Wannon Water’s proposed hike – the second highest in the state - would add an average of $70 to a homeowner’s bill on top of inflation increases and $35 for renters from July 1. 

The price rise comes after a four-year $70 government rebate scheme ends in June.

The Essential Service Commission’s draft decision only approved a $331.5m five-year revenue plan – 6.7 per cent lower than Wannon Water proposed – and would mean it would have to absorb about $23.8m in costs.

Wannon Water has until May 8 to make another submission for review, but managing director Andrew Jeffers said no decisions had been made on whether it would challenge or accept the decision.

Consumer Action Law Centre policy officer Patrick Sloyan, who was in Warrnambool on Tuesday for a commission forum, said customers would have taken a “big hit” financially under the original proposal, especially those who were already struggling to pay for their utility bills.

The commission’s draft review urges Wannon Water to manage increases in labour cost above inflation through efficiency improvements or increased revenue from customer growth.

“We found little evidence the corporation has sought to minimise costs or prices on behalf of its customers,” the review states.

“In percentage terms, our proposed reductions are the largest of any water corporation in our price review.

“This indicated Wannon Water’s proposed prices were not based on reasonable assumptions about prudent and efficient expenditure.”

The commission’s water director Marcus Crudden said it believed average homeowners’s water bills should remain about $1100 plus inflation.

“We think they can get by on some slightly lower operating and capital expenditure than proposed and this is a draft decision and they do get a chance to come back on some of that and further argue their case,” he said.

Of the 17 water corporations that it reviewed, Mr Crudden said Wannon Water was one of only four that had proposed a rise on top of inflation.

Mr Jeffers said affordability was high on its priority and pointed out that it had reduced water bills over the past five years by 5.9 per cent.

“The ESC is an independent pricing regulator, so we’ve put something forward and they’ve said ‘well we think you can still do all that for less cost’. So that’s what I’d call a positive conflict situation,” he said.

“We’re doing what we should do and have a good hard look at whether we can identify additional savings over and above what we already have identified in our pricing submission and come back to the commission.”

He said in the past few weeks it had been looking at areas of discretionary expenditure, such as the traineeship program.