Water conservation mandates are being abolished and there are warnings Sydney Water is being fattened for sale as the Baird government overhauls water competition laws.

The wind-back comes as the Bureau of Meteorology warns of signs of an El Nino in the Pacific, which may bring warmer, drier weather to Australia and increase the drought risk.

The government has introduced a bill that relieves private water companies of their obligation to develop alternative sources of water, such as water recycling.

At the same time, the Independent Pricing and Regulatory Tribunal has recommended that Sydney Water’s usage and efficiency targets be scrapped, saying they may lead to unnecessary and costly water-saving programs.

About ten private companies compete with public utilities in NSW, providing water to residential, commercial and industrial customers. They include a recycled water project at the Central Park residential development at Chippendale and a recycling scheme at Rosehill that supplies industrial and commercial sites in Western Sydney.