John Gummer, Environment Secretary, said in a Commons written answer that the Government intended to go further than the original scheme, outlined in a consultative document last spring.
It proposed a system of "common carrier" arrangements where water companies could supply industrial customers beyond their regional borders. The plans were widely seen at the time as a way for ministers to head off intense criticism of water privatisation from both business and residential customers.
Following responses to the consultative document, Mr Gummer said he would apply the scheme to smaller users than those outlined in the original proposals. He also urged customers to take advantage of the opportunities for competition which already exists.
Details of the scheme are likely to be included in the Conservatives' election manifesto. They will emphasise the benefits of common carriage for water, requiring the existing privatised companies to give clearer details of their costs in offering services.
He said he would seek to persuade more customers to take up so-called in-set appointments, where the water regulator, Ofwat, appoints another company to take over the running of services. In-set appointments do not involve the transfer of assets or staff, but are intended to work on the basis of a purely financial transaction where the new company pays the existing water business to run the same services.
So far, one London-based company, Envirologic, has led the way by working with several large users of water to examine the current cost of bills and suggest economies to the privatised supplier.
However, so far Ian Byatt, the head of Ofwat, has been reluctant to grant in-set appointments because the current rules are too vague.
Mr Byatt has suggested altering the law so that inset operators are only allowed to run services for five years.