Water firms are too quick to pass on costs to customers, MPs complained after warnings measures to protect fish from sex-changing chemicals could add £100 to household bills.
The industry claims removing hormones used in contraceptive pills and other pharmaceutical products from waste would require the sort of treatment usually reserved for drinking water.
A Commons committee questioned the Government's estimated cost of the move however and accused firms of failing to act on previous demands that they develop cheaper procedures.
Several oestrogen-based pharmaceutical products were among 15 chemicals the European Commission proposed to add to a controlled list after surveys found huge numbers of male fish had become "intersex".
Their inclusion was postponed for two years amid disputes over the extent of the impact on fish populations but the science and technology select committee said it should "not be ruled out" if science proved the case.
In its report, the committee said the £100 additional cost per bill was "speculative at best". Firms "seem to have neglected the potential to develop innovative new treatment methods which could treat water at lower cost and with lower carbon emissions", the MPs concluded.
"We are not convinced the industry is giving appropriate priority to innovation. It seems content instead to pass the burden of increased costs to its customers."
The sort of "strict regulatory standards" suggested by the Commission might be required to force action.
Ministers needed to address "troubling" claims that official estimates of the costs of the proposed regulations had been deliberately over-stated, the report said, calling for a "clear explanation" of the potential impact on bills and the scope for developing cheaper treatment methods.
A Defra spokeswoman said: "Improving water quality is not just important for the environment but economically too. We are continuing to work with the water industry and regulators to develop innovative approaches to treat chemicals in waste water."