Affected residents say they are being forced to endure third world conditions as families have to collect water in buckets to provide for their daily drinking water and basic hygiene requirements.
Water bores have dried up at six Hawea Flat properties, during what is normally the wettest time of the year.
However, Contact Energy says the problem is because the Hawea area has experienced a drier than usual winter, which is also the reason for record low lake levels.
Leanne Harling and her 8-year-old son have been without running water for more than a week.
Their house and its 12.5m-deep bore had never run dry in the 15 years she had lived there, she said.
The pair had made daily trips, across the road to the Hawea Flat play group facility's outside tap - about 100m away - to fill buckets of water for their daily needs.
"We use two buckets for flushing the toilet and another two for cleaning dishes, while we fill milk containers for drinking from," she said.
They shower and wash clothes at friends' houses.
Camphill Rd neighbours Kelly and Thomas Urquhart have two boys aged 2 and 8, and have also been without water from their 12.5m bore for the past week.
The neighbouring families claimed their dried-up bores were "everything to do with the lake".
"Contact may have solved the national power shortage by dropping Lake Hawea, but they've created a local water crisis instead," Mrs Urquhart said.
Contact Energy spokesman Jonathan Hill said it wasn't "particularly constructive" to start talking about blame.
"The problem has arisen because there has been an intensely dry period without any significant rain down south," he said.
Contact had kept within its resource consent conditions and had not taken the lake past its 338m above sea level (masl) minimum.
The electricity company had done "everything it could" to manage Lake Hawea responsibly and the problem was "simply about not enough rain", Mr Hill said.
Lake Hawea has been on the rise since the beginning of the month as snow melt and rainfall increased, and was now above 339masl.
Ms Harling said what upset her the most was that no-one could offer any solutions,"I've spoken to council representatives, Lake Hawea guardians, resident associations and everyone just says they're sorry.
"No-one can tell me when the water will start running again," she said.
Hawea Residents Association Errol Carr said arrangements were being made for a water tanker to bring in supplies for the affected households.
Representatives from the Otago Regional Council and the Queenstown Lakes District Council said there was little they could do except help with trucking in water supplies and dispensing advice for those considering drilling bores in the future.
Private water bores were the responsibility of the property owner and not rated by the regional council or district council.
Mr Carr said Hawea properties with bores drilled to 18m deep and deeper still had water.
The dry wells were a warning to other households, he said.
"If people don't put wells down deep enough, they may have to face the consequences of running dry."
