Hunter Water announced on Monday it would introduce level two restrictions on January 20, with the region's total storage at 57.9 per cent capacity - a level not seen since July, 1980.

It means outdoor watering will be limited to 15 minutes every second day, vehicles and buildings can only be washed using a bucket and showers will be restricted to four minutes per person each day.

Large non-residential water users will have to implement their Water Efficiency Management Plans and smaller non-residential operations - those that use less than 10 mega litres a year - will have to devise a management plan.

The trigger point for level two restrictions is 50 per cent capacity, but Hunter Water's executive drought lead Darren Cleary said on Monday the utility was announcing the move early to give residents and businesses time to prepare.

Mr Cleary said Hunter Water had also been working with the region's councils - given using sprinklers on sporting fields would not be allowed under level two restrictions - to work out alternative irrigation methods and priorities.

"There is work that needs to be done, not just for residential customers but particularly our business customers do need some time to adjust and understand how they can bring into effect those water savings, particularly because water is essential for many of their operations," he said.

"We have a severe drought that's currently affecting us and most of the state, and the forecast is unfortunately for those hot and dry conditions to continue until at least February.

"We hope that's not the case, we hope rain occurs, but we need to be ready and prepared in the event that they do continue."

Bob Skelton, a Hunter resident for 50 years known across the region as the bush poet the Minmi Magster, said he was concerned that conditions had gotten "out of hand" early.

Aside from 1980, Mr Skelton said the summer of 1994 was particularly memorable as a dry one.

"In '94 it was a lot bloody drier, but that was in late January - we're only in early December. That was bad then," he told the Newcastle Herald.

"It's a bit of a worry. I only hope that it does do a U-turn. The old Grahamstown [dam] is bloody low, I went past there the other day, it's looking sick."

Mr Skelton said the region's population was smaller in 1980, the last time dam levels were this low.

In his experience, people tended to use less water back then.

"Our old place, we only had one tap out the back," he said.

"Big showers and all that - we never had that. That didn't happen in the old days.

"We must use a hell of a lot more water today.

"What we need is rain."

When announcing the restrictions, NSW Water Minister Melinda Pavey said the Lower Hunter's dams were "declining at a rapid rate of about one per cent each week".

The Newcastle Herald reported last month that the Department of Planning, Industry and Environment had put Hunter Water's plan for a desalination plant at Belmont on public exhibition until December 19.

The $87 million facility would be designed for use when the region's storage level dropped below 35 per cent and would cater for more than 10 per cent of the Lower Hunter's needs during a period of level three restrictions.

It would be equipped to make 15 million litres of fresh water from sea water each day.

Hunter Water's environmental impact statement for the facility said severe drought modelling showed "the total water storage level could drop very quickly".

The report said it could fall from 65 per cent capacity to 15 per cent within 24 months.

"Planning for rare drought events is required because running out of water would have a significant impact on the lives of people, on businesses in the region and on the State as a whole," it said.

"Even though the chance of such an extreme drought is extremely low, historical records show that the Lower Hunter's climate is highly variable."

Use of recycled water, greywater, rainwater - so long as the tank or dam is not topped from or switched to the drinking water supply - bore water and water used for firefighting, testing and other related activities are not subject to the restrictions, Hunter Water says.

The benchmark to bring in level three restrictions is 40 per cent storage capacity across the Lower Hunter's four facilities - Grahamstown, Anna Bay, Tomago and Chichester.

Hunter Water data predicts that a dry outlook would have the region's dam levels close to that trigger point by the middle of next year.

Community water use in the region increased from 4.75 million litres in October to 5.2 million litres in November. The total dam level dropped by 1.1 per cent in the past week.

While definitions of the various levels of water use limits have changed over the decades, the last time the Lower Hunter was in the grip of the equivalent of level two restrictions was September, 1980.

Level one restrictions were introduced in the Lower Hunter three months ago, for the first time in 25 years.

Mr Cleary said on Monday Hunter Water recorded a 17 per cent decrease in usage since then - the equivalent of about 62,000 households worth of water.

"The community response has been fantastic," he said.

"We've seen significant water savings being achieved, particularly given how hot and dry it has been.

"The community has responded, they are taking on board our message and we will continue to work with the community to save water."

Mr Cleary said restrictions would not be tightened before January 20 and the utility was focusing on education.

"We have community water officers out there at the moment in the community helping them to understand restrictions and educating them about them," he said.

"Certainly, if there is a flagrant and repeated breach then we have the ability to fine people and we will do so."

While you're with us, did you know the Newcastle Herald offers breaking news alerts, daily email newsletters and more? Keep up to date with all the local news - sign up here.