Water-borne illness, primarily caused by fecal contamination of drinking water, is a major health burden in the state of Andhra Pradesh, India. Currently drinking water is treated at the reservoir level and supplied on alternate days, necessitating storage in households for up to 48 hrs. We hypothesized that fecal contamination occurs principally during storage due to poor water handling. In this study we tested for coliform bacteria in water samples collected at distribution points as household storage containers were filled, and then tested containers in the same households 24–36 hours after collection. We also conducted an observational survey to make an assessment of water handling and hygiene. Ninety-two percent (47/51) of samples tested at supply points were adequately chlorinated and bacterial contamination was found in two samples with no residual chlorine. Samples collected from household storage containers showed an increase in contamination in 18/50 houses (36%). Households with contaminated stored samples did not show significant differences in demographics, water handling, hygiene practices, or sanitation. Nevertheless, the dramatic increase in contamination after collection indicates that until an uninterrupted water supply is possible, the point at which the biggest health impact can be made is at the household level.