The Independent Competition and Regulatory Commission announced on Tuesday that almost all residential water users would pay less for their water next year, after releasing its final decision and price direction for regulated water and sewage service prices in Canberra.

Senior Commissioner Joe Dimasi said the final decision determined the amount of revenue Canberra’s water supplier Icon Water could earn, and what prices it can charge in line with inflation, for the next five years.

"What the report will do is bring down the price of water and sewage for the average householder, and for non-household users as well, and then we’ll keep those prices constant at about CPI for the next few years after that, so it is good news," he said.

"The average household consumes about 200 kilolitres a year in water, and they can expect a decrease next year of around $42."

"It’s going to be a little bit of relief on cost of living pressures, and essentially I think what we’ve done is we’ve provided enough revenue to Icon to make sure that they give good service but keep prices as low as we possibly could."

Under the commission’s final decision, prices will be 3.2 per cent lower than those initially proposed by Icon Water in June 2017.

Mr Dimasi said the lower prices were the result of efficiencies in Icon Water’s planned operating and capital expenditure, lower interest rates and the commission’s decision on how to calculate the return on Icon Water’s capital investments.

"It’s a bit lower than Icon had proposed, but what we did is we went very carefully through their expenditure proposal, their capital expenditure and operational expenditure, and made sure that they were as efficient as possible,” he said.

“We reduced those by smaller amounts, but also the return we allowed them was a little bit less, and that is I think consistent with market conditions, so I think it was not an unreasonable outcome from our perspective.”

He said the commission’s final decision meant Canberra residential consumers would continue paying lower-than-average bills compared with other jurisdictions.

Icon Water managing director John Knox welcomed the prices set by the commission.

“The price reduction has allowed for measured and gradual rebalancing of tariffs, which will improve affordability while continuing to promote water conservation,” he said.

“The annual water supply charge will increase by $16 in 2018-19, which will be more than offset by the reduced volume charges.”

He confirmed that the price reduction was a result of "Icon Water efficiencies in operational and capital expenditure and a lower interest rate environment".