The latest Orange City Council quarterly budget review has found council revenue from water was expected to be down by $400,000 over the current financial year.

It's a rare upside to the drought for the bill payers of the 16,000 residential and business water accounts across the city.

The latest council figures show people are using 120 litres of water a day, compared to 200 litres a day 12 months ago when Orange was on lighter restrictions.

Chair of council's finance policy committee, Cr Joanne McRae, said it was unusual to have council call on people to cut water use even though it was leading to it receive less income.

"It is quite a unique situation," she said.

"Council is taking a prudent approach, a sensible approach, for the long-term water situation."

She said the drop in income was currently not affecting council's ability to spend on water projects but that could change.

Cr McRae said if the lack of rain continued into 2021 and beyond then the drop in revenue would have an impact on council spending.

She said residents and businesses were largely responding to the water crisis.

"Most of the community are abiding by the restrictions," she said.

"[However] I do know people are continuing to report those who are breaking the rules."

She said council staff were monitoring the situation.

Council spokesman Nick Redmond said "working together" was the way for council and the community to combat the drought through using less water.

"There's a direct benefit for residents who are also paying less in their water rates," he said.

"This also means that the council is expecting to receive around $400,000 less this year than was in the water budget. This is money that was going to make a contribution to a number of water projects," Mr Redmond said.

"Last week's council meeting heard an update on the first six months of the financial year. Those figures will continued to be reviewed and they may change."

Mr Redmond said the drought was also influencing which water projects council water staff handled.

"Council water staff are focussing on new projects which have been funded by the NSW government such as a new pipeline from Spring Creek Dam and other demand-management projects to further reduce water use," he said.

"The size of the commitment to deliver these projects is a significant reason why other water projects will be put on the back-burner, rather than the drop in revenue. These projects include plans to upgrade Gosling Creek dam."

Orange is still on track to introduce Level 6 water restrictions in mid-May unless there is significant rain.