The average Canberra household can expect an increase in water charges of at least 10 per cent next year as Actew Water tries to recoup $268 million in lost revenue and pay for capital works, including the Cotter dam.
In its latest submission to the Independent Competition and Regulatory Commission, the government-owned organisation recommends fixed water charges be increased from about $100 to $130 per year from July 2013.
The document also suggests that the point at which households start paying higher usage charges be reduced from 200 kilolitres per year to 120 kilolitres.
But Actew's managing director Mark Sullivan has conceded it will be difficult to explain to Canberrans the need to recoup the revenue shortfall after they followed instructions and reduced their water consumption during the drought.
The ICRC is conducting a review of water and sewerage services that will determine what prices Actew will charge from July 1 next year up until 2018.
Mr Sullivan said if the ICRC adopts the recommendations in the submission, the average household water bill, which was about $960 in 2010-11, would increase by at least 10 per cent.
Mr Sullivan said a ''double number'' price rise was necessary to recover the cost of higher than forecast capital expenditure and lower than forecast water consumption over the past four years, and to cover a likely increase in the organisation's operating costs over the next five years.
Actew's submission says the ICRC underestimated the amount of expenditure on infrastructure such as the dam and the Murrumbidgee to Googong pipeline by about 67 per cent in its 2008 price determination.
The document says drought and water restrictions, followed by heavy rain, meant the commission had overestimated the amount of water households would consume by about 30 per cent.
But Mr Sullivan said explaining the revenue recovery to Canberrans, who believed they had done the right thing by saving water, would be difficult.
''I find it very difficult to justify it,'' he said.
''It's why we argue so strongly against five-year water pricing.
''Because if you hadn't have had five-year water pricing, it wouldn't have happened.''
Mr Sullivan said a review and price adjustment last year was also ''no longer holding up very well''.
Actew's submission recommends the ICRC move back to an annual price ''reset'' for water to avoid the price shocks that could result from the current five year setting of charges.
Mr Sullivan said although Actew's submission also suggested reducing the level at which higher charges took effect, the 120 kilolitres would still cover basic indoor water use for most households.
ACT Treasurer Andrew Barr said although the ICRC determined water prices independently, the government had argued for more flexibility in the setting of charges.
''Setting the prices over a five-year period makes it tricky to respond to drought or record breaking rain - both of which we've seen in the ACT in recent years - and the corresponding effect on Actew's revenue,'' he said.
Mr Barr said the government had also called for greater pricing choice for consumers.