Water restrictions could be introduced in the Lower Hunter as soon as next March following some of the lowest rainfall on record in recent months.
Meanwhile, the Belmont desalination plant is at least four years away.
Rainfall across the region over the last three months has been the bottom 10 per cent of rainfall totals for this time of year.
The region's overall storage levels are presently sitting at 84.4 per cent, down 15.5 per cent from a year ago.
At the height of the last drought, storage levels dropped to 52.7 per cent in early 2020.
Hunter Water confirmed this week that the current drought conditions were starting to impact on its area of operations
"If hot and dry weather persists, we could reach the trigger for water restrictions of 60 per cent total storage by March next year," a spokeswoman said.
Level 1 water restrictions were introduced in September 2019 for the first time in 25 years.
The enforceable restrictions include requiring watering to occur with a trigger nozzle before 10am or after 4pm, a ban on hosing of hard surfaces such as concrete, paths and driveways. Sprinklers are also banned.
Meanwhile, Hunter Water is finalising the detailed design and environmental approvals for the $200million Belmont desalination plant.
The project was first proposed in 2019 as an emergency drought response measure that would be turned on when water storages reach 35 per cent
However, it was decided to create a permanent facility and double its capacity in 2021.
When operational, it will add up to 30 million litres per day of rainfall independent drinking water, or about 15 per cent of the region's average daily needs.
The spokeswoman said the delivery timeframe for the project would be confirmed once all approvals had been obtained.
"We expect the desalination plant will take approximately four years to construct once we have approvals. We're progressing the project as quickly as we can, and it remains a high priority for Hunter Water to deliver for the region's long term water security."
The project is a key component of the Lower Hunter Water Security plan.
The plan, released in August 2021, contains a range of water security measures to improve the region's drought resilience as well as cater for population growth.
In addition to construction of the Belmont desalination plant, there are plans for a pipeline to connect the Glennies Creek and Lostock dams, increased water conservation and recycling initiatives plus continued leakage reduction across the network.
The plan also includes readiness works for the potential construction of a second desalination plant at Walsh Point in the Port of Newcastle.
The cost of implementing the plan will form part of Hunter Water's next submission to the Independent Pricing and Regulatory Tribunal.
NSW Water Minister Rose Jackson said water conservation was important given the predicted dry and hot conditions.
"With El Nino declared, I encourage everyone to take a look at their water habits and assess if there are actions they can take to reduce water use," she said.
On Saturday, the government said investigations were under way to double the capacity of Sydney's desalination plant to bolster drought resilience.
The plant can produce up to 15 per cent of the city's water and upgrading it would boost that to 30 per cent with a daily output of 500 megalitres.
