Northern Ireland Minister David Cairns has denied there is any plan to privatise the water service.
Parts of the Water Service could be sold off, MPs were told
SDLP leader Mark Durkan claimed on Tuesday that the government was considering part-privatising or selling off the water service.
However, Mr Cairns said any such decision would be subject to a new Northern Ireland Assembly.
The minister for Regional Developlment said: "We are not privatising the Water Service.
"We would not have gone to all this time trouble and effort, including legal actions, to bring in a model which was wholly owned by government if we were going to privatise it."
However, during a debate on Tuesday on water by a key parliamentary committee, Mr Durkan told MPs that the legislation allowed for the introduction of private sector ownership without any consultation.
BBC Northern Ireland special investigations correspondent Mike McKimm said that it seemed that, under pressure from the Treasury, the administration in Northern Ireland may consider a part-privatisation in 2008.
"But it is understood that the present secretary of state - Peter Hain - does not want to see water privatised here, it has been described as a 'red line position' for Mr Hain - he simply won't accept it."
In a statement the Department for Regional Development said the secretary of state has ruled out privatisation under direct rule and this will be up to the devolved administration to decide.
It said that the GoCo (government owned company) to be set up on 1 April, 2007, would be wholly government-owned.
Mr Cairns launched a "Water Charges Made Clear" leaflet on Wednesday to explain how future bills would be calculated.
He said that, with phasing, the average water and sewerage bill next April would be around £100.
"We know that over a quarter of all Northern Ireland residents receive benefits that will entitle them to the reduced tariff. This leaflet explains how people can find out if they are entitled to the reduced tariff and what to do if they are not currently claiming benefits they are entitled to," Mr Cairns said.