Lambert is giving evidence to a planning inquiry into the Thames Estuary project. London Mayor Ken Livingstone refused Thames planning permission for the £200M plant, saying it was too energy intensive (News last week).
'Thames Water is concerned about the impact of terrorist activity or a major operational incident on water supply security - and the consequences for those who live and work in London,' he said.
John Hobson QC, acting on behalf of the Mayor of London, said that the terrorist argument was a 'red herring'.
'Thames Water has produced absolutely no evidence to substantiate this assertion, stating that it has been advised that details cannot be disclosed in public on grounds of national security,' he said.
'The Mayor of London is deputy chair of the London Regional Resilience Forum, the Government's emergency planning group for the capital, and he will confirm that the London Resilience Plan not only contains no commitment to grant permission for a desalination plant, it does not even mention it.'
But Lambert insisted that the terrorist threat was genuine and revealed that the water industry met with government officials since the September 11 atrocities to plan a defence against terror attacks on the capital.
'Worst-case scenarios have been identified and agreed with the security services. The consequences of the realisation of any of those scenarios would impact on very many customers. The loss of supply could be for an extended period.'
He told the inquiry that a decision was taken to engineer infrastructure that would reduce the consequences of an attack on London's water supply, he claimed.
'Thames Water included a number of initiatives in its Strategic Business Plan to improve supply security - but of most significance is the introduction of the Thames Gateway Water Treatment Plant,' he said.
London Borough of Newham principle planner Sunil Sahadevan told the inquiry that the council had no objection to the desalination plant.
The case continues.