Explainer: Why the new Dungowan Dam will make water bills go up

It's complicated, but to put it simply, the cost of large-scale infrastructure must eventually be recovered to keep money in the coffers.

The easiest and fairest way to do that, is for the people using that infrastructure to all chip in a little bit over a long period of time.

That's exactly what's happening with the Sydney Desalination Plant. It's an expensive piece of infrastructure at a cost of $1.08 billion. It was decided every Sydney water user chips in an extra $87 annually for the infrastructure. When it gets turned on, that increases to $125.

But that $1 billion cost is split between Sydney's 5.3 million residents.

The $480-million cost of Dungowan Dam will be shared between a much, much smaller user group, most likely confined to the Peel Valley.

So how much extra will people be charged over what period? There's an independent government agency set up to answer that very question - the Independent Pricing and Regulatory Tribunal (IPART).

IPART aims to balance the government's need to get the money back without putting too much strain on residents - but it's a tough balance to strike.

Irrigators in the Peel Valley already have some of the highest water rates in the state, and one of the contributing factors is that a relatively small number of water users in the valley (compared to other valleys) are paying off a large piece of infrastructure (the $43-million Chaffey Dam upgrade).

The state government does have the ability to 'gift' the Dungowan Dam infrastructure to Tamworth Regional Council.

However, the cost recovery responsibility then falls to the council (and its residents), who won't be trying to get back the money from the initial investment, but instead create a long-term nest egg for when the dam inevitably needs large-scale repairs or maintenance in several decades' time.

So will your water bill go up? Yes. By how much? We don't know, let's talk about it.