Reticulated sewage connections are among the most successful initiatives to improve public health, but it is feared connections to existing properties will be prohibitively expensive for Lower Hunter residents in coming years.
The Independent Pricing and Regulatory Tribunal is considering a proposal to remove the Environmental Improvement Charge, which has traditionally been used to pay for existing connections.
If the charge is scrapped, property owners could be charged about $60,000 to get connected.
The proposal has infuriated Lower Hunter councils which are concerned about the cost and health impacts of unsewered communities at North Rothbury and Hexham.
NSW Health wrote to Hunter Water in 2014 encouraging the connection of unsewered parts of the Hunter to the network.
"Over the centuries the provision of reticulated sewage remains one of mans greatest public health interventions and has succeeded in drastically reducing the incidence of water-borne diseases among urban populations along with increasing human life expectancy," NSW Health wrote.
Similarly, the EPA said connecting areas such as Hexham to the network should be a priority.
"The EPA supports the sewering of these areas based on environmental sensitivity criteria, particularly Hexham due to its proximity to the Hunter River and associated residential, recreational and commercial uses. The EPA recommends HWC give consideration to sewering the Tomago area as it has similar uses to Hexham associated with industrial lands occurring on the Tomago sandbeds which recharge the underlying drinking water aquifer," the letter says.
It is estimated it would cost about $5 million to connect Hexham to the network, a fraction of what Hunter Water pays to the state government in royalties.
Newcastle MP Tim Crakanthorp, who has raised the plight of Hexham residents and businesses seeking to be connected to the sewage system, described the situation as a "disgrace".
"It is unbelievable to think that a suburb just over 10 kilometres from the Newcastle CBD doesn't have access to this basic infrastructure," he said.
"This isn't just about convenience, this is a health issue and land owners should not be forking out tens of thousands of dollars for a sewer connection."
"Instead of gouging an extra $100 million dividend out of Hunter Water, the government should be investing in basic infrastructure like sewer connections in Hexham. It's high time the Minister stepped up and provided this basic service."
A Hunter Water spokeswoman said prices are regulated independent of government by the Independent Regulatory and Pricing Tribunal.
"Our latest advice from IPART follows a new methodology for calculating the cost of providing backlog sewerage services to existing property owners in the Lower Hunter," she said.
"While we are obliged to apply this new determination when considering future backlog sewer schemes, Hunter Water remains committed to ongoing discussions with councils across the region to identify priority areas and working together to measure the broader health and environmental benefits of future schemes."