A Newcastle desalination plant and a new dam are among the options under consideration to improve the Lower Hunter's long-term water security in the face the worsening drought.
Investigations are also under way to expand the proposed Belmont desalination plant as well as opportunities to increase water sharing between the Lower Hunter and other regions.
The options have been shortlisted for further investigation, as part of a comprehensive review of the Lower Hunter Water Plan.
"We're considering potential new sources of water to enhance our existing supplies such as dams, desalination, groundwater and water sharing," Hunter Water's chief investment officer Darren Cleary said.
"We've worked with the CSIRO using a spatial mapping tool to shortlist possible dam locations. From a list of thousands of potential sites, we've identified two areas for further investigation including one at Upper Chichester, upstream of our existing Chichester Dam, and another at Limeburners Creek, east of Clarence Town.
"We'll also be exploring increasing the size of the proposed desalination plant at Belmont, as well as a potential site for a plant at Walsh Point, located in the Port of Newcastle."
Investigations into a potential new groundwater source below the Tomago Sandbeds plus increased stormwater harvesting and water recycling initiatives are also under consideration.
The plant, to be built adjacent to the wastewater treatment plant, would be switched on when storages reach 15 per cent and produce 15 million litres of water a day or 10 per cent of the region's water needs.
While details about a potential expansion of the Belmont project have not been provided, the state government announced in January that it would double the Kurnell desalination plant, which currently produces 15 per cent of Sydney's water.
The original Lower Hunter Water Plan, which emphasised water recycling and conservation, was born after the former state government abandoned plans for the $450million Tillegra Dam in 2011.
However, the severe drought, which has seen water levels drop to their lowest point in 40 years, has led to a review of the region's long-term water security.
"During the life of this plan we will engage with our community to understand their views about indirect potable reuse (adding highly-purified recycled water to our raw water supplies prior to the final water treatment process), as a potential option," Mr Cleary said.
The options will be put up for public consultation at forums and information sessions to be held over coming months.
Rain dumped across the Hunter in recent days has failed to replenish the region's dams, with almost all of the region's storages lower than a week ago.
Hunter Water data on Friday revealed Grahamstown Dam, Tomago sandbeds and Anna Bay sandbeds were all lower than a week earlier.
Only Chichester Dam had risen in the same timeframe, jumping 0.3 per cent.
That compares to a 0.6 per cent drop in the 182,000-megalitre Grahamstown Dam and a 1.1 per cent drop at Tomago. In Anna Bay, it was down 0.1 per cent.