A Thames Water spokesman said: “We’re disappointed in Ofwat’s decision, which we don’t believe is in the best interests of our customers or the environment. South East England is a water-stressed region and we need to act now to protect water resources.

“Smart meters are critical in helping us to reduce and identify leaks and meet the unprecedented demand for water, while giving customers greater control over their water use and bills.”

Thames Water planned to pay for the smart meter roll-out using money from a £2.7bn funding scheme set up by Ofwat to support industry investment in green projects. The scheme is designed to allow suppliers to reclaim the cash through household bills.

Around £72m was set aside for Thames Water’s flagship smart meter strategy, although this depended on the supplier meeting strict conditions that have not been met, the Water Report first reported.

This included targets to reduce leaks, which hit a five-year high earlier this year.

The spokesman added: “This bid was approved by Ofwat and our ability to recover the £72m allowance was conditional on us delivering at least 98pc of our leakage performance commitment between the 2020-2025 period.

“While we met our leakage target in years one and two, the impact of drought and freeze-thaw events over the last year meant we fell short of our year three target.”

Ofwat declined to comment.

The Telegraph revealed in August that the company was trying to doorstep unsuspecting customers to install devices.