The Victorian Department of Primary Industries has begun a formal investigation into flooding of the Yallourn open-cut coal mine in the Latrobe Valley.
State Energy Minister Michael O'Brien ordered the inquiry after the Morwell River diversion failed to withstand last month's floods.
The Yallourn mine owner, TRUenergy, built the river diversion and could be liable for any damage caused by its collapse.
TRUenergy has since brought three of its four Yallourn Power Station units back online.
Mr O'Brien says a geotechnical expert has been appointed to investigate the cause of the river breach.
He says the quality of the water being pumped from the mine into the Latrobe River is being carefully monitored.
"We are investigating to work out was this a problem with the design, was this a problem with the construction or is there some other cause?" he said.
"We've appointed an independent geotechnical expert to work with my department on this investigation because we do need to get to the bottom of exactly how this could have happened."
He says the Environment Protection Authority is monitoring the quality of water being pumped into the river.
"Monitoring is not being undertaken by TRUenergy itself, it's being undertaken independently by a nationally accredited agency, so I think that should give the locals a lot of confidence that there's absolutely appropriate control and regulation of the repair work being done following this incident," he said.
The Government says it is confident the dewatering of the flooded coal mine meets environmental protection limits.
© ABC 2012
13:39 EST With 28mm already recorded in the rain gauge this month, Alice Springs is having its wettest May since 2004.