The national water regulator is not ruling out legal action against Queenstown Lakes District Council for the lack of barriers to filter out cryptosporidium.
On Monday, Te Whatu Ora confirmed 56 cases, 12 probable cases, and eight that are under investigation.
Taumata Arowai head of regulatory Steve Taylor told Morning Report the council had been issued with a compliance order, and other councils should take note of its expectations.
The regulator had a number of options if councils did not meet the new requirements, including prosecution, Taylor said.
The warning came as authorities were no closer to finding the source of the outbreak. It was yet to be detected across the network despite repeated tests, and the boil water notice remained in place.
New regulations requiring protozoa barriers came into effect in November 2022, Taylor said.
"The requirement is something that has been in the legislation for quite some time - and since November last year, the law changes made that requirement absolutely clear."
Taylor said the water regulator was "comfortable" with the approach the council was taking, both in terms of isolating the Kelvin Heights supply and prioritising installing of protozoa barrier at Two Mile plant.
"They're moving quickly, which is prudent in this situation. The time frame that Queenstown has indicated is a pragmatic way of ensuring that happens... and we'll be setting an expectation that that does take place."
He said the regulator would not rule out fining the council, "but the fact that Queenstown is working quickly to resolve this is the right action".
Was this a sign that the regulator would get tough on councils if filters were not in place?
"We've set a clear expectation across all water suppliers that are taking source water as drinking water, that they must have a protozoa barrier for those large supplies where there is a risk of surface water contamination.
"The barrier exists for a reason - to keep water safe - and we'll be making that information publicly available so everyone can see what the state of their supply is."
On Friday, Queenstown City Council secured UV disinfection equipment to provide a temporary barrier against cryptosporidium.
It was planning to isolate the areas served by the Kelvin Heights water treatment plant, because it already had an effective protozoa barrier - so part of the town would be able to drink from the tap again.
Taylor said residents still needed to boil water until further notice.
"At this stage, it's really important until it's clear we understand what the source of the contamination is. We want to ensure that it is not still present or that it's going to recur in the short term."
Sampling and testing of the city's water supply had identified the CBD as the area of most concern, which is why the council has put forward a plan to separate the Kelvin Heights supply, Taylor said.
"They've got a series of steps which we're comfortable will provide safe drinking water in that area."
Meanwhile, people in Queenstown who have had cryptosporidiosis are being urged to take extra steps to help stop the spread.
Te Whatu Ora said sharing bathwater or swimming pools could spread crypto to other people, and it advised patients not to do so until they had been symptom-free for two weeks.
The health agency said former cases should also make sure all surfaces in their homes, including door handles, were cleaned regularly with a product that contained hydrogen peroxide - not chlorine or bleach.