It has also been revealed that upgrade work to sewage treatment plants in the Southern Highlands has led to raw waste being pumped into the rivers that fill Sydney's main water reservoir, the Warragamba Dam.

The Department of Environment and Conservation has vowed to investigate the claims and spokesman John Dengate said: "We are very concerned and will be investigating precisely what went on."

A contractor, who worked at the sewage treatment plant in Bowral, has raised the alarm over the dirty water because he fears it could lead to a health epidemic.

Terry Fitzgerald, who worked as a contractor laying the pipe that feeds treated sewage into the Wingecarribee River, said that, during 12 months of upgrade work to the sewage treatment plant, which ended in February this year, raw sewage had been pumped into the river.

"I saw it overflow once because of an error and the raw sewage went down into the river," he said.

The new pipeline goes through land owned by software developer Les Pongrass.

"They have been pumping recycled sewage into the Sydney water supply via the Mittagong Rivulet through our property for years," he said.

At times raw sewage was pumped into the river. "You can't swim in the river now," he said.

State Utilities Minister David Campbell said: "I am advised the only incident that the Bowral Sewage Treatment Plant team was aware of was an incident that occurred on September 22, 2005.

"In that incident, a discharge of turbid water, not sewage, went into Macquarie Rivulet, a tributary of the Wingecarribee River, during open-trenching construction of a pipeline creek crossing by a subcontractor.

"Creek water was diverted by pumping from the trench as the pipeline was laid, but the water was directed into the creek immediately downstream of the trench instead of across a grassed area to filter the water."

He also confirmed that treated water does flow into the Sydney water supply.

"A number of sewage treatment plants currently discharge treated effluent into local waterways within the Warragamba Dam Catchment.

"The flow from these plants would represent less than 1 per cent of the average flow into Warragamba Dam.

"Warragamba Dam, when full, contains enough water to supply four years' supply to Sydney," he said.

A spokeswoman for the Sydney Catchment Authority said the Bowral Sewage Treatment Plant had been upgraded as part of a $20 million overhaul of Sydney's water supply.

She said the Bowral upgrade "significantly" improved water quality in the Wingecarribee River.