A new report from Tasmania's Economic Regulator says more water price rises are inevitable because the state's water corporations are only recovering half of their operating costs.


The Economic Regulator, Glenn Appleyard, has released a discussion paper on how water prices will be determined when independent regulation of water prices begins in July 2012.


In the report, Mr Appleyard reveals the industry is operating at about half of full cost recovery and the current level of income is unsustainable.


The paper does not outline how much water prices will have to increase, or when to improve the industry's bottom line.


Mr Appleyard says the impact of rising prices on households will have to be taken into account and has flagged possible caps to increasing rates.


The Economic Regulator will consult with the three water corporations and members of the public.


The discussion paper is available for download here.


Comments are due by Monday 18th April 2011.