EPA director environmental services Bruce Dawson said the EPA had requested that Central Highlands Water undertake sampling and analysis of the lake water to ascertain the level and extent of contamination.

"We have also requested a full incident report from CHW," he said.

"EPA's initial investigation suggests that the spill could have occurred as a result of a system failure due to numerous power interruptions in the Daylesford region on Easter Sunday.

"We will be investigating this fully."

Mr Dawson said the EPA would also investigate the exact amount and nature of the spill, the cause of the incident, CHW's response to the incident and any damage to the environment.

"In particular we will be asking CHW to examine what actions are possible to ensure this sort of incident does not happen again," he said.

"EPA understands the importance of Lake Daylesford to the local community and we will inform the community of the results of our investigation as soon as they are available."

Mr Dawson added that while no affected wildlife had been seen the community was being asked to "keep their eyes open" and contact the Pollution Watch Line on 9695 2777 if they see any injured fish or bird life.

CHW communications manager Wendy Stubbs said the spill was due to a power interruption in the area that affected one of the pump stations.

Ms Stubbs said laboratory test results taken since April 14 showed that ammonia levels had returned to normal and at three of four sample points E.coli (bacterial contamination) levels were also well below the recommended limit for recreational water use.

"Lakes such as this have E.coli naturally occurring due to the numbers of large birds such as swans, ducks and geese using the lakes," she said.

"There has been no public health issue or any injury to wildlife."

Meanwhile, the Opposition's environment spokesman David Davis said it was not the first time a CHW maintenance malfunction allowed sewage to spill into Lake Daylesford.

"Following a pump overflow incident at the lake in September 2003, virtually identical to the weekend's sewerage contamination, Central Highlands was fined $5000," he said.

Mr Davis said that despite CHW spending $430,000 to upgrade the system at Lake Daylesford it had "again ignored its duty of care".

"The EPA noted in November 2003 that Central Highlands failed to ensure adequate checking of the function of the remaining pump," he said.