Coliban Water announced the further upgrades to the plant last November, a day after the Environment Protection Authority laid charges over alleged non-compliant water releases into the Campaspe River.

The plant has struggled to contain the treated water it produces when there is not sufficient irrigation demand or sufficient flows to release into the Campaspe River.

The second phase of upgrade works at the plant is expected to be completed by December.

"Our new storage lagoon is a major component of our upgrade works and will more than double the storage capacity at the plant," project director Danny McLean said.

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This new lagoon, along with a storage lagoon built at the Hardwick Meatworks property during the first phase of upgrade works, will bring the total storage capacity to more than 600 megalitres.

Mr McLean said a new class C to class B treatment plant was expected to be commissioned this month.

"We are currently assessing expressions of interest from local landowners wanting to be supplied with recycled water produced at the plant," he said.

"This additional reuse scheme will support local businesses and agriculture and help protect the Campaspe River."

Once this second phase of works is completed, it is anticipated only class B water will be used for offsite irrigation and tertiary treated water - which is higher quality - is released into the river.

It is expected the upgrade works, once completed, will serve the community for another 20 years.

The charges brought against Coliban Water have not yet resolved.