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