THE Keneally government has signed a 10-year agreement to recycle more than 1 billion litres of water a year at Eraring Power Station.
NSW Water Minister Phil Costa said yesterday the scheme would save "precious drinking water" equivalent to 1.5 per cent of the Hunter's annual water needs.
He said the agreement extended a 15-year partnership with Eraring, which had recycled more than 15 billion litres of water since 1994.
The agreement followed a $30 million upgrade to the Dora Creek sewage treatment plant.
The recycled water would be used mainly in the plant's boilers.
Mr Costa said the water would "meet up to 93 per cent of the power station's water needs, with the exception of drinking and amenities".
He said it was part of the Lower Hunter Recycled Water Initiative, to almost double the amount of water recycled in the region.
Mr Costa said water recycling was one way to secure the Hunter's water supply.
"We need a package of measures to secure the Hunter's water, including recycling, water efficiency and increasing water storage with Tillegra Dam," he said.