Thames Tideway, the private company building the British capital’s new sewer, is seeking to raise Londoners’ water bills to cope with an extra £233m costs as a result of the Covid-19 pandemic.

Thames Water’s customers are currently paying for the £4.1bn cost of the tunnel through an £18 a year surcharge on their water bills, which could rise to between £20 and £25 if water regulator Ofwat agrees to the plans.

Construction of the tunnel, which will run for 16 miles under the river Thames and stop billions of litres of sewage from pouring into the river every year, is more than half way completed.

But the privately financed company developing the tunnel was forced to suspend work during lockdown last year, delaying completion of the project by about nine months to early 2025.

A consultation finished this week and a decision on the customer surcharge increase is expected by the autumn. Ofwat says it is investigating the impact of the pandemic, “which might mean a modest increase in cost”.

Tideway said that the £20 to £25 surcharge was within the range estimated for the project when it was agreed in 2015 “despite the significant impacts of the pandemic”.

The tunnel has become a test case for how the UK should harness private sector investment in infrastructure following the abolition of the private finance initiative three years ago. The government is planning to pass legislation in the autumn that would pave the way for a similar model to be used for a £20bn nuclear power plant at Sizewell in Suffolk.

Although the London tunnel is still being built, the developer is already receiving an income, paid for out of customer’s water bills.

Tideway has deferred £57.7m in interest payments to shareholders this year, recognising the uncertainties caused by the pandemic. Over the life of the project so far, investors have received £193.2m in interest on their loans as well as £54.5m in capital repayments on £1.3bn of equity and loans since 2015.

Nick Hood, analyst at Opus Restructuring, said the interest payments were in effect dividends, and “excessive” given that investors were bearing very little risk as the project is underwritten by taxpayers and paid for by consumers.

“It has kept the project off balance sheet for Thames Water and the government but is ultimately proving expensive for consumers, who are having to pay for a service, even before they receive it,” he said.

“We are also having to pay two sets of management fees — to Thames Water and to Thames Tideway — which is not insignificant,” he added.

Andy Mitchell, chief executive of the project, received a total pay package of £863,000 in the year to March 31, down from £1.6m for the previous 12 month period, while Mark Sneesby, chief operating officer, took £549,000, down from £1.1m, the annual report said. The board includes former Mitie chief executive Ruby McGregor-Smith and John Holland-Kaye, the chief executive of Heathrow airport.

Mitchell said last week as Tideways released its annual report that the company had met “a whole new set of challenges” this year. “This was a feat of meticulous planning and care and I pay tribute to our teams, including our contractors, for what they achieved.”

When complete in 2025, the tunnel will be leased to Thames Water to operate and maintained on a 125-year concession at a price set by regulator Ofwat.