Hunter Water has blamed toxic algae and water weed for restricting the amount of water it pumped from the Williams River into Grahamstown Dam for the first six months of this year.
Despite being the region's main source of drinking water, Hunter Water pumped only 77 per cent of its allowable take into the dam between January and June.
Opponents of a potential new dam in the Hunter argue the incident highlights the need to improve existing water harvesting and conservation practices rather than creating a new storage.
Hunter Water is presently investigating sites at Chichester and Grahamstown as potential locations for a new satellite dam, however, it is yet to commit to the project.
A Hunter Water spokeswoman said the corporation aimed to maximise the amount of water it drew from the Williams River.
"While every effort is made to harvest as much water as possible, there are a number of factors such as water quality, weed and river flow, which can limit how much we can take," she said.
"The Williams River was impacted by blue green algae in May, as well as an unprecedented water weed (hornwort) event throughout this entire period, which affected our ability to harvest water due to blocked screens and pumps or due to the presence of toxic algae."
The spokeswoman said the corporation pumped all of the water available under its licence during this week's east coast low.
"So far, we have pumped 2,200 million litres of water from the Williams River into Grahamstown Dam. We are optimistic that we can harvest a further 1,000 million litres from this event," she said.
Dam opponents have also called for the increased use of recycled water.
"Hunter Water needs to fix problems within their system and concentrate on the strategies prioritised through Hunter Water's consultation processes before embarking on another dam," Healthy Rivers Group spokesman Ken Edwards said.
"We would like the Auditor-General to audit Hunter Water Corporation for its work on 'water conservation' in the Lower Hunter region."
The most recent Hunter Water figures show Hunter Water produced 6.5 gigalitres of recycled water in 2018, compared to 5.4 gigalitres in 2017-16.
A 2018 survey of 700 Hunter Water customers found most people would be willing to pay more for water recycling and conservation projects.
About three quarters of those surveyed said they would be willing to pay between $1 and $2.50 more per year to increase the amount of wastewater turned into recycled water for irrigation of parks and sporting grounds.
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