ASSESSING THE ECONOMIC IMPACT OF PROJECTED CLIMATE CHANGE ON WATER SUPPLIES IN SMALL TOWNS Dr Pierre Mukheibir 1 , 1 Wannon Regional Water Authority, Warrnambool, Victoria Presented at Ozwater 09, Melbourne ABSTRACT By way of a case study of a small town in South Africa, the consequence of projected climate change impacts on the pricing of water supplies is illustrated. The term climate impact factor is introduced to explain the ratio between the cost of responses under current climate conditions and those under projected climate change impacts. In order to meet the same projected water demand, the investment cost is predicted to quadruple over the 30 year period when considering climate change impacts. This in turn results in an increase in the average unit selling price of the water increasing by 25% per annum. A fundamental shift in government funding policy is therefore required if water supplies at the small town level are to be sustained under projected climate conditions. INTRODUCTION When faced with actual or impending water shortages, water authorities have in the past tended to estimate future requirements by extrapolating past trends in consumption and climate, adjusted for expected increase in population and industrial growth. This paper aims to provide a preliminary assessment of the significant financial impact of relatively small changes in rainfall on water supplies. Climate change directly impacts on sustainable development through stresses on physical and financial resources. In small towns these resources are generally in short supply and negative impacts on either can adversely affect the sustainable delivery of services related to the local development goals, specifically the supply of clean safe water. Bredasdorp is located approximately 200km south-east of Cape Town. It falls in the Cape Agulhas municipal area and has an approximate population of around 13000 (Afri-Coast 2003). A conservative approach was employed in this specific study to illustrate the methodology and to not get distracted by the various alternative scenarios that could be considered, such as reduced poverty levels, consumption patterns, the impact of abrupt drying and longer inter- annular drought cycles and the compound impact of climate change on other basic human needs. METHODOLOGY The following steps were followed when undertaking this case study: 1. Historical rainfall data for Bredasdorp was obtained from the South African Weather Service(SAWS 2007) . 2. Climate projection results for seasonal precipitation for the region were obtained from the Climate Systems Analysis Group (CSAG) (Hewitson & Johnston 2006). The projections are presented as the median change of a range of GCMs, since the median is considered as the likely change. The intensity and frequency considerations of rainfall have not been taken into account when determining the future runoff and recharge, since this involves fairly technical calculations and this was considered beyond the scope of this study. 3. The supply and demand patterns from a base year of 2005 up to 2035 were projected. This was done for both the present average/normal climate (NC) conditions (based on historic climate records) and the projected climate change (CC) conditions (based on the CSAG projections). These two scenarios have been termed in this paper as the NC Scenario and the CC Scenario. 4. To assess the total cost of supply under the two scenarios, the discounted levelised cost (DLC) was calculated by using the following equation (Fane et al. 2003):          t t t t r 1 Y r 1 C DLC Eq 1 where: DLC = discounted levelised cost C t = the capital and operating costs in year t Y t = estimated annual safe supply in year t