South West Water has been fined £20,000 after drinking water was contaminated with diesel oil at a Devon reservoir.
South West Water received nearly 2,400 complaints
The firm admitted four offences under the Water Act at Honiton Magistrates' Court relating to the incident at the Belvedere reservoir in Exeter in 2006.
It was also involved in a serious pollution incident in which partially treated sewage was discharged into the River Fal in Cornwall on 2 June.
The Environment Agency is investigating how it happened.
The diesel contamination happened on 3 February 2006 when a South West Water (SWW) worker mistakenly connected a drum containing 20 litres of diesel to a chlorination unit on the reservoir outlet.
SWW received nearly 2,400 complaints, many of them about the objectionable taste or smell in their water.
"Do Not Drink" notices were issued to about 3,000 households in the Beacon Heath, Pennsylvania and Stoke Hill areas of Exeter from 6 February until 9 February when the all-clear was given.
SWW director of operations Dr Stephen Bird told BBC News: "It should not have happened given our clear procedures and we needed to learn some lessons from that.
"We now have probably the most robust procedures in the water industry to make sure it does not happen again."
The company was also ordered to pay costs of £11,875 in relation to the incident.
In Cornwall, the Environment Agency is investigating a serious pollution incident in which partially treated sewage was discharged into the River Fal from SWW's Newham treatment works about two weeks ago.
Regular sampling will continue to check water quality in the river
Shell fisheries in the area were closed by the Port of Falmouth and Truro Health Authority as a precaution.
SWW said the discharge on 2 June was caused by an operational fault which was repaired as quickly as possible.
It said in a statement: "The sewage was fully settled and fine screened and, as required, we advised both the Environment Agency and Truro and Falmouth Port Health Authority of the discharge."
Sampling will continue on a regular basis to check water quality.