South West Water has been ordered to pay £8,750 in fines and costs after potentially harmful aluminium sulphate leaked into a Devon stream.
The firm admitted polluting the Littleham Brook at Exmouth in 2006.
Cullompton magistrates heard that the chemical was discharged after storage tanks overflowed at the works.
The brook was discoloured for more than a mile but an independent survey found there was no observable damage to wildlife in the river, said the firm.
Aluminium sulphate is used in the waste water treatment process as an aid to concentrating waste sludge and is stored in bulk on site.
After a passer-by alerted the Environment Agency, South West Water blocked nearby drains to prevent any further discharges from the site.
Richard Tugwell for the Environment Agency said: "South West Water took the handling and storage of the chemical seriously, but no thought had been given to the disposal of the liquor which had accumulated in the containment bunds."
South West Water said after the case: "We are confident that our site operators followed all necessary emergency procedures but unfortunately a small amount of heavily diluted chemical escaped the closed drainage system and entered the watercourse.
"A large investment has since been made at the sewage treatment works to ensure this does not happen again."