Braidwood residents have endured Christmas Day and Boxing Day without clean drinking water and are demanding an explanation from their local council.

The town's water supply was hit with its second E. coli outbreak in three years on Friday, forcing residents and businesses to boil their water for five days over the festive period.

Palerang Council has blamed the outbreak on a lightning strike that struck the town's chlorination plant and caused blackouts last Thursday and Friday.

But the council said yesterday it had not received any reports of ill-health effects from the bacteria and expected the boil water notice to be lifted today.

The latest contamination has highlighted the town's drinking water crisis, with a new treatment plant for the town now 18 months overdue. Palerang allocated almost $3 million to build a new plant in 2010 but have since gotten into a contractual dispute which has cost it $400,000.

They have now reissued tenders for the project and the completion date has been pushed back to the end of next year.

Frank and Shaunea Exon said the situation was unacceptable.

The couple were both hit with severe cases of diarrhoea in 2008, while Mrs Exon was pregnant, after a similar outbreak of E. coli shut down the town's water supply for 20 days.

''I don't understand it,'' Mrs Exon said.

''We're paying some of the highest rates in the country, higher than Sydney and Canberra, so they can build this new water treatment plant and they still can't seem to get it right. To not have access to basic services in this day and age, especially at Christmas, is a bit ridiculous.''

The couple say they no longer trust the town water supply and have since bought a filter, as have a number of others throughout the town.

But the new TorPeas restaurant was caught off guard by the outbreak after just opening their doors nine weeks ago.

Owner Jane Norris said her main street business was one of the only eateries open on Christmas Day and she had 80 people booked in for lunch.

''We got the notification two days before Christmas and we freaked out a little because we had so much seafood on the menu that we couldn't wash with town water,'' she said.

''We spent an hour every day boiling water, decanting it and keeping it in the cooler room and bought extra bottles of hand sanitiser.

''The whole situation was made worse on Friday because we had a two-hour blackout, so it was like cooking in the restaurant in the dark with just a few torches.''

Palerang has admitted it struggled to control the quality of water coming from the Shoalhaven River but refused to take any blame for the delays in getting a new treatment plant up and running.

General manager Peter Bascomb said the council had employed a contractor based on the advice of the NSW Department of Public Works but was forced to terminate the contract due to a range of reasons including constant delays and arguments over the work.

Mayor Walter Reynolds said the affair had left a foul taste in the mouths of his staff and fellow councillors.

''It's very sickening, it shouldn't happen,'' he said.

''In a well-run show these things don't happen but it was not our fault ... council will accept no responsibility for what happened.''

This reporter is on Twitter: @breanna_tucker