New schemes to recycle water, of the type used in major developments at Barangaroo and Central Park in inner Sydney, will be killed off under a pricing scheme being pushed by Sydney Water and the independent regulator.

That is the view of industry experts, the City of Sydney and the property development industry, who fear the proposed prices will cruel attempts to develop alternative water supplies for neighbourhoods across the city.

"That is a scandal," said the Sydney Lord Mayor, Clover Moore. "We should just be encouraging people on the driest continent on earth to be recycling water."

The issue relates to the manner in which Sydney Water prices are determined for developers and developments that re-use water, such as, for instance, using recycled water to nurture parks and public spaces, or in the toilet systems in new buildings.