The water supplier warned it had found E. coli on three separate occasions.

Rapid assessments in the Bendigo, Castlemaine and Inglewood areas found no immediate threat to the public and no need to issue boil water notices, the department said in an annual report to state parliament on Victoria's drinking water.

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Coliban repaired tanks and "optimised" disinfection systems. It also brought forward routine tank cleaning and inspection programs.

The water supplier also failed to realise it had not performed an integrity test on a "membrane train" at its Rochester water treatment plant for "a period of time", the report stated.

"One of the membrane modules in the affected train may have had an integrity breach," it stated.

"This issue raised a concern of the potential for inadequate pathogen removal in the drinking water produced."

The department concluded that Coliban had not detected the issue quickly enough, but noted the water supplier had made its improvements to better identify and respond to failed integrity tests.

Coliban also found trihalomethanes - byproducts of disinfection formed when chlorine comes in contact with organic matter - on three occasions across its network.

"Coliban Water has taken appropriate measures to manage the concentration of total trihalomethanes by ceasing temporary disinfection using free chlorine and returning to residual disinfection using chloramination," the report stated.

It found that Coliban had seen a 14 per cent drop in water quality complaints during the 2019/20 financial year.

The supplier was also fully compliant for standards surrounding turbidity. Turbidity measures the cloudiness of water because of fine, suspended matter.

Department of Health Secretary Euan Wallace thanked all water agencies for their work supplying safe drinking water during the coronaviurus pandemic.

"Their role was fundamental in rapidly preparing and responding to prevent issues," he said.

Professor Wallace warned that algal blooms, bushfires, floods and power outages will be an increasingly big challenge for water treatment plants as climate change intensifies.

"These hazards have multiple impacts including reduced capacity for raw water harvesting in catchments; challenges for water treatment plants to safely treat the change in water quality; and maintaining acceptable water quality within distribution systems," he said.

"Difficulties in meeting these challenges were evident in the increased number of drinking water advisories issued by water agencies to affected customers this past year.

"Indirectly, these hazards have also made visible a number of treatment plant and process failures that could have been prevented."

Professor Wallace said that rising numbers of incidents statewide had prompted the department to start improving regulations that would help water agencies protect the public.

Coliban Water has been contacted for comment.

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