Hunter Water has lodged an environmental impact statement for a $100 million desalination plant at Belmont that will be used if the region's water storages reach critical levels.
Construction of the plant will start when storages drop to between 35 and 40 per cent. If the current trend continues that point is likely to be reached in the middle of next year.
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.
"It's something, that quite honestly, we don't want to do," Water Minister Melinda Pavey said on Tuesday.
"We want it to rain, but it is our responsibility and it is the right thing to do to be prepared in the event that if we don't get significant inflows towards the middle of next year that we are in a position to be able to add 10 per cent capacity to the Hunter's water supply."
Hunter Water acting chief executive Graham Wood said the project fell within the organisation's capital works program.
"It's not budgeted for as such because it's an emergency operation but we have taken that into account going forward," he said.
"There won't be any change to our borrowing ratios."
Water produced from the plant would not be pumped beyond the Lower Hunter
"This is a relatively small desalination plant," Mr Wood said.
"There are options for the Upper Hunter that are being looked at but I don't think this is a viable option for the transfer to the Upper Hunter."
The Newcastle Herald reported on Monday that Lower Hunter residents had saved about 12 per cent since the introduction of Level one water restrictions five weeks ago.
If that level of savings is sustained it would delay the introduction of Level two water restrictions until January or February.
Ms Pavey said it was essential that other water security measures, such as recycling, were pursued in addition to desalination.
"I'm a great supporter of recycling," she said.
"Where we can I think it is something that should be explored as a matter of urgency because I think the community expects that. I think the debate about water conversation has grown quite considerably and it needs to be part of the mix."
Hunter Water isalso investigating new groundwater supply options for the Hunter.
These include a groundwater source located about 100 metres beneath the surface at Tomago.
"We have found it but we just don't know how much is there and if it is connected to the existing aquifers," Hunter Water chief investment officer Darren Cleary said.
Read the Newcastle Herald Water Pressure series here