Water companies have been warned they must offer value for money or risk a backlash of complaints from customers.
In its annual report, the Consumer Council for Water (CCWater) revealed that written complaints had reduced by 7.4% in England and Wales.
This was down for the fifth year in a row while complaints by telephone were also down.
But the water watchdog's chief executive was concerned that the rate at which complaints had fallen had slowed.
Tony Smith said that "the poorest performers remain too far behind the rest of the industry."
Billing and charges remained the biggest area of concern for customers, the watchdog said, accounting for over 56% of the total 150,942 written complaints made in the year to 31 March 2013.
Worst performer was Southern Water, which saw a 77% increase in written complaints compared with the previous year.
South East Water's number of complaints remained twice the industry average despite a reduction of nearly 33%.
Thames Water, the country's biggest water company, managed a 6.5% reduction in complaints but it remained the only company to fall short of CCWater's target to resolve 90% of complaints first time.
CCwater said it continues to meet regularly with water companies to put pressure on them to prioritise customer service.
It has told the regulator, Ofwat, there "needs to be stronger penalties for water companies who are failing to satisfy the expectations of their customers."
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