Residents and fire crews were last night battling another raging inferno on the edge of town, and locals still could not drink the water from their taps.

The council first issued an official alert on Friday stating the town's drinking water was unsafe, and the problem is still plaguing residents.

The council said last month's fires at the town's water supply dam had caused problems with water treatment due to ash.

It recommends water for drinking or food preparation be brought to a rolling boil to make it safe. Water should then be allowed to cool, stored in a clean container with a lid and refrigerated.

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A spokesperson said the council was working to fix this problem and the advice should be followed until further notice.

It also confirmed on Tuesday the Tenterfield Dam level was now at 28 per cent, and drilling continued in the hope of finding a sustainable water supply to supplement the dam.

The council said it was now drilling bore numbers six, seven and eight on its list of potential bore sites. The drilling rig was now sinking test bores behind Tenterfield Transport Museum near the showground.

The council said that, unfortunately, the archery club bore site could contribute only three litres of water per second to its goal of an absolute minimum overall volume of 9-10 litres per second.

Drilling at the other four sites, including near Tenterfield Station, all came up empty.

Council chief executive Terry Dodds said the sense of urgency was increasing as the weather warmed and the town moved into summer.

He said the dam was expected to drop 8.6mm a day during summer due to evaporation alone - more than twice the winter evaporation rate.

The cost for the test bores is now hovering about $500,000.