"It's wonderful for us," Sally Forman of the mayor's office told AFP. "It means citizens will have a more livable environment when they come back to homes that weren't destroyed."

Water remained contaminated or unavailable in two of the city's hardest-hit sections, one of them the predominantly African-American, working-class neighborhood known as the Lower Ninth Ward.

City officials are hoping the return of clean water will hasten the revival of restaurants, hotels and other businesses in a city that raked in billions of dollars from tourists prior to the double blows of hurricanes Katrina and Rita.

Electric service in New Orleans "is still coming back," according to Forman, who estimated that the local utility company had restored power to about 40 percent of the city as of Friday.

Destroyed homes and shuttered businesses have erased the city's tax base, prompting Mayor Ray Nagin to announce recently that he is laying off half of New Orleans's civil servants.

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