
An independent review has called for a huge increase in the use of water meters to encourage people to use water more efficiently.
It recommended an approach that would put meters in 80% of homes in England by 2020, compared with 35% currently.
The review for England and Wales found that charging based on property's rateable value was outdated.
Ageing infrastructure, population growth and climate change are putting pressure on supply and cost of water.
About two thirds of households are charged based on rateable value (RV).
"The RV system is out of date and does not target efficiently those who need help nor does it provide customers with an incentive to save water," said the report for the Department of the Environment and Welsh Assembly.
A future charging system based on volume use was the "approach most likely to encourage customers to use water efficiently and will best support the development of a sustainable water supply".
The report did not recommend universal, compulsory metering, but said "area wide" schemes could bring 80% metering in England by 2020.
It also recommended help for low-income families who required it owing to such metering changes.
Environment minister Huw Irranca-Davies said the department would "consider [the] recommendations carefully ahead of a full public consultation".
The Environment Agency wants "near universal" water metering in England and Wales to help protect supplies, claiming that metered households use 10-15% less water.
In response to the report published on Tuesday, an agency spokesman said: "Widespread water metering implemented by water companies, including safeguards to protect vulnerable groups, would provide a fairer charging system and is vital to help reduce water consumption and avert future severe shortages."
The UK was "one of the few developed countries that have low levels of metering", he said.
"Water resources are already under pressure in many parts of England, with some 25 million people living in areas where there is less water available water per person than Spain or Morocco."
The review was led by Anna Walker, chairman of the Office of the Rail Regulator, who is experienced in regulatory, environmental and social issues.
The report also called for more action over non-payment of water charges, suggesting bad debt typically added £12 to annual bills.