Water bills for the average Melbourne household are likely to rise by about $200 next year after the regulator handed out a draft decision on pricing proposals put forward by the city's retailers.


The Essential Services Commission rejected price rises of almost $300 proposed by water retailers.


Instead, they suggested an increase of between 20 and 26 per cent from July 1, which would allow water retailers to recoup costs from the multibillion-dollar Wonthaggi desalination plant.


Water Minister Peter Walsh said that if the desalination plant had not been built, bills may have only increased by around $50 next year.


"The overwhelming majority of the price increase is because of the desalination plant, a legacy that the Labor Party and Daniel Andrews have left for the people of Melbourne."


Melbourne Water has been asked to resubmit its proposals for the recovery of costs associated with the desalination plant.


The Victorian Council of Social Service said the price rises should prompt a review of water concessions for disadvantaged households.


"We know the current water concession fails too many people – particularly those in larger households who have less capacity to substantially lower their water usage," acting VCOSS chief executive Carolyn Atkins said.