Households could face a hike in water bills during droughts under new plans
The proposals could come into force from April if approved in the coming weeks
Suppliers could introduce “surge pricing” when water becomes scarce, with the changes designed to encourage households to cut back on their water use.
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The proposals, which could come into force from April if Ofwat gives them final approval in the coming weeks, would allow companies to adjust prices depending on the weather and the amount of water being used.
The scheme would rely on households having smart meters, which would allow suppliers to monitor water consumption, the Telegraph reported.
The plans come after Andy Burnham announced a £65 million package to help farmers deal with the impact of drought on Saturday.
Mr Burnham criticised water companies on Thursday, accusing them of treating customers "as a blank cheque".
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Similar pricing schemes have already been tested in parts of the country, with the biggest trial involving around 14,000 Anglian Water households in Lincoln and Norwich.
It comes after Ofwat provisionally approved an extra £3.4 billion in spending by water companies, which could lead to millions of households seeing their bills rise.
The regulator has already permitted water firms to increase bills by 36% between 2025 and 2030.
A government representative said: "This Government is committed to championing consumers and protecting households from cost of living pressures.
“We have already ring-fenced money earmarked for new infrastructure so it can only be spent on fixing the problems, and will go further by fundamentally reforming the water sector so that it works for the public, keeping bills as low as they can be.
“Water companies are trialling new charging structures which must, as promised, make bills fairer and more affordable while encouraging greater water efficiency.”
Ofwat have stressed that no final decision has yet been made on the proposals.
The regulator added: “The efficient use of water is the is in the best interests of everyone, including businesses.
"The options we are progressing would support greater consideration of water scarcity and efficiency by water companies when setting their charges, and encourage more tariff innovation.
"We recently carried out a period of consultation on the proposals and will reach a final decision in the near future."