The Government has published a draft legal proposal designed to make it easier for water customers in England and Wales to switch suppliers.
It is hoped this will result in consumer savings of up to £2bn over the next 30 years.
The proposed new law will give the water regulator, Ofwat, additional powers and will free up businesses and government agencies to switch suppliers if they believe they can get a better deal elsewhere.
The proposals will also allow companies to trade water in bulk, allowing resources to be moved more freely during droughts.
Caroline Spelman is the Secretary of State for Environment, Food and Rural Affairs.
"For the first time all businesses and other organizations will be able to shop around for their water and sewerage suppliers. By slashing red tape, we will also stimulate a market for new water resources and incentivise more water recycling," she said in a statement.
The move to further deregulate the water industry comes in the week that the final few water authority regions lifted hosepipe bans after record rainfall in April and June and flash flooding across the UK in July. Some regions were hit with a month's worth of rain in just a few hours.
Prior to this year the UK had suffered two dry winters, depleting underground aquifer stores and forcing authorities to impose a 'hosepipe' ban, preventing homeowners from watering their gardens in a bid to save reserves.
It is hoped the moves to deregulate the industry will result in savings for local authorities of up to £20m over the next three years as the market becomes more competitive. New entrants into the water supply market will be handed a regulator-drafted set of standard Terms and Conditions. At present, any new company has to negotiate terms with the 21 other suppliers, making competition difficult.
A spokesman for South West water welcomes the move.
According to the Western Morning News, the spokesman said: "We very much support the long-term aim of the draft Water Bill to ensure customers have sustainable water supplies and great value services which are balanced with environmental conservation."
Government outlines plan to let water users shop around (Western Morning News)