Hunter Water has identified Upper Chichester and Limeburners Creek east of Clarence Town as potential new dam sites and would explore groundwater resources under the Tomago Sandbeds as part of a comprehensive review into the region's long-term water plan.
The Lower Hunter Water Plan was released in 2014 after the former state government dropped plans for the Tillegra Dam in 2011.
Hunter Water's chief investment officer Darren Cleary said "all options are actively being investigated" with the review of the plan now at the stage where the utility is exploring "potential sites for supply and demand options".
"We've been through a rigorous process to look at all of the options available to us that could help reduce the amount of water we use and to supplement our existing drinking water supplies," Mr Cleary said.
"We're considering potential new sources of water to enhance our existing supplies such as dams, desalination, groundwater and water sharing.
"We'll continue investigating a potential groundwater source known as a palaeochannel below the Tomago Sandbeds and ways to increase our capacity to share water with other regions, including enlarging existing dams outside of our area of operations."
Mr Cleary said Hunter Water had identified a number of potential dam sites for further investigation.
"We've worked with the CSIRO using a spatial mapping tool to shortlist possible dam locations," he said.
"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.
"In addition, we're looking at ways to reduce demand such as stormwater harvesting for irrigation of playing fields, potential recycled water schemes for use on a range of public facilities and in industry, as well as other water conservation programs."
Mr Cleary said the severe drought affecting the Hunter reinforced the importance for the utility to consider all options for the region's "long-term water security".
"Aside from continuing to invest in water conservation and leakage reduction, no decisions have been made about which options will be included in the revised plan," he said.
"It's important we do this work now to understand their technical feasibility, as well as the environmental, social and financial aspects."
Mr Cleary said Hunter Water was committed to keeping the community informed about the plan over coming months with forums and information sessions.
While recent rain has boosted the Lower Hunter's water storage levels, with Chichester Dam rising an incredible 45 per cent from the week before, Hunter Water said the downpour had been far from drought-breaking.
"Level 2 water restrictions are in place and we encourage everyone to continue to comply and to save water around their homes by using four buckets of water less a day," Hunter Water said.