The Clutha District Council said work on a $5.3 million, 17km drinking-water pipeline from Milton to Waihola began last month, and was making good progress.
The project will also require additions to pumping infrastructure in Milton and Milburn, which will be tendered for next month.
Council group service delivery manager Jules Witt said the pipeline was expected to be completed by September, and the additional supply for Waihola would become available once the pump station works were completed.
At present, Waihola’s 250 households are supplied by the North Bruce rural water scheme.
In August last year, residents complained to the Otago Daily Times about continuing issues with the quality and quantity of drinking water in the town, exacerbated by a burst water main.
Mr Witt said the new pipeline would provide capacity for an additional 250 households.
Clutha Mayor Bryan Cadogan said the council was making a "significant" investment in the Waihola upgrade, and in further upgrades to Lawrence, Tuapeka and Balmoral.
Together, the projects would improve water supply and quality for nearly 1000 properties.
A new bore at Greenfield near Clydevale would supply households in the Lawrence area.
"The Greenfield Rural Drinking Water Scheme Project, which involves a new water source and construction of a 41km pipeline from near the Clydevale Bridge to Lawrence, will get under way next month," Mr Cadogan said.
Mr Witt said the first stage of upgrades to pipework would cost $16.3 million.
