The firm told a judicial review it did not accept the discharge of final treated effluent had degraded the quality of Llyn Padarn at Llanberis.
Anglers claim water quality threatens the future of the Arctic char fish.
A High Court judge reserved judgement in the case at Caernarfon on Wednesday.
The judicial review proceedings have been brought by the Seiont, Gwyrfai, and Llyfni Anglers Society, represented by a body called Fish Legal - an umbrella organisation for fishing groups.
Lawyers claimed Natural Resources Wales (NRW) had not done enough to protect the Arctic char, primarily from raw sewage and treated effluent discharged by Welsh Water.
The company said since 2010 it had invested £3.6m at the works, with another £4.6m agreed to be spent by summer 2016.
It said the work completed meant the lake met water quality standards necessary to be awarded bathing water status by the Welsh government.
"It is not accepted that the discharge of final treated effluent has degraded the lake as alleged by the society, or caused damage to fish stocks," its statement  added.
More than £4.5m is to be spent at a water treatment works near a Snowdonia lake to improve the quality of water returned to the environment, Welsh Water has said.