Almost one hundred million litres of water a day are leaking from pipes across Sussex.
Ten to 15 per cent of all water pumped into the mains pipes by Southern Water in the last financial year was wasted.
A proportion leaks from pipes in people's homes, for which the householder is responsible.
The total loss from the company's network in 2004/05 was 92 million litres a day, enough to fill 37 Olympic-size swimming pools or supply more than twice the population of Brighton and Hove.
The company has employed a team of leakbusters' to work around the clock to find and repair leaks and insists its record is good in comparison to other firms, such as Thames Water, which loses around 30 per cent.
But MPs said yesterday it was not good enough for the industry to preach water conservation to combat the current drought while such huge quantities are being squandered.
Des Turner, Labour MP for Brighton Kemptown, said: "Over the last ten years they have only managed to improve from 25 per cent to 15 per cent.
"It is still not good enough. The South-East has one of the highest populations and one of the lowest rainfall levels and therefore is most vulnerable to water supply shortages. Fifteen per cent becomes a lot."
The figures were released by Environment Agency Elliot Morley just days before Defra is due to hold a public hearing to decide whether to allow Southern Water to enforce strict restrictions on business use.
The firm has applied for permission to prevent tap water being used in car washes, for window cleaning and to water sports grounds.
It already has permission to take extra water from Sussex rivers, which can pose a threat to wildlife.
A hosepipe ban has been in place across Sussex since July last year and there are fears that standpipes might be introduced later this year.
For the coming year Southern Water, which supplies sewerage to most of Sussex and tap water to many, is to put up the price of the average bill from £296 to £313, a rise of 5.9 per cent compared to the national average of 5.5 per cent.
Mr Turner said with the current situation, there was little choice but for water firms to apply for drought orders and restrictions.
"There is not much alternative but to grant them in those circumstances or before we know it we shall have standpipes. We will probably will anyway, unless we have a few more weeks of the awful weather we have had in the last three days."
Norman Baker, Lib Dem MP for Lewes, said: "Water companies and the Government should be doing more to encourage saving water by making devices more freely available."
Penny Hodge, spokeswoman for Southern Water, said: "Ten to 15 per cent is our target set by Ofwat. Other water companies are considerably higher."
Jane Gould, spokeswoman for South East Water, said one third of the water lost was actually from customer pipes.
Customers can report leaks from the water mains at any time of day by calling 0800 820 999.
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