The top water adviser to Julia Gillard and the state premiers is considering a new round of reforms.
These include linking prices to dam storage levels and opening the water supply in cities and towns to further competition.
The National Water Commission is conducting research on the measures as it does a landmark review of the national water initiative - the 2004 inter-governmental deal to overhaul management of water resources - that is due to be released in the middle of next year.
The NWC’s acting chief executive, James Cameron, said there was a window of opportunity to identify and implement reform to urban water as Australia moved out of the crisis caused by a decade of drought.
“Scarcity pricing” - where water bills rise when storage levels are low - is part of the review.
The NWC is also considering measures to boost competition among urban water suppliers, a move that could trigger the dismantling of public monopolies that control supplies in big dams, and greater private sector involvement.
The NWC has outlined its reform push in a submission to the Productivity Commission, which the government has commissioned to investigate the country’s urban water systems.
Mr Cameron said further reform would benefit consumers.
“The upside to the consumer is that they will have confidence that their water supply is secure,” he told The Australian.
“They will have the confidence that their water is being delivered at the most efficient cost, that the prices that they eventually pay for that supply are the lowest possible prices for delivering the sorts of security, health and sustainability outcomes that as a community as a whole we are seeking.”
Rising water bills and skyrocketing electricity costs are driving up water transport and treatment costs further, especially when energy-guzzling desalination plants are in use.
Mr Cameron stressed that the NWC had not reached a position on scarcity pricing.
But he confirmed work was under way into scarcity pricing, which advocates say brings demand for water into line with the available supply.
Mr Cameron said now was a good time to step up the pace of reform after a period in which governments had commissioned desalination plants to drought-proof the biggest cities.
“We are in a position now, with the welcome rains that have occurred in recent years, to make sure that future investment decisions are made in a way that gives the community as a whole, as well as governments, confidence that we have efficient investment decisions delivering security, delivering environmental sustainability and delivering core health needs,” he said.
Mr Cameron said the national water initiative of 2004 was based on commitments that were “relatively light” and tackled “a relative narrow set of considerations”.
He pointed to population growth and climate change - as well as less predictable rainfall patterns - as reasons for further reform. The Treasury brief to the incoming government said that beyond the reforms to salvage the ailing Murray-Darling Basin, a “new, more ambitious reform agenda” was needed.
Treasury said urban water pricing should be reformed, urban water monopolies broken up and new entrants given access to water and sewerage systems.
Water Services Association of Australia executive director Ross Young said that “a lot more work needs to be done” before scarcity pricing could be rolled out so that it was effective in reducing water consumption and would not cause financial hardship to vulnerable consumers.
