AWG, the UK water utility, backed down from its threat to take Britain's water regulator to the Competition Commission over what it had claimed were "unfair" price cuts.
AWG, which owns Anglian Water, made the threat in December after the regulator rejected the group's request to increase customers' charges but allowed increases for two other water companies.
The company was not available for immediate comment. However, in a brief statement to the London Stock Exchange it said it had decided not to pursue the action.
"The company has noted the regulator's acknowledgement that there have been additional costs incurred which we expect to be taken into account in the future," it said.
The water regulator ordered all English and Welsh water companies to cut the average household bill by 12.3 per cent last April. Water companies have since complained that the price controls are threatening their ability to fund large investment programmes to improve water quality and protect the environment.
Anglian, together with Welsh Water and Tendring Hundred, asked for their cuts to be reduced because revenues would be lower than forecast as a result of surprisingly high numbers of customers switching to water meters.
Anglian also wanted more revenue to pay for tougher water quality monitoring, while Welsh Water cited increasing costs due to work needed on waste treatment and water quality projects.
Philip Fletcher, the water regulator, allowed modest increases for Welsh Water and Tendring Hundred but said the changes in Anglian's costs fell below the threshold at which he would consider re-setting price limits.