Fianna Fáil drafted legislation for the introduction of water charges two weeks before the Government was forced into a Troika bailout, which included a provision for establishing a State-owned water company.
But current Fianna Fáil leader Micheál Martin reacted to the revelation by insisting the last Government did not introduce water charges during its time in office.
Cabinet papers show the Fianna Fáil-led Coalition expected the charges to cost every household €500 a year.
As it turned out, Irish Water charges households with two adults a flat rate of €260 a year, if they do not have a water meter.
Brian Cowen's government estimated that the installation of water meters would cost €500m over five years.
The Coalition - also comprising the Green Party and the Progressive Democrats - wanted to create a national water agency, which would employ 25 staff and cost €4m a year.
It was expected that the metering programme would lead to the creation of between 1,200 and 1,800 jobs.
But Fianna Fáil leader Mr Martin said: "That never happened. That Government did not introduce water charges. In fact we went two-thirds through the fiscal correction as laid down by the Troika and it was in our four-year plan and never went near water charges."
The Cabinet documents, released to RTÉ's The Week in Politics, show the then Environment Minister and Green Party leader John Gormley wanted a referendum held to constitutionally protect the country's water system from privatisation.
However, this was rejected after his party colleague, former Communications Minister Eamon Ryan, highlighted the complexities involved. The Cabinet agreed a referendum could be pursued separately with the Attorney General.
Mr Gormley was against the option of introducing a flat-rate water charge as he believed there would be no incentive for households to conserve water. Former Finance Minister Brian Lenihan was in favour of a flat-rate charge to cover the costs of installing meters.
"He considers it imperative that the programme is commercialised and that households pay for the cost of the meter installation through a charge in their water metering bill," a briefing document stated.
There was an agreement that every household would be given a 40,000 litres free water allowance under the scheme. There is currently 30,000 litres free allowance per household and an additional 38,000 for every child in a family.
At the time, the then Tourism Minister Mary Hanafin, who is seeking to be re-elected to the Dáil, welcomed the fact that charges would lead to greater water conservation.
Ms Hanafin suggested that the Government should include a free water allowance for B&Bs.
Fianna Fáil has since proposed abolishing Irish Water and water charges if elected to Government. Instead, a national water agency would build new infrastructure.