A spokesperson for the company said it was "pleased" the appeal was successful.
Since 2010, Dwr Cymru Welsh Water has been legally responsible for monitoring its water quality at its treatment plants and submitting its results to the regulator Natural Resources Wales (NRW).
Upon receiving its 2020 annual report, NRW officers said they were alarmed to find that the quality of the information provided had noticeably deteriorated compared to previous years, as 676 offences took place in 2020 with a further 142 breaches in 2021.
They all involved breaches of environmental permit licence due to samples not being taken in a timely way, or being incomplete or being submitted late or not at all.
This meant any potential harm to water quality, wildlife and other amenities would not have been known.
In a statement, a Welsh Water spokesperson said there was no "identified environmental harm associated with this case and the monitoring failures represented a very small number (around 1%) of examples in a programme involving tens of thousands of submissions each year.
"Nonetheless, we recognised our compliance fell short during 2020/21, a time when so much was impacted by Covid, and we entered a guilty plea at the earliest opportunity and we apologised at the hearing," it added.