The Local Government Minister says a water service run by a centralised provider could help rural communities keep up with the costs of supplying safe drinking water.

Nanaia Mahuta addressed stakeholders at the Water Summit in Wellington saying the Government is exploring whether this approach would work for New Zealand.

It was one of the recommendations in the Havelock North Drinking Water Inquiry.

Mahuta says this model could mean urban ratepayers subsidising rural ones.

"Our small towns and provincial areas have fallen behind and the cost of upgrading their drinking water will effectively be unaffordable. The small communities cannot do it alone."

She says the government wants stakeholder feedback on a possible move to an aggregated water service, more like the Wellington Water model.

Mahuta says the drinking water tragedy in Havelock North was a sobering reminder that something needs to change and this is just one idea they're exploring.

"We're not ruling anything in or out, we're just saying that the Havelock North report has indicated things need to change, so we are picking up that challenge and saying this is what change could look like."

She says an aggregated service could lift capacity and provide sustainable funding but that they are just getting the conversation started.

"This isn't an area where the government has a predetermined outcome, in fact, we want to engage local government, industry stakeholders around what it could look like in a New Zealand context."