AVERAGE household water bills could be slashed by up to $100 a year as a result of a decision to mothball the state's $1.8 billion Port Stanvac desalination plant.

After revealing yesterday it would place the plant on "standby" from 2015, SA Water acknowledged that the independent regulator could demand that the $100 million annual savings be passed on to the organisation's million customers.

The Essential Services Commission of South Australia is currently deciding how much revenue SA Water will be allowed to earn from 2013 to 2016 and chairman Paul Kerin confirmed the utility would not need as much revenue without the desalination plant.

"Any cost-saving will result in a lower revenue requirement," he said. Acting Water Minister Michael O'Brien said the government would push for cheaper water.

"Now that SA Water has said that they believe cheaper water is available - it is expected that ESCOSA will set a lower maximum revenue and the government will demand that SA Water passes on any savings," Mr O'Brien said.

SA Water customers will still have to pay for the $1.8 billion construction cost.

This has already been factored in to water bills since 2008.

SA Water chief executive John Ringham said the cost of running the desalination plant was around $130 million a year, but on standby would be $30 million.

The plant is expected to begin producing water for consumers from next year.

SA Water would not commit to a cut in water bills but a spokesman acknowledged ESCOSA could demand that the $100 million saving be wiped off SA Water's revenue for each year the plant was mothballed.

Reaction to the announcement yesterday led to the first tweet by Isobel Redmond since her ill-fated announcement, and then backflip, that 35,000 public service jobs would be cut if the Liberals were to win the next election. "Labor's desal disaster," she tweeted, linking to a written statement.

"South Australians were told that future water price rises would be restricted to CPI.

"Today SA Water reveals that it cannot afford to run the desalination plant without price rises in excess of CPI," the statement read.

SA Water had cited the promise to keep water prices at close to inflation in coming years as the reason for the policy shift.

"To keep costs down for our customers, SA Water is planning to use our lower-cost water sources first, which will mean placing the desalination plant in standby mode when these cheaper sources are available," SA Water chief executive John Ringham said.

"Improved inflows into the River Murray and Mount Lofty catchments have put us in a position where we can utilise these sources first and we are anticipating that the desalination plant may not need to be operated in the upcoming regulatory period (2013 to 2016) after the completion of its 24-month warranty."

SA Water has the Essential Services Commission of South Australia to approve the plan, which will mean the desalination plant, which was to supply half of Adelaide's water supply, will be put on "standby" as soon as it completes a two-year "warranty" running period in 2015.

The cost of Murray water is around one tenth of desalinated water and an SA Water spokesman said the plant would now only be used if and when another drought began.

When matching a Liberal Party policy to build the desalination plant in 2006, the State Government said that it was essential to stop Adelaide's dependence on the then drought-stricken Murray.

But flooding rains in NSW, Victoria and Queensland have since returned the river system to health, despite long-term over-allocation of water.

MONEY DOWN THE DRAIN?

South Australians were stuck with desalination as a solution to reliance on the Murray when the State Government stole a 2007 Liberal Party policy to build a plant.

"The time for talk is well and truly over. The time is here now for governments to commit to tangible projects that deliver the extra water Adelaide and the rest of SA needs," then Opposition Leader Iain Evans said launching the policy.

The Liberals' desalination plant was to cost $400 million but the State Government version ended up costing $1.8 billion.

In 2009 then-premier Mike Rann said the plant was needed so that water restrictions in Adelaide could be lifted, a problem which was later solved before the desalination plant came online.

Mr Rann declared, "this will be the biggest capital works project ever seen in the state's history".

The economic benefit to the state was to be $2.8 billion through jobs and better water security, Parliament was told.

Then water minister Karlene Maywald said: "But what this is about is guaranteeing our water security for the future".