Northern Ireland's politicians are seeking to scrap the first year's bill for the new water charges, political sources have said.
Key issues include whether there will be separate charges
It would be part of a peace dividend which could be worth up to £1bn over the next five years.
It is understood scrapping water bills scheduled to be paid in April could cost £70-80m.
The negotiations with the government also deal with how the Water Service might be funded in future years.
Key issues include whether there will be separate charges or if water could be paid as part of household rates.
Another matter under discussion is how the government values the Water Service's assets.
A political source said a future assembly could scrap water charges, but it is thought politicians do not want this to be at the expense of damaging cuts in other public services.
Pressure is growing on the Treasury to boost the annual Northern Ireland budget by as much as £200m a year, but its thought Chancellor Gordon Brown has not yet made any firm decisions.