This paper has two objectives: first, to identify the main contaminants responsible for high treatment costs in the Umgeni catchment area, and second, to predict treatment costs from observed levels of contaminants. A partial adjustment model of treatment costs is estimated for the DV Harris plant, which draws water from Midmar Dam, using ordinary least squares regression and principal component analysis. The model highlights important policy issues and explains 61% of the variation in chemical treatment costs. Environmental contaminants have a marked impact on treatment costs. Treatment costs increase when levels of alkalinity, sodium and turbidity fall. Conversely, costs rise with higher levels of dissolved oxygen and water stability. Paradoxically, clean water - typical of Midmar Dam - is expensive to treat. Treatment costs also rise when concentrations of the algae, Chlorella, decline. Apparently the level of Chlorella varies inversely with the level of other, more harmful, contaminants.


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