Just months after two water bodies near Mildura were merged, the Vic Department of Sustainability and Environment (DSE) has hired consulting firm Deloitte to help rank water suppliers.

The disclosure follows bad financial results for Victoria's water authorities, with some posting losses close to $30 million, while those achieving profit had revenue slashed by water restrictions.

DSE spokeswoman Laura Crowden confirmed that Deloitte, which advised Water Minister Tim Holding ahead of the Mildura merger, was hired to develop a set of key performance indicators "to assist in monitoring the governance of water corporations".

"This is part of an ongoing review of governance arrangements to ensure water authorities continue to provide a high level of service to its customers," she said.

Water industry sources fear the study will establish a ranking system leading to another round of mergers.

Already this year Melbourne Water has argued for the city's three water retailers to be merged; a notion investigated but rejected by the Victorian Competition and Efficiency Commission.

Mr Holding visited one of the state's most vulnerable water authorities, Coliban Water (Bendigo), on Friday.

Coliban lost $29 million in 2007-08, and losses are forecast until at least 2012.

Mr Holding's spokesman, Luke Enright, said the Deloitte study was about setting benchmarks, not targeting ailing bodies like Coliban.

"This has nothing to do with the structure of the water industry in Victoria," he said.

The First Mildura Irrigation Trust was abolished in August and its assets transferred to Lower Murray Water despite assurances to the contrary from the Government.

The merger followed a Deloitte investigation, but a breach of investment guidelines was a significant factor.

In 2007-08, Grampians Wimmera Mallee Water lost $21 million, Central Highlands Water (Ballarat) lost $7.6 million and North East Water lost $1.6 million.