But planning will only proceed if dam levels in the region continue to drop.

The news that Water Minister Melinda Pavey was considering a desalination plant in the Illawarra broke in early January when she announced a fast-tracking of the expansion of the state's only other plant, at Kurnell.

On Monday, Labor's Treasury spokesman Walt Secord visited the Illawarra to call on the minister and government to commit to build a plant in the region.

A spokesperson for Ms Pavey said work was being done towards the feasibility of a plant in the region - including assessing possible locations.

"WaterNSW is currently in the early stages of investigating a new desalination plant in the Illawarra," the spokesperson said.

"This includes work to select sites for the potential new desalination plant and suitable connection points into the water supply network."

However, the government was not yet ready to commit to drawing up plans for the new infrastructure, instead waiting to see if the drought breaks.

"Should dam levels continue to decrease at the current rate, WaterNSW will prepare a project design which would be subject to a rigorous and comprehensive environmental assessment process," the spokesperson said.

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"A major community engagement program will be carried out and feedback from the community will be taken into consideration before a decision is made to proceed with construction."

A desalination plant in the Illawarra would have the potential to create between 500 and 1000 local jobs, depending on the size.

During Monday's visit, Mr Secord claimed a plant would take up a similar footprint to "a Bunnings outlet".

The desalination plant at Kurnell was brought back online in January last year.

Running at full capacity it can supply 250 million litres of water a day, which represents about 15 per cent of Sydney's drinking water requirements.

The planned expansion could see it provide up to 500 million litres a day.