SYDNEY'S water reserves could reach full capacity within three months, raising the prospect that drinking water will be flowing out to sea afterwards while households are paying millions of dollars for desalinated water.

The surging level of Warragamba Dam - now almost 85 per cent full - will top out by the middle of May if the current weather pattern does not change.

Surging level ... Warragamba was at 85 per cent yesterday. Credit:Adam Hollingworth

Regardless of the rising level - which has climbed 4.9 per cent in the past month - the Kurnell desalination plant will be kept in operation until the middle of June as part of a two-year ''proving period''.

By that date, experts say, the state government will be in the ''embarrassing situation'' of watching millions of litres of ''free'' water wash away into the environment while each household pays an estimated $96 extra a year for treated seawater.