The $200,000 is in addition to $400,000 recently allocated to connect the Lithgow villages, such as Marrangaroo, Wallerawang, Portland, Rydal, Cullen Bullen and Glen Davis to the Lithgow town water supply, which would help alleviate the demand on Oberon Dam slightly.

The $200,000 is available to be spent on a project identified by Oberon Council.

Previously, council was aiming toward a water re-use scheme, where excess water from the Oberon sewerage plant would be re-treated and used at the Oberon Timber Complex.

At this stage Oberon Council has said it is still considering many options to deal with the drought and water situation, and is consulting with staff to decide the best project to put the funding towards.

In the meantime, Delta Electricity is still relying on Oberon Dam to power the station at Wallerawang and this will continue until the dam drops below eight per cent capacity, at which point all major users will be cut off.

Some winter rain has fortunately kept the dam level steady on 12.05 per cent for the past couple of weeks, and Oberon continues to hope for more rain than has already fallen in the first month of winter.