The Israeli government approved the connection of the new Palestinian city, Rawabi, to the water grid last week after more than a year of delays.
The decision will allow the company building Rawabi, which is designed to house 40,000, to finally hand over the keys to the first new flats.
Israel's security establishment had recommended that water be supplied to Rawabi, but pressure from Israeli settler councils, which claimed that the new town could pose a security risk, along with Israeli anger at the PA's unilateral policies, caused a delay in the decision.
In addition, last week the government decided to use some of the Palestinian tax funds that Israel has withheld for the past three months to partially defray the PA's unpaid debt to the Israeli Electric Corporation (IEC).
The debt, which currently stands at nearly NIS 2 bn (£325 million), has accumulated over the past two years. Some NIS 300 million (£49 million) of the frozen tax funds will be used to pay part of the electricity bill.
Pressure from settler councils caused a delay in the decision
The tax duties that Israel collects on behalf of the PA were frozen three months ago in retaliation against the Palestinians' decision to refer Israel to the International Criminal Court for alleged war crimes.