South East Water (SEW) is being investigated by regulator Ofwat after repeated outages since November have left tens of thousands of households and businesses across Kent and Sussex without drinking water.
In an update on Thursday, the firm said around 8,500 addresses were still without water.
With some properties entering a sixth day without water, the watchdog said it was investigating whether SEW had breached its licence conditions by failing to meet customer service standards obligations or by offering appropriate support to those affected.
It comes after the government asked the watchdog to review the company's licence.
In November and December, Tunbridge Wells suffered a sustained outage, with 24,000 properties in and around the Kent town left without drinkable water for almost two weeks.
Ofwat is already looking into SEW's supply resilience to assess whether it has failed to develop and maintain an efficient water supply system, which is ongoing.
Lynn Parker, Ofwat senior director for enforcement, said the last six weeks had been "miserable for businesses and households across Kent and Sussex, with repeated supply problems.
"We know that this has had a huge impact on all parts of daily life and hurt businesses, particularly in the run-up to the festive period.
"That is why we need to investigate and to determine whether the company has breached its licence condition."
It is the regulator's first investigation into a potential breach of the customer-focused licence condition.
A major incident was declared in the counties on Monday.
Prime Minister Sir Keir Starmer said on Wednesday that ministers were holding emergency daily meetings over the ongoing SEW outage after a number of schools in Kent and Sussex were forced to close due to the outage.
SEW blamed power cuts and burst pipes caused by Storm Goretti overnight between Friday and Saturday last week for the disruption to services.
Water restored to 16,500
SEW's incident manager, Matthew Dean, said around 8,500 properties across Kent were currently without water, but added that supplies have been restored "to the 16,500 properties in East Grinstead" - the majority on Wednesday.
Those still without water include 6,500 properties in Tunbridge Wells using a boosted system after storage tank levels "dropped below" the required mark.
Mr Dean said a new recovery plan for the town was launched at 5.30pm and the firm's aim is that on Friday morning, for customers will "wake up to a consistent water supply".
In a statement on Thursday, he said SEW was extending the outage there as "local drinking water storage tanks have not refilled at the speed required".
He said "around 2,000 properties will be experiencing intermittent supply, low pressure or no water this morning [Thursday] in the south Tonbridge and Bidborough area of Kent.
A similar number of properties in the Loose and Coxheath areas have had supplies restored.
SEW 'sorry' for outages
Mr Dean said: "We are very sorry to all our customers who have been and continue to be affected. We know and understand how difficult going without water for such a long period of time is and how difficult it makes everyday life".
Mike Keil, the chief executive of the Consumer Council for Water, said many customers will conclude that SEW "has lost its ability to provide a reliable water supply. Customers are feeling anxious and uncertain every time they turn on the tap".
He said SEW customers "are impatient for change after suffering repeated service failures, compounded by poor communication".
Read more from Sky News:
ICE shooting 'chaos' in US - latest
Eyewitness on Iran killings
Inside UK terror attack rehearsal
On its website, the firm said it was "extremely sorry to all customers who currently have no water or low pressure," along with details of affected areas and locations of six bottled water stations, three in each county.
(c) Sky News 2026: Water company probed after tens of thousands of homes lose supply
'It's like a road closure' - Uganda's president on shutting down the internet as his country votes in election
Murder investigation launched after 68-year-old woman stabbed to death in village
Sadiq Khan: AI could usher in new era of mass unemployment
Yellow weather warning for rain extended - with flooding expected in parts of England
I'm ashamed of Sir Keir Starmer, says rebel MP - as row over justice reforms escalates
Minneapolis: Clashes in US city after second ICE shooting in space of week
The hidden parking fine loopholes every driver should know about | Money newsletter
Ofcom welcomes Grok sexualised image restrictions and says investigation 'ongoing'
