Works had looked set to be further delayed with a Victorian Civil Administrative Tribunal hearing set down for February next year, but an agreement struck between the parties will mean the project can now go out to tender.

Clean Ocean Foundation said it had achieved its goal of forcing the Environmental Protection Authority and Wannon Water to abandon plans for a deep ocean outfall from its sewage treatment plant - something that was scheduled to happen after the $40 million upgrade.

Wannon Water chief executive officer Andrew Jeffers said a revised agreement on the previous EPA decision now says it had to do an evaluation report that considered all the options.

"We think that's a much better outcome for the community," Mr Jeffers said.

He said he was pleased to work with the foundation and EPA to ensure the "critical upgrade" could proceed

In a negotiated settlement, the foundation said Wannon Water and the EPA would now be required to work with it to eliminate the need for an outfall pipe and a mixing zone which is referred to as "the dead zone around an outfall pipe".

They will have to introduce disinfection of the toxic waste stream, something that was not proposed by Wannon Water initially, foundation chief executive officer John Gemmill said.

"For an environmental charity with limited resources, we took a huge risk beginning this costly legal process but were given no choice by the ghastly outcome initially approved by the EPA," Mr Gemmill said.

"This agreement will also allow us to unearth the true cost industrial waste places on the Warrnambool community, and ultimately help us in our goal to reform the system so that the polluter is required to pay a fair price for its impact on the environment."

Mr Gemmill said the issue was especially important in relation to the Port Fairy outfall that also discharges a combined domestic and industrial effluent stream.

He said they didn't want to stop the current $40 million Warrnambool upgrade, but the outcome meant they now had a seat on the reference committee for when Wannon Water took the next step in its expansion of the site which is due in 2029.

"To our knowledge, it's the first time that an environmental group's got that in Victoria," Mr Gemmill said.

"The community will be safe by the end of 2025, and then they'll have a water treatment system by the end of the decade that they can be proud."

An EPA spokesperson said the VCAT decision required Wannon Water to provide an evaluation study report prepared by a qualified expert.

"The report must identify alternative wastewater disposal methodologies, to the satisfaction of EPA," the spokesperson said.

"EPA's priority will continue to be to protect the environment."

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