Lake Opuha's dam, near Fairlie, has been issued a water shortage direction by the regional council because of lower than expected snow melt and El Niño weather conditions.
The dam generates electricity for the national grid and supplies water to 16,000 hectares of farmland.
Opuha Water acting chief executive Jeremy Boys said they were reducing the flows a little now to keep the water running in three months' time.
"We tend to manage water, retain it and distribute it, I think, in quite a conservative way that helps benefit not only the rivers, the economy, but a whole lot of social activities," he said.
"It's a very popular lake in summer for waterskiing and fishing and that sort of thing."
While the lake was at 90 percent capacity, Boys said there was only 15 percent of snow melt left, which would need to last through a dry, El Niño summer.
"We've probably got about 15 percent of what we call our typical snow levels in the hills, so normally we rely on that being in the bank, shall we say, for distributing water later in the season," he said.
"And it's probably another reason we're taking restrictions now is because that bank is close to empty."
Boys said the notice would be reviewed on 14 October.
