Southern Water has been asked to cut the amount of water it takes from a Hampshire river by almost half.
The Environment Agency has published a plan to reduce abstraction from the River Test from 136 to 80 million litres a day.
It's hoped the move will help protect wildlife and restore sustainable abstraction.
Southern Water said it recognised the region was water stressed.
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Hundreds of homes were left without water on the Isle of Sheppey after a mains burst. More than 1000 housholds were relying on bottled water and 3 schools had to close on Friday.
Water was restored today - but Southern Water says some people may still experience problems as the supply becomes re-established. It comes after long-running repairs were carried out to the Island's water main under the A249 at Bobbing.
Sarah Saunders has the latest.
100 2 litre bottles at The Promenade, Leysdown-on-sea. More on the way. Free bottled water at Morrison's car park Queenborough
Southern Water say they have now installed two water mains after a burst water main left thousands of homes on the Isle of Sheppey without water.
The mains run underneath the A249 between Sheerness and Bobbing and water is being pumped back into supply.
The water firm says the work needs to be carried out slowly to avoid any further damage to the pipe and means that some customers will receive their water supply back later than others.
"We are sorry for the inconvenience this disruption has caused customers and are working as hard as we can to ensure all supplies are returned as soon as possible. Free bottled water is still available from Morrison's carpark in Queenborough."
Four thousand homes on the Isle of Sheppey have been without water for most of the day. It's due to a burst water main on the - A249 - between Sheerness and Bobbing. Bottled water is being provided for residents in the area.
Southern Water says "We are working as swiftly as possible to reconnect the water supply to customers on the Isle of Sheppey. Bottled water is available at Morrison's supermarket in Queenborough. We are sorry for the inconvenience but it is unlikely that water supplies will be connected this evening. This is because once the water supply is reconnected it will take a few hours to test and refill the water network in the area. A separate burst on a much smaller pipe in Harps Avenue, Minster, was fixed earlier today however the customers affected by that incident may still be without water because of the larger burst under the A249."
Hundreds of homes on the Isle of Sheppey in Kent have been without water for a large part of the day after a mains burst. This happened on the A249
Southern Water say "We are working as swiftly as possible to reconnect the water supply to customers on the Isle of Sheppey. Bottled water is available at Morrison's supermarket in Queenborough. We are sorry for the inconvenience but it is unlikely that water supplies will be connected this evening.
This is because once the water supply is reconnected it will take a few hours to test and refill the water network in the area."
Southern Water will today be sentenced for releasing 40 million litres of untreated sewage onto the Sussex Coast
The sewage was released from East Worthing Wastewater Treatment Works between 31 August and 4 September 2012.
It led to the closure of an 11 mile stretch of beach.