Hunter Water will use drone technology to investigate a water leak which nearby residents say has streamed down an inner-city street for nearly a year.
Residents in the City Extra unit block in Newcomen Street say the leak began emptying into a gutter when water was connected to the adjacent Herald Apartments.
"The amount of water flowing down the street is alarming when considered in the context of the current drought and Hunter Water-imposed restrictions," City Extra resident Jason Oswald said on Thursday.
The City Extra body corporate had paid for an independent laboratory to test the water after a "lack of action" by Hunter Water.
Ms Oswald said the testing had found enough evidence of fluoride to indicate it could be coming from the Hunter's supply of drinking water.
"The leak didn't start until after water services were connected to the Herald. Logically, if it was ground water, it would exist prior to this," he said.
A Hunter Water spokesperson said an operations team had been "actively investigating" the source of the water.
"Through our investigation we have checked our infrastructure in the area for leaks, tested the water to determine if it is from our reticulated system, and reviewed the billed water use of nearby customers," the spokesperson said in a written statement.
"Unfortunately, these actions have returned inconclusive results, and we have not yet identified the source of the water."
The spokesperson said Hunter Water would use thermal-imaging technology to examine the Newcomen Street leak.
"Hunter Water takes leakage very seriously and has progressed to a deeper investigation, including the trial of new technologies such as LiDAR, which uses drones at night to detect hard-to-find leaks.
"We will also further investigate potential groundwater sources in the area."
Water Minister Melinda Pavey announced last week that the Hunter would move to level-two water restrictions on January 20 as the region's water storage dipped to 57.9 per cent capacity, the lowest since July 1980.
Hunter Water introduced level-one water restrictions in September.