The huge spray and associated water run-off also caused concerns for Lake Hawea dam controllers Contact Energy.
Contact Energy's Clyde Generation Manager said an engineer was sent to inspect the pipe leak site, because of initial concerns about the possible destabilising effects of water erosion on the earth dam.
"There was a little bit of wash-out, but we are satisfied there is no serious damage to the structure [of the dam]," he said.
Contact's engineer had watched council contractors United Water fix the mains fault, he said.
The power company would be seeking assurances from the council that the problem would be sorted out to ensure such a leak could not recur, Mr Quinn said.
Water pressure at Lake Hawea households dropped about 8:30am, when the fault was first noticed.
Queenstown Lakes District Council water services manager Garry McGraw said council staff had been alerted to the problem by an "alarming' drop in water levels at the Lake Hawea reservoir.
Normal water supply was restored to "99%" of households by about lunchtime, he said.
The fault appeared to have occurred from "either a burst mains join or a cracked pipe pump," Mr McGraw said.
A water flow meter installed about a month ago by contractors United Water was initially thought to be the cause of the problem.
Council contractors and staff had spent the day in Lake Hawea clearing air from fire hydrants and righting water pressure in pipes, once the initial fault and burst main were stabilised, Mr McGraw said.
