The massive hike in the water supply charge is one of several options the Independent Competition and Regulatory Commission is considering in its 2016 tariff review, that will set water and sewage charges for four to five years, starting in June, 2018.

A technical paper released in June explored how to ensure the tariff system sent customers "suitable price signals", operated more efficiently and recovered the same level of revenue for Icon Water.

It outlined a series of reform options that could see ACT residents paying an annual water supply fee between $605 and $865, up from the current $101 annual charge, with a single per kilolitre price thereafter for all water users, instead of the current two-tier system.

But the paper leaves any formal recommendations to a draft report due in September.

That report could put water prices on the political agenda in the lead-up to the ACT's October election, with consultations and a public forum on the new tariff system expected just weeks out from polling day, before the commission's final decision and report by year's end.

The commission's paper noted that the new higher supply charge and lower per kilolitre tariff would mean "low volume water users will face substantial negative impacts", hence a need to roll the increases out over an extended period – possibly up to 10 years.

It also noted the benefits for utility Icon Water would mean it could recover anywhere from 60 per cent to 80 per cent of its revenue from "fixed charges", rather than the current system, which recovers only 10 per cent of revenue from the annual supply charge.

While annual water supply charges would rise considerably, the cost of water per kilolitre would fall about 80 cents per kilolitre for most residential users, from $2.60 per kilolitre to $1.74 per kilolitre consumed each quarter.

It could mean savings for larger users like sporting fields and industry, who may benefit from the same $1.74 per kilolitre rate, down from the current $5.22 per kilolitre charged to users that consume more than 0.548 per kilolitre of water each quarter under the existing two-tier tariff system.

ICRC senior commissioner Joe Dimasi said the commission had noted in the report that "the pursuit of economic efficiency" dictated "a move towards a supply charge and one volumetric price", set at the current marginal cost of $1.74 per kilolitre.

"The $605 supply charge is indicative and has been calculated for the purposes of showing the level of supply charge that would be required, for cost recovery purposes, to permit a single volumetric charge of $1.74 per kilolitre," he said.

But rising residential water costs could be partially offset by an average 6 per cent fall in sewage charges, with the paper outlining a drop in the sewage fixture charge from $512 to $480, while the annual sewage supply charge could fall from $523 to $490.

A submission from ClubsACT called for reduced water fees, on the grounds some facilities had been hit with steady rises over the past decade, despite steady or flat consumption, and arguing clubs provide facilities and wider community health benefits.

But the ACT Civil and Administrative Tribunal, which deals with hardship applications from Icon Water customers, argued those on the lower tier "should be maintained at the current price level or lower" and the bigger users on the second tier "should be priced as required to meet the commission's price path".

Icon Water's submission backed the need to send a price signal to customers, but rejected any immediate move to "full cost-recovery", while staying open to other options including keeping separate tariffs with "a higher supply charge for non-residential customers".

An Icon spokeswoman said the utility agreed "in principle" there should be a "rebalancing of the fixed and usage charge", but the corporation was still talking to its customers about the detail.

It also included analysis of its customer base against the paper's options, revealing the change "would result in bill increases" for about 85 per cent of the ACT's concession card holders, or those with ACT government utilities concessions, who use less than 300 kilolitres of water a year.

The commission's September draft report of the tariff review will be open for public consultation.