An extraordinary general meeting between ACTEW's board and its two shareholders, Chief Minister Katy Gallagher and Treasurer Andrew Barr, ended dramatically on Monday with Mr Mackay resigning after 15 years with the organisation because of the "frenzy" in recent weeks over the under-reporting of Mr Sullivan's salary by $234,000.

After the meeting, Ms Gallagher indicated that ACTEW would renegotiate Mr Sullivan's $855,000 salary and put an end to bonuses for executives at the corporation which would now be subject to a full ''structural review''.

Mr Mackay later confirmed that board had accepted Mr Sullivan's offer of a new deal on Monday afternoon which also included entering into a new contract that removes his bonus payment.

The new package also reflected changes to Mr Sullivan's job which were expected with the looming completion of the big water security projects, including the enlarged Cotter Dam, that have been managed by Mr Sullivan.

Mr Mackay's resignation also includes his departure from ACTEW's half-owned gas and power utilities ActewAGL.

The government now wants the independent Remunerations Tribunal to have a role in setting executive pay, a new Statement of Corporate Intent to ''ensure the highest standard of transparency'' from ACTEW.

There will also be a ''structural review'' of ACTEW to ensure Canberra's water and sewerage services are delivered in the most ''efficient and effective'' way.

The government also threw its weight behind the independent regulator's recommendation of a reduction in water prices that would save the average Canberra household up to $230 each year.

Mr Mackay said he was not pushed to resign and Ms Gallagher said she did not try to convince him to stay when he told her on Friday of his intention to step down. Ms Gallagher said on Monday afternoon that she believed ''generational change'' and ''fresh eyes'' were needed at the water corporation.

After the meeting, Mr Mackay said he had "no expectation" of more resignations from the board and Mr Barr said that Mr Sullivan had the government's support to continue as managing director.

"I jumped," Mr Mackay told ABC radio.

"I made the decision myself.''

The chairman said the flurry of front-page and radio and TV reports in recent weeks had been "pretty rough" and he hoped his resignation would end the "frenzy".

"Obviously there were some pros in doing it [resigning]," he said.

"The main one of those is I think it may just help to stop the frenzy that's gone on for the last three weeks.

"There is now a frenzy on and there's some concerns of the shareholders, maybe now's the time to go before it gets worse and starts to damage my reputation, the corporation, other people's reputation.

''But just to be clear, I don't think the salary scandal, so to speak, was a sackable offence or a resignable offence on its own,'' he said.

Ms Gallagher said she had no doubt that the controversy had played a part in Mr Mackay's decision to quit.

''John came to me on Friday and indicated that he would like to step down as chair,'' she said.

''I didn't try to persuade him not to and indeed we spoke of the need for generational change and for fresh eyes to come into ACTEW.

''It's a very important appointment in the community and John has been there a long time and he has been a significant contributor as well.'' Mr Mackay's resignation is effective as of June 30 and Ms Gallagher said she did not want the government to interfere in the running of ACTEW.

''There is a contract in place which Mr Sullivan has entered into in good faith with the board and I understand that they are considering renegotiating that contract,'' she said.

''We expect that any remuneration package should be underpinned by rigour around that salary package and we also made it clear that we did not think that bonuses were appropriate for a government-owned utility.

''They're not what we see in other parts of the public sector and that has formed some of the confusion that's led to this error.''