The Draft Lower Hunter Water Security Plan, to be released on Monday, focuses on providing a sustainable and resilient water supply for the region in response to increased climate variability and forecast population growth.

"The recent drought rewrote the rules for many communities around NSW. New insights gained during the drought have confirmed that our region is more vulnerable to drought than we previously thought," Hunter Water Managing Director Darren Cleary said.

"The Hunter's storages can go from typical operating levels to critical in less than three years. If drought were to continue beyond this, our region could run out of water."

The plan builds on the 2014 Lower Hunter Water Plan, which emphasised water conservation as the primary means to achieving improved water security.

It also reflects growing community expectations about improved water conservation and recycling.

A key part of the draft plan is ongoing investment in water conservation, network leakage reduction, recycled water and stormwater harvesting for non-drinking, including new and expanded industrial and public open space irrigation schemes.

It also seeks to build on improvements in behavioural change and efficiency gains that were achieved during the last drought.

Significantly, the plan does not include the construction of a new Lower Hunter dam.

Investigations in two possible dam sites at Upper Chichester and Limeburners Creek were unfavourable in terms of their economic costs, and environmental and social impacts.

"Dams remain an essential part of the Hunter's water supply system. The draft plan aims to make better use of existing dams and supporting a new pipeline connection between the Lostock and Glennies Creek Dams in the Upper Hunter, enabling transfers between the regions and effectively providing an additional supply of water for the Lower Hunter," the draft plan says.

The $200 million Belmont desalination plant, which received state government planning approval last week, is another key component of the plan.

In addition to being an rainfall independent source of water, the draft plan argues the Belmont plant, which can produce 30-million-litres of water per day, represents an economically efficient means to achieving improved water security.

Readiness activities for a second drought-response desalination plant at Walsh Point in the Port of Newcastle will also commence.

Purified recycled water for drinking will be explored further, providing a potential future water source that will cater for the growing needs of the region.

The multi-million initiatives contained in the plan will contribute to increased costs over time.

Hunter Water bills will not change before 1 July 2024.

Beyond that, and subject to approval by the Independent Pricing and Regulatory Tribunal, the actions proposed are likely to increase annual residential customer bills by between $75 and $120 per year, representing a one-off increase of between six and nine per cent for the average residential customer.

"What we have heard is that the community wants us to invest to improve the resilience of our water supply system," Mr Cleary said.

"I think there will be discussion during the exhibition period about whether it is the right amount of expenditure. Clearly there will be some in the community who will be concerned [about the cost of the plan].

"It is important to note that our support for vulnerable customers and our pensioner rebates will continue."

Water Minister Melinda Pavey said the plan provided a pathway for economic development within the Greater Newcastle area until 2060.

"Water is fundamental to the region's growth, prosperity and quality of life. I'm proud of the comprehensive work involving a whole-of-government approach to ensure we have a sustainable and resilient water supply for the Lower Hunter, now and for future generations," she said.

"Hunter Water has developed a draft Plan that will support the growth of the region and ensure it can respond to system shocks, including drought and a changing climate."

The draft plan will remain on exhibition until on Sunday 19 September 2021.