The government and residents of Kitui and Makueni counties are locked in a disagreement over what the proposed Thwake dam should produce first.
Locals want the Sh62 billion dam to produce water for domestic purposes and irrigation while the government insists on electricity.
The project is designed to be undertaken in four non-simultaneous phases: Construction of a reservoir, generation of power, installation of a water and sewerage system and building an irrigation system.
The government signed a deal with China Gezhouba Group to begin working on the dam in a ceremony witnessed by leaders from Kitui, Machakos and Makueni counties.
On Friday, Water CS Eugene Wamalwa met the leaders and families that will be displaced then announced that construction begins next month.
"We want to come here in January with the President and his deputy to do the official ground breaking," Mr Wamalwa said at the meeting in Wote town, Makueni County.
He defended the prioritisation of the electricity generation.
"Some of the power will be needed to pump water to higher levels for subsequent distribution," he said.
"A portion of the power will be required to run Konza Technocity and the rest will be injected into the national grid."
The dam will sit on the confluence of Thwake and Athi rivers and is touted as the greatest water reservoir in the country.
"The two projects are interconnected. Once Thwake dam is completed, Konza Technocity project will take off," the minister said.
Though governors Kivutha Kibwana (Makueni), Charity Ngilu (Kitui) and Alfred Mutua (Machakos) praised the government for the project, they insisted that it would be of little significance to the region if implemented as planned.
"The four phases should happen concurrently. Our people should not wait for decades to get its fruits," said Dr Mutua.
MPs Daniel Maanzo (Makueni), Erastus Kivasu (Mbooni), Boni Mwalika (Kitui Rural) and Rachael Nyamai (Kitui South) supported the county bosses.
They also insisted that the contractor should hire locals when work begins.