Britain's competition watchdog said on Friday that Pennon Group's acquisition of Sutton and East Surrey (SES) Water could hurt the water regulator's ability to make comparisons between water companies.

The Competition & Markets Authority (CMA) said the deal could undermine the authority of Ofwat, the water regulator for England and Wales, by removing SES from its dataset and reducing the number of comparators available to estimate cost allowances and set service quality targets.

The CMA, which started looking into the deal in January, will refer it to a in-depth investigation unless its accepts the undertakings provided Pennon, the company said in a statement.

Pennon has until May 13 to offer its undertakings to the CMA.

Pennon had bought the holding company of SES Water in January, expanding its services to the region for an enterprise value of 380 million pounds (about $482 million).

The company already owns South West Water, Bristol Water and Bournemouth Water.

SES Water is a drinking water only supplier in the South East, supplying 160 million litres of clean water every day to around 745,000 customers across East Surrey, West Sussex, West Kent and South London, according to Pennon's website.

(Reporting by Radhika Anilkumar and Prerna Bedi in Bengaluru; Editing by Savio D'Souza and Varun H K)