HUNTER households could be charged an extra $322 over four years for the cost of water and sewer services, a 45 per cent increase to an average bill.
Hunter Water said yesterday the money would pay for capital infrastructure, including Tillegra Dam, and cover increases in operating costs.
The corporation hopes the increase will encourage Hunter residents to conserve and recycle water.
In a submission to the Independent Pricing and Regulatory Tribunal, Hunter Water is seeking to raise prices for residential and sewer services from July 1, 2009.
If the state's economic regulator approves the proposed fees, the first increase would be about $165 in 2009-10 for a typical household that uses about 200,000 litres of water a year.
The annual increase would be between $59 and $43 a year for the next three years up to 2012-13.
Hunter Water managing director Kevin Young said yesterday the fixed price of water would be kept low but the volumetric charge would be high.
Sewer service fixed charges would increase but sewer use charges are set to be removed.
Mr Young said money raised would help pay for capital infrastructure, such as Tillegra Dam, treatment plant upgrades, and water recycling in residential subdivisions and at Kooragang Island.
Extra finance would also cover the corporation's increased operating costs, which have risen with labor shortages and changes in industry standards.
Mr Young said the proposed increases were significant but in line with changes in the industry nationally.
"No one likes price increases but we've got a strong belief we've got to invest now," he said.
"The truth is if we don't invest now it will cost more in the long run."
Some commentators have questioned the need for, and cost to Hunter Water customers, of the $380 million Tillegra Dam since plans were announced in November 2006.
Mr Young said the project, which would receive about 12 per cent of the money raised from the new price schedule and cost a typical family about $38 a year, was an investment in the region's long-term drought security.
He said the proposed levies would send a strong recycling and conservation signal to the community.
About 2 per cent of the money raised from higher household bills would go towards new water efficiency programs.
The tribunal is expected to call next month for public submissions on Hunter Water's proposed prices and hold a public hearing in Newcastle in November or December.