Minister for the Environment Alan Kelly has said Irish Water would have to distinguish between those who want to pay water charges and cannot, and those who simply refuse to pay.
He said he accepted that "people are in financial difficulty" and added that instead of cut-offs and cutting supply to a trickle, there would be late payment penalties added to bills three months following a year of non-payment.
Minister Kelly also said he would introduce legislation to allow landlords to deduct unpaid water bills from tenants' deposits if necessary.
On charges, the Minister said it would be possible for the per unit price of water to be reduced for 2017 and 2018, and that legislation would be introduced to ensure that water charges after 2018 could still be capped.
On the future of Irish Water, Mr Kelly said: "Privatisation is not the will of the people." He said legislation would be introduced to ensure that if any future Government sought to change that position, it would be required to put it to the people in a referendum.
As previously reported, the Government will establish a new public/bill-payers forum to advise Irish Water on service expectations and provide feedback on investment priorities.
The Minister said: "I want Irish Water to be a customer-focussed and customer-friendly organisation."