UPDATE 1-UK watchdog criticises water companies over spending plans

(Adds Yorkshire Water response)

July 4 (Reuters) - Britain's water industry regulator on Thursday criticised spending plans from four water companies to cover the cost of their basic services from next year that would lead to higher charges for customers.

The Water Services Regulation Authority (Ofwat) said Anglian Water, Thames Water and Yorkshire Water had asked to be allowed to spend "significantly" more than they do currently on basic expenditure for wholesale water and/or wastewater services. The regulator said SES Water was also seeking increased costs for providing retail services.

Under Ofwat's price review system, the regulator expects water companies to make big improvements to efficiency by 2025 so they can provide better services for customers, protect and improve the environment, while at the same time keeping bills low.

The watchdog said after looking at the companies' plans it found a significant gap between its view of efficient costs for retail and wholesale costs, and the four companies' proposals.

"We are disappointed that revised proposals from Anglian Water, SES Water, Thames Water, and Yorkshire Water have not yet risen to the challenge we have set them," Ofwat Senior Director David Black said in a statement.

Black said the regulator had written to the four companies to allow them additional time to reconsider.

Anglian Water said in response its cost plan was developed after talking to customers.

"As the company serving the driest and one of the fastest growing parts of the country, we're confident our plan is the right one to ensure a sustainable future for our region," the company said in an email.

Yorkshire Water said it had developed a robust business plan.

"We are undertaking analysis on the figures which Ofwat have provided to us and will remain in dialogue with them over the coming weeks," Nevil Muncaster, Director of Asset Management at Yorkshire Water, said.

Thames Water did not immediately respond to requests for comment. SES Water could not immediately be reached for comment.

Ofwat will announce its draft decisions for fourteen water companies on July 18, including setting out its views on companies' proposed costs in full.

The watchdog's statement on Thursday did not cover additional investment to improve services.

All of the companies have until 30 August 2019 to respond.

Other water utilities in the country include South Staffordshire, Bristol, Severn Trent, Essex and Sussex , Portsmouth and United Utilities. (Reporting by Tanishaa Nadkar and Noor Zainab Hussain in Bengaluru; Editing by Arun Koyyur and Jane Merriman)