Lower Hunter's water storages have risen above 70 per cent for the first time in 15 months thanks to heavy rain in recent weeks.
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The figure is up 4.3 per cent on the same time last year and represents a remarkable rebound from a low of 52.5 per cent in February.
But level one restrictions, which were introduced last September, will remain in place.
"While we have received some welcome rain since February, it hasn't created enough runoff to refill our dams and groundwater storages. In a typical year, our storages would be well over 90 per cent capacity after the amount of rain we have received," a Hunter Water spokesman said on Sunday.
"We need to take into account a range of factors, including how far above 70 per cent storage we reach and the weather outlook, before we can say with confidence that our storages have recovered enough to warrant removing water restrictions."
Meanwhile, Hunter Water is about to commence the next phase of on-site investigations into the feasibility of a potential new satellite dam in the Lower Hunter .
Sites near Chichester and Grahamstown dams have been identified as locations for the potential project.
Dams are among a range of options including recycled water, stormwater harvesting, desalination, groundwater, inter-regional transfers that are under consideration as part of a review of the Lower Hunter Water Security Plan.
Work in coming weeks will involve on-site ecological investigations to gain a better understanding of potential environmental impacts.
"We want to gather the necessary information to make assessments on all options as quickly as possible, so we can move towards finalising the Lower Hunter Water Security Plan next year," a spokesman said.
Ecological and geotech investigations have also been carried out into a proposed desalination plant at Belmont. Investigations into a potential alternative desalination site in the Port of Newcastle have also been done.
The Newcastle Herald reported earlier this month that 19 monitoring bores had been sunk to investigate a Palaeochannel under the Tomago aquifer.
Hunter Water recently received approval from the natural resources access regulator to install three larger bores for further investigation to test their water quality and production potential.
If the new bores prove viable they will be connected to pumps and pipes to Grahamstown Water Treatment Plant.
Hunter Water is hoping the project will yield the first new drinking water supply for the region in more than 50 years.