Orange council's corporate and community relations manager Nick Red-mond said the council had the strategic capacity to take on the water provider's management, with or without a merger, in a report responding to the Local Government Review Panel's suggestion that Orange, Blayney and Cabonne be amalgamated.

"The benefit of this arrangement would be that Orange could provide significant technical and managerial expertise to CTW, particularly in relation to key strategic projects aimed at ensuring regional water security for towns within the Lachlan catchment," Mr Redmond said in the report.

But Mr Perry rejected the inference and said CTW had been operating very successfully since 1944.

Besides Cabonne and Blayney, CTW also supplies water to the Weddin Shire, including Grenfell, two villages and a significant number of rural consumers in the Cowra Shire, rural consumers in the Bland Shire and a small number of rural consumers in Forbes Shire, Mr Perry said.

"If there is to be a merger of OCC [Orange City Council], Cabonne and Blayney, then the solution would be for CTW to continue operating as a very successful local water utility with OCC joining the county council as a constituent member," he said.

Mr Redmond said CTW's submission to the review panel called for control of Orange's water and sewer, despite having about a quarter of the capacity and value a notion that was illogical.

But Mr Perry said the statement had been quoted out of context and CTW wanted the status quo to remain, with local councils in control of water utilities, but governed by county councils.

"I don't see the need for [a takeover]," he said. "I wonder if there is an ulterior motive and they want the security of our water supplies."

Despite his concerns, Mr Perry said it would be unlikely to affect the cost of water for ratepayers.