Action may be taken against Thames Water for problems that left more than 700 homes without water for three days.
Residents were left without water for three days over the weekend
The firm said the water in Pamber Heath, on the Berks/Hants border, was contaminated by standing water, which escaped into the general supply.
It apologised to residents and offered them a £40 discount on their next bill.
The Drinking Water Inspectorate (DWI) said procedures should be in place to stop such errors and is now considering sanctions against Thames Water.
Dr Steve Lambert, from the DWI, said: "What will happen now is that the water company will report to the Drinking Water Inspectorate.
"We will make an initial assessment on that, but I think we can fairly confidently say already that we will be asking them to do detailed investigations to find out the cause."
Thames Water said tests showed traces of a petrochemical-like substance, which escaped into the mains after a valve was opened during maintenance.
The contamination is thought to have come from a build-up of residue from the lining of the main in Silchester Road.
John Halsall, Thames Water's director of water services, said: "We are extremely sorry that this incident occurred and we are treating it very seriously.
"The main has now been completely isolated from the system. It will be flushed through again in the near future and not put back into service until it passes stringent water quality tests.
"We would like to assure our customers that at no point was there any risk to public heath and the 'do not use' notice was issued as a precaution."
Thames Water said that domestic customers will receive a deduction of £40 from their next bill and any other individual claims for compensation will be considered on a case-by-case basis.
Local health protection representatives gave the water supply a clean bill of health on Monday afternoon.
Thames Water said tens of thousands of litres of bottled water were distributed free of cost to the 764 affected homes.
Residents received a flyer on Friday night informing them that water from taps may be unsafe to drink and should only be used for flushing toilets.
People had reported earlier that there was a petrol-like taste in their tap water.