Fixing leaking pipes and upgrading water mains in Milton could cost the Clutha District Council $260,000.
Between 2001 and February last year, 130 leaks were detected in concrete pipes in the town.
Council district assets manager Jules Witt said most of the leaks were caused by pipe joint failure.
Most of the worst affected pipes and joints are in the southern part of the township, around Edward, Chaucer, Moore, Mill and Queen Sts.
Milton's water supply features about 28km of pipelines made up of a variety of materials - including concrete, cast iron, polyethylene, PVC and asbestos cement.
The council has budgeted $260,000 for its Milton water main renewal project, which includes replacing 1.1km of concrete pipes with PVC pipes and installing four flow meters.
Eight tenders were received and the contract was awarded to C Demie Contracting Ltd for $243,982. The highest tender was $616,140.
Work is expected to start later this month.
In a report last May, council senior water services engineer Ani Satterthwaite said old concrete pipes in Milton's urban water supply could be leaking 490,000 litres of water a day, at a cost of $48,000 a year.
Pipe joint failures caused leaks and, if not fixed, resulted in the need for more water to be treated to meet the same demand.
Last February, water loss management contractor Detection Services found 38 leaks - more than the number of repairs in any year in the previous 12-year period. However, Ms Satterthwaite said this could be due to the fact that without the use of detection equipment, leaks might go undetected until the consequences became visible on the ground.
Between 2001 and 2012 there was no significant increase in demand in Milton, other than the supply to the Otago Corrections Facility in 2007.
The daily average flow production of the new Milton water treatment plant had increased from 1400cu m per day when it was commissioned in 2008 to 2000cu m per day in 2012.
The increase of the plant's flow production could be due to water losses caused by leaks in the reticulation.
Last year, council staff began monitoring the plant's flow production and night flow trending to confirm this theory, and this work was ongoing, Mr Witt said.
