and South East Water £207 million meaning the firms could face penalties of up to £8 million.

The water watchdog also said under-performing water firms would also be stopped from increasing rates to meet the cost of major projects - effectively meaning lower water bills for customers.

Earlier this week, Southern Water and South East Water were named as two of the worst performing water companies in the country.

The firms had the highest number of complaints per customer in the country at more than double the industry average of 49 complaints for every 10,000 connections.

The Ofwat criteria gives each firm a score based on the number of complaints a company receives and the results of consumer surveys.

For 2012/13, Southern scored the lowest of all water companies with 62 out of 100 under the SIM system with South East Water scoring 73.

Steve Hobbs, senior policy manager at the Consumer Council for Water, said: “We want Ofwat to firstly use all of its available teeth - it could penalise poor performing companies by 1 per cent of their costs.

“If this doesn't work, they should increase the penalty to 2 or 3 per cent.”

An Ofwat spokesman said: “If they are performing poorly and let their customers down, it is quite right their shareholders should pay and not their customers.

“In terms of the size of any penalty, it's too early to say but those companies who are performing well below the average SIM score can expect to be penalised.”

A Southern Water spokeswoman said the firm had just recorded its three best-ever SIM survey scores.

A South East Water spokeswoman said: “The Service Incentive Mechanism is measured by taking a range of factors into account, one of which is written complaints, and while we are working hard to make improvements to our written complaint levels we are performing much better in other areas measured as part of SIM, for example, customer satisfaction.”