Canberra households will save about $230 on their annual water bills under recommendations from the Independent Competition and Regulatory Commission.

The ICRC has recommended a 16.9 per cent reduction in ACTEW's water charges per kilolitre and a 24 per cent reduction in sewerage charges in a draft report released in Tuesday.

The Commission has also recommended that the ACT Government consider breaking up ACTEW and place its water and sewerage business within a separate territory-owned corporation.

The report estimates the combined household bill for water and sewerage could fall by 19 per cent, equating to $4.42 per week or $230 per year.

The recommendation comes despite ACTEW's warnings of sharp increases to water bills to recover revenue shortfalls caused by lower than forecast water consumption by ACT households in recent years.

The Commission said it did not see "any merit to raise water prices for future water users to recover the consequences of lower than expected water sales over the last five years".

"The precise size of the price reductions delivered in the final report will be influenced by submissions we receive on this draft report," Senior Commissioner Malcolm Gray said.

ACTEW's half interest in the joint ventures with AGL and Jemena would be held in a separate territory-owned corporation.

"The Commission recommends that the two territory-owned corporations be completely separated with separate boards," the Commission said in its draft report. 

Treasurer Andrew Barr said the Government was broadly supportive of a reduction in water charges but needed to study the draft determination in more detail.

“The trade offs associated with this will be presumably a reduced recenue stream to ACTEW it may result in job losses within that organisation and it certainly will impact on the dividend that they [ACTEW] pay to the territory government,’’ Mr Barr said.

Liberal Zed Seselja said Canberrans had been paying too much for water in recent years.

“We want to see Canberrans pay less rather than more and it certainly appears that for years they’ve been paying too much,’’ Mr Seselja said.