Danville wants to sell more water from Herrington Lake, either to cities south of Interstate 64 or to the Bluegrass Water Consortium.
To take more water, the city needs permission from Kentucky Utilities, which owns the lake.
Several city commissioners said at a meeting Monday that they hope to make an offer to the power company by the end of the year.
Danville consultant Tetra Tech will spend the next two weeks gathering information about how much water is in the lake, and then the city will write a proposal for KU.
Meanwhile, the consortium has already voted to use an alternate supply of water, but it would "leave the door open" for a Danville proposal, Tetra Tech's Dan Shoemaker told commissioners.